Rebounding sales sees Devro shares rise

Devro, a manufacturer of collagen based sausage casings, saw sales growth bounce back over the first half the year.

In its interim report released Wednesday, the company posted a total revenue increase of 11% to £125.2m, built primarily around its 6% increase in sales volumes in the British and Irish markets.

That was compared favourably to the 6.6% drop in sales volumes seen in 2016.

Exchange rate fluctuations also benefited the company in the second half of 2016. Due to a "significant weakening" of the pound towards the end of 2016, translational exchange gains improved underlying profits to the tune of £2.8m.

Completion of its new Chinese based plant helped the group to a 125% increase in volume sales in the region, while Russia saw an increase of 19%. The Japanese division posted a 5% increase in volumes thanks to an expansion into non-meat categories, while South-East Asia reported impressive 40% growth.

In Latin America, the company did see a 35% decrease in sales volumes due to ongoing issues related to the transition in the supply of products between plants. Further work is planned to resolve these problems in the second half following completion of new plants in the area.

Peter Page, chief executive of Devro, commented that,"Devro has made good progress with its principal objectives of growing revenue, volumes and market share in a range of markets, whilst reducing unit costs in operations. The Devro 100 programme to accelerate achievement of these objectives has progressed well during the first half of 2017."

Changes in prices and product mix were a drag, subtracting 6% from the group's sales.

The underlying EBITDA was ahead of the first half of 2016 by 16.7% to £30.8m, lowering its EBITDA/net debt ratio to 2.4 times.

Unaudited earnings per share were 6.0p, which was down on last year's 6.3p, as profits before tax slipped from £13.7m to £13.1m.

However, operating cash flows before pension deficit funding improved by £7.6m to £23.9m thanks to lower exceptional spend and capital expenditures.

Devro kept its interim payout at 2.7p.

"The Board's expectations for the full-year remain unchanged and the business continues to generate strong cash flow from the underlying operations, which will enable net debt covenant ratios to be returned to historic levels over time," said Page.

As of BST 1245 Devro shares had risen 4.9% to 226.7p