Devro on track for £20M profit despite meat ‘crisis’

By Anne Bruce

- Last updated on GMT

Related tags: Scotland

Devro is on track for sizzling profits -– despite crisis in the Scottish meat products sector
Devro is on track for sizzling profits -– despite crisis in the Scottish meat products sector
Sausage skin giant Devro is on track to report £20M pre-tax profit when it posts first half results at the end of July, predicts broker Investec – despite warnings of a crisis in the  Scottish meat products industry.

The Scottish firm manufactures and distributes goods derived from collagen, and is the world leader in sausage casing. It has sites in Scotland, the USA, Czech Republic and Australia.

Analyst Nicola Mallard said in a note that Devro was operating in an expanding market, with global growth for edible collagen casings benefiting from increased demand from developing and emerging markets such as China.

New products, such as its Select casing – a cheaper alternative to sheep gut – were currently selling well, she said, and at premium prices, in the more mature markets.

Good progress

“This year’s focus is on installing new capacity to give the group headroom for growth in the coming years and it is making good progress in this respect,”​ she said.

The group has a major expansion plan underway. Having put some initial extra capacity in place in Scotland last year, 2012 sees the work start in the Czech Republic.

It will replace a number of its older extrusion lines with new ones, which will run at twice the speed of the older models. It is estimated that the increase in available capacity once these projects are all complete will be 8% this year and a further 8% next year.

Strong demand

The group was working flat out to match continued strong demand, said Investec. It was expecting it to report good revenues, based both on volumes up about 8% and prices around 2%, despite a weak euro and increased energy costs.

Pre-tax profit was predicted to be up 5% to £20M, excluding pension finance items.

Meanwhile MPs and Scottish Members of Parliament have warned of a crisis in the Scottish meat products industry.

Drew Smith, member of the Scottish Parliament, said: “It is clear that there is a crisis in the Scottish meat products industry. The Scottish government must make clear that this industry and these jobs are a priority.”

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