Devro, the world’s largest manufacturer of collagen products such as sausage casings for the food industry, has been given a boost by the fall in sterling.
The Scottish group said the weakness of sterling during the second half of last year had added £2.4m ($3.4m) to its annual pre-exceptional operating profit of £20.6m, a 16 per cent increase on the previous year.
Profit before exceptionals was 21 per cent higher at £18.8m in the year to December 31, but pre-tax profit was 5 per cent lower at £15.3m because of an exceptional charge of £3.5m.
Peter Page, chief executive, said most of the charge was due to reorganisation of the group’s manufacturing activities in the Czech Republic, which – along with additional investment in replacement lines this year – would generate annual savings of about £2m from next year.
Devro said the downturn in the car, furniture and aerospace industries was having a significant impact on the availability of cattle hides, its prime source of raw collagen, but it was working with suppliers to ensure a sustainable supply.
Higher energy costs cut operating profits by £1.5m. Although energy costs have fallen in recent months, Devro said utility costs would remain at higher levels for the first half because of the timing of fixed-priced supply contracts.
Revenue rose 17 per cent to £183.1m. Pat Barrett, chairman, said that in the group’s operational review in January last year, it had stressed that pricing was to be given precedence over volume and market share.
“We are now able to report that that we achieved average price increases of 3.2 per cent overall during the year on a constant currency basis, whilst also increasing sales volumes,” he said.
Devro said sales growth in edible collagen casing was most evident in the developing markets of eastern Europe, where volumes rose 15 per cent, but was also significant in South Africa and Kenya. UK sales continued to recover, ending the year 2 per cent higher, due in part to new and improved products in its Scottish operation. Sales volumes fell in the more mature markets of western Europe and Scandinavia.
Earning per share rose 3 per cent to 7.6p (7.4p). The final dividend is held at 3.025p for a 4.45p total.
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