Devro produces plan for potential euro exit

City Editor

Wednesday 1 August 2012

SCOTTISH sausage skin manufacturer Devro has contingency plans for a break-up of the euro and has seen a dip in sales related to Mediterranean favourites such as salami, but said the eurozone crisis is having just a limited impact on demand.

UNDER CONTROL: Devro says demand has held up and it has plans to deal with any emerging euro crisis.

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TIM SHARP CITY EDITOR

The company posted a pre-tax profit of £19.6 million for the six months to June 30, broadly in line with the previous year.

On its preferred earnings measure, which strips out financing and pension expenses, earnings were up 5.7% at £20.2m despite adverse currency movements.

Revenues rose 7.7% at £115.4m year on year. The company has continued to make inroads in traditional sausage heartlands such as Germany with its top-end Select product and is also seeing sales continue to rise in new markets such as China and Latin America.Chief executive Peter Page told The Herald: "There is no evidence in our sales to suggest that the wider economic situation is affecting our business and certainly we are not worried about the eurozone."He said that the sausage sales are insulated as a non-discretionary purchase.But sales of non-edible casings used for products such as salami and dried fermented sausage popular in the Mediterranean nations at the centre of the eurozone sovereign debt crisis had fallen around 1%, he said.Mr Page said that Devro is "not excessively exposed" to vulnerable eurozone nations and maintains tight trading terms to avoid bad debts."Beyond that we have contingency plans but nothing we have turned into action at this stage," he said.Devro's Select product has benefited as falling lamb production in Australia, New Zealand and the UK, has pushed up the price of traditional sheep gut casings.Emerging markets now account for 35% of sales, with sales growth of 50% recorded in Latin America in the period.It is also targeting China where urbanisation is leading to greater use of formal shops and fridge storage and the adoption of western cuisine such as sausages. Traditional Chinese lap chong sweetsausage is served on a stick and does not require a casing.Devro has boosted its workforce at Bellshill and Moodiesburn in Lanarkshire from 480 to 500 in recent months after investing £15m in new high-speed lines.The more efficient production has helped to offset higher energy costs. It is also improving its Czech plant and expects to reap the benefits in 2013.Falls in discount rates led to a £4.9m increase in the group's pension obligations to £51.5m in the course of the six months.The company increased its cash contribution to fund its UK pension deficit from £1.1m to £1.5m a year from 2013. It also plans a £500,000 injection into its US scheme. Devro shares fell 3.99 (1.33%) to close at 296.61.

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Devro produces plan for potential euro exit

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