Scotland business

Shares dip for Lanarkshire sausage firm Devro after profits warning

Sausage skin maker Devro has seen its share price fall 11% after a warning of falling profits.

The Lanarkshire firm has set out plans to move from older production capacity, raising doubts about the future of manufacturing in Scotland.

Since the start of this year sales of collagen sausage casings have risen in Germany, Japan, China and the US.

But other markets were weaker, and total volumes were down.

The firm blamed currency fluctuations, European retail markets and the Russian ban on pork imports from the EU.

Devro, headquartered in Moodiesburn, sells only 11% of its output in the UK and Ireland. It says it now expects volumes and prices to be flat during this year.

It is bringing forward plans to streamline manufacturing, moving from older, higher-cost production lines to more cost-efficient technology.

New investment

It has recently invested in its Czech facilities. It is now doing so in its US plant, and it is building a £50m factory in China. While there has been some recent investment in Scotland, some of its other production lines are among the oldest.

Profits are expected to fall by £8m this year. In 2013, pre-tax profits fell from £39.3m to £37.5m.

It is expected that the closure of some capacity will cost £6m in cash, with non-cash costs of around £10m.

A company source stressed that the market update was more about bringing forward investment in the US and China rather than announcements at its other sites.

The statement also said: "The board remains confident that with a low cost manufacturing base and a world class product range Devro will be in a strong position to benefit from the growing demand for collagen casing driven by protein consumption worldwide."

There was a sharp drop in share price at the start of March, after Devro released its full-year results for 2013. With the most recent fall, the share price has declined by more than a third.

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