Devro issues profits warning; shares slip

Stock in Devro suffered a steep fall on Monday after the company warned that its profits in 2014 would be £8 million lower than previously expected.

The Moodiesburn-based sausage skin maker is accelerating its plans to streamline its manufacturing capacity. It has plans to move from conventional, higher-cost production lines to a greater proportion of manufacturing based on cost-efficient technology.

The move is aimed at slashing manufacturing costs by £4 million in 2015, but the company will have to take one-off charges of £16 million over the next couple of years.

Chief executive officer Peter Page said in a statement, "This decision, coupled with the revised expectation for sales for the year, is expected to reduce profits for 2014 by approximately £8m."

Last year, the company's pre-tax profits had fell from £39.3 million to £37.5 million. Following the disheartening announcement, Devro shares slipped by more than 11 per cent to close at 211.5p apiece.

Since the beginning of 2014, the company's sales have increased in Germany, Japan, China and the United States; but other markets remained sluggish, which led to decline in the company's total sales. The company held a number of factors, including currency fluctuations and Russia's ban on pork imports, responsible for decline in its total sales.

However, Devro's board is still confident that its low-cost manufacturing base, world class product range and growing demand for collagen casings would help it regain a strong position.