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Steve Hannam, the Chairman of FTSE 250 sausage casing supplier Devro, has added to 12,594 shares to his and his wife's stake in the company on the same day the company warned that full-year operating profits will be slightly below expectations, although still ahead of last year.
Hannam purchased the shares at 317.61p each for a total of £40,000. He and his wife now hold 223,622 shares, equal to 0.135% of the issued share capital.
The firm blamed the decrease in expected profits on a number of factors, namely adverse currency movements, increased raw material costs and extended plant commissioning periods. It said it expects the trend of increased raw material prices to continue into next year.
Consensus forecasts for the full year ending December 31st are for pre-tax profits of £43.64m on turnover of £242.50m. Earnings per share are expected to come in at 21.15p, putting it on a price earnings ratio of 15.9.
In an interim management statement covering the period from July 1st to date, the firm was upbeat about turnover, saying: "Sales volumes have continued to grow across a wide range of markets, notably in Japan, Europe and the Americas, with sales of the premium 'Select' range continuing the momentum of the first half. Overall market demand remains strong both in established and emerging markets."
The interim dividend was increased from 2.5p to 2.65p.
As expected, following the firm's investment programme, net debt increased to £31.4m (2011: £24.0m).
Regionally, edible collagen volumes in continental Europe continue to increase, particularly in Eastern Europe, Scandinavia and Germany with sales of Select making a significant contribution to this increase. The Eurozone difficulties have had limited impact on the levels of demand and sales.
UK and Ireland volumes, as expected, were down as a small number of product lines moved back to hog gut casing.
Edible collagen volumes in the Americas increased considerably with solid growth in Latin American markets. Strong manufacturing performance compared to the prior year assisted in the improved availability of product to satisfy demand.
Total volumes were up in Asia/Pacific with Japan showing significant growth reflecting the demand for Select. South East Asia and Korea also continue to grow.
Devro, a manufacturer of collagen products for the food industry, is on track to meet its full year targets following continued strong sales growth in Japan, South East Asia, Eastern Europe and Latin America.
Revenue for the half-year increased 7.7% to £115.4m (2011: £107.1m), with operating profit of £20.7m (2011: £19.5m), despite higher input costs.
Profit before tax, excluding net finance expense/income on pension, was £20.2m, 5.7% higher than £19.1m the same half the previous year, with earnings per share at 9.9p (2011: 9.2p). Reported profit before tax was unchanged at £19.6m.
Steve Hannam, Chairman of Devro, said: "Sales have increased across a wide range of markets and the good momentum from the second half of 2011 has continued into 2012.
"Sales of our premium Select range, which is specifically designed to replicate the characteristics of high quality sheep gut in developed markets, continue to grow strongly in Japan and Europe, and we are now achieving our 2012 target for Select of 8% of total sales.
"The global market for collagen casings continues to expand due to economic growth and increased meat consumption in emerging markets. High sheep gut prices and limited availability also provide good opportunities in developed markets for substitution by collagen casing.
"The outlook for the remainder of the year is for continued volume growth particularly of sales of differentiated products such as Select, supported by further manufacturing improvements arising from our capital program
Investec Securities retained its "buy" stance on Devro (DVO) with a 345p target price. The broker expects the sausage casings manufacturer to report first half pre-tax profit growth of 5% to 20 million pounds and believes the firm's primary focus will be the installation of new capacity to support future growth. Investec noted growing demand for the group's products in emerging markets, while adding that its Select brand is selling at a premium in mature markets. Devro shares lost 5.2p to 309.5p.
Growing Chinese Demand Helps Devro Exports To Surge
SAUSAGE skin maker Devro unveiled a rise in sales during the first quarter, as export growth made up for a slow start to the year in its domestic market.
Steve Hannam, chairman of the Moodiesburn-based firm, told investors at its annual general meeting that eastern Europe, Japan, Latin America, Russia and south-east Asia were “all demonstrating solid growth”.
Hannam described trading conditions in the UK as “slow”, but added that sales of the company’s up-market “Select” range of collagen products – which replace sheep gut in premium sausages – had increased in Europe and Japan.
He added: “Manufacturing performance was slightly below expectations early in the year, but recent performance is much improved.
“The newly installed lines in Scotland are in full production and product development work continues on the new line in the US.”
Replacing older machines at its factory in Bellshill helped Devro to post a 22.4 per cent rise in profits before exceptional items to £43 million in 2011, on the back of a 6.6 per cent increase in turnover to £227.7m.
Devro, which employs more than 2,100 people, is also installing more efficient equipment at its facility in the Czech Republic.
Chief executive Peter Page said: “The continued growth in volume and value of sales, across a wide variety of markets, is most encouraging and reflects well on our strategy for long-term growth.”
Devro and its peers have enjoyed rising sales in China and other developing markets in south-east Asia as the growing middle-classes spend more money on processed meat.
The firm sells cases made from collagen, the same material that makes up the connective tissue found in all mammals, which is designed to replace sausage skins made from animal guts.
See also Herald's article:
Here's a couple of links about SCLP, one of the hottest stocks at the moment:
Shore Capital maintained its "buy" stance on Devro (DVO) following strong full year results, with adjusted pre-tax profit growth of 22.4% to 43 million pounds, on revenues of 27.7 million pounds. The broker believes that the sausage skin manufacturer will be able to improve its margins through modernising its production systems, brand development and economies of scale
In the Telegraph Questor's column is all about sausage skin maker Devro, which uses collagen to encase the meat instead of the more traditional gut. After stripping out exceptional items profits rose 22.4% in 2011 with the shares trading at 14.6 2012 earnings. Questor loves Devro but thinks after a surge of 21% so far this year, it’s time to sell.
Brewin Dolphin reiterated its "buy" recommendation for Devro (DVO), with a 340p target price. The broker notes that first half growth was ahead of forecasts, with pre-tax profits up 19% to 19.6 million pounds, with sales up by 2.4%, despite being down after the first four months. Brewin also approves of the food casing manufacturer selling its third party distribution division in Germany for 1.9 million euros (1.66 million pounds) which will allow it to focus on its core business. Shares in Devro sizzled up 9p to 262p.
be to break? Good share to have with good dividends.No plans to sell for a good while yet. Mulledwine, you seem to be around quite a bit, in your opinion would this be a good share to put in my sipp, as I've just set one up? Any advice appreciated
Sausage skin maker Devro has been mulling how to expand in potentially the richest market, China. Analysts had pointed out that a new plant there would cost
60m and would limit expansion in other growth markets, such as Russia or Latin America. Yesterday it ruled out new build, preferring “other options”, probably a joint venture. This will come as a relief, while all those other positives are there. The shares, on just short of 15 times’ this year’s earnings, look up with events, though, says the Times.
Sausage skins maker Devro produced full-fat results for 2010 with operating margin improving sharply to 16.1% from 12.4%. Profit before tax and exceptional items in 2010 rose 44.4% to £36.3m from £25.1m in 2009.
Ahead of full-year results next week, Panmure Gordon re-iterated its "buy" rating for Devro (DVO), the food industry casings producer, with a 275p target price. The broker expects the company will report a 10% increase in revenues to 243.2 million pounds for the 12-months, and a 47% jump in pre-tax profits to 36.8 million pounds. This, it added, equates to an earnings per share of 16.5p. That said, Panmure believes the business remains well positioned to deliver growth from conversions and expansion into new markets, and expects ongoing investment in capacity and efficiency to underpin steady operating profit margin expansion. Shares in Devro rose 2.3p to 233.8p.