Devro warns on Q1 profits but retains targets

Sausage skins maker Devro warned that profits for the first quarter of the year were below last year's but that it is confident it will meet full year expectations.

Sausage skins maker Devro warned that profits for the first quarter of the year were below last year's but that it is confident it will meet full year expectations.

The Scotland-based company released a statement from Chairman Steve Hannam ahead of its annual general meeting Thursday morning that explained how profits were hampered by manufacturing issues and the timing of price increases.

Hannam reassured that the board remained "confident" the group will meet its expectations for the full year, but admitted "profits for the first quarter of the year are below the corresponding period in 2012 due to lower production yields".

However, he assured that "remedial action" has been taken that, allied to recent price rises, additional capacity and a focus on improving production processes, the board does "expect stronger performance as the year progresses".

With input costs having risen broadly in line with expectations, the company has increased prices, as it announced in February at the time of its 2012 preliminary results.

But this came too late to counteract lower manufacturing yields, particularly in the US, which restricted the amount of product available for sale and raised unit costs.

Devro's global sales continued to grow during the period, with a slower start in the more mature markets of the UK and Australia counterbalanced by good growth in much of Europe and North America.

A major capital investment programme in the Czech Republic is proceeding as planned, with significant additional volume scheduled to come on stream in the second half of this year in order to support further growth in 2014.

Analyst Nicola Mallard at broker Investec stated: "Given the phasing of new capacity coming on stream, we expect sales and profits to be biased to the second half. The group remains confident of meeting full year expectations and we make no changes to forecast full year 2013 or or 2014 numbers."

The share price fell 1.43% to 330.80p by 09:20 Thursday.

OH

Recommended

How to boost your income as dividends come back in fashion
Income investing

How to boost your income as dividends come back in fashion

Dividends are back in fashion. But how do you go about building an income-generating portfolio?
4 Jul 2022
Persimmon yields 12.3%, but can you trust the company to deliver?
Share tips

Persimmon yields 12.3%, but can you trust the company to deliver?

With a dividend yield of 12.3%, Persimmon looks like a highly attractive prospect for income investors. But that sort of yield can also indicate compa…
1 Jul 2022
Don’t try to time the bottom – start buying good companies now
Investment strategy

Don’t try to time the bottom – start buying good companies now

Markets are having a rough time, so you may be tempted to wait to try to call the bottom and pick up some bargains. But that would be a mistake, says …
1 Jul 2022
Share tips of the week – 1 July
Share tips

Share tips of the week – 1 July

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
1 Jul 2022

Most Popular

UK house prices are definitely cooling off – but are they heading for a fall?
House prices

UK house prices are definitely cooling off – but are they heading for a fall?

UK house prices hit a fresh high in June, but as interest rates start to rise, the market is cooling John Stepek assesses just how much of an effect h…
30 Jun 2022
How to invest in copper, the most important metal in the world
Industrial metals

How to invest in copper, the most important metal in the world

As the world looks to electrify and try to move away from fossil fuels, copper looks set to be the biggest beneficiary. But how can you invest? Rupert…
30 Jun 2022
Don’t try to time the bottom – start buying good companies now
Investment strategy

Don’t try to time the bottom – start buying good companies now

Markets are having a rough time, so you may be tempted to wait to try to call the bottom and pick up some bargains. But that would be a mistake, says …
1 Jul 2022