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UPDATE 1-Sausage-skin maker Devro announces efficiency drive after 2016 sales fall
March 6, 2017 / 9:20 AM / 9 months ago

UPDATE 1-Sausage-skin maker Devro announces efficiency drive after 2016 sales fall

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March 6 (Reuters) - British sausage-skin maker Devro Plc on Monday announced an investment programme to increase sales and manufacturing efficiency after reporting a 6.6 percent fall in 2016 sales volumes.

The maker of edible collagen casings for bratwurst, salami and chorizo said it would invest 7-8 million pounds ($8.6 million to $9.8 million) and expected exceptional costs of the programme to be 10-12 million pounds.

It expects the programme to deliver annual savings of 13-16 million pounds by 2019, Devro said.

Devro reported a 14 percent rise in 2016 underlying operating profit to 38.1 million pounds, helped by favourable currency movement and lower input costs. Revenue rose 4.7 percent to 241.1 million pounds.

But full-year sales volumes fell 6.6 percent.

Total volumes for its edible collagen casings, which makes up over 80 percent of group’s sales, fell 8.2 percent.

Sales in China for 2016 fell 31.4 percent, as the company held prices steady despite an oversupplied lower-end market. Devro said it was testing new products for China from its new plant in Nantong.

Its Russian business was hurt by a weak rouble, driving down volumes in Russia and surrounding markets 13 percent for the year.

Brokerage Investec said in a note that the benefits of the investment programme would not be felt until 2018/19. It trimmed the price target on the stock from 270p to 245p.

Devro shares fell as much as 5.6 percent on Monday before paring losses to trade down 2.2 percent at 182.7 pence.

$1 = 0.8149 pounds Reporting by Rahul B in Bengaluru; editing by Jason Neely and Edmund Blair

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