THE chief executive of sausage skin manufacturer Devro has insisted that 2014 was a "good year" - in spite of profits being hit by a major restructuring programme.
Devro saw pre-tax profits plunge to £2.2 million from £37.5m in 2013 after taking steps to revamp its manufacturing operations in Scotland, and build new factories overseas.
The company, in the midst of a three-year transformation plan, has axed 130 jobs at its sites in Moodiesburn and Bellshill as a result of decommissioning less efficient technology.
The restructure dented profits by £6.6m, and contributed to the £24m of exceptional items booked last year. Investment in new factories in China and the US also contributed to the exceptional charges, and between them will represent around £95m of capital investment over a two-year period. Before one-offs Devro reported operating profits of £30.3m, down on the prior year's £42.1m thanks to the restructuring and foreign currency movements worth £4.3m.
While revenue fell to £232.3m from £242.7m, cash generation from operations before exceptional items leapt to £48.1m from £43.8m.
Investors reacted coolly to the figures, sending the share price down by more than seven per cent in morning trading. The shares closed down 16.75p, or 5.77 per cent, at 273.5p.
However, there was a more upbeat response from brokers. N+1 Singer described the results as "pleasing... in terms of tenor, stability and outlook", adding the sales momentum shown by Devro in the second half was sufficient to maintain its buy stance on recovery grounds. And Investec noted there had been "solid" volume growth for the year which has continued in 2015.
Devro chief executive Peter Page said that 2014 had been a good year - "with the benefit of looking back".
He said: "Our total volumes were up three per cent, and our constant currency sales were up two per cent. But we were getting volume growth in those markets where strategically we want to grow - the US, Germany, Japan, China.
"If you look at the numbers, perhaps the most telling number is cash generated from operations before exceptionals, which actually went up quite a bit.
He added: "It was a tough year. We worked our way through it pretty well. I think everyone is very pleased with all the progress we have made."
Mr Page conceded the redundancy programme in Scotland, from where Devro exports to the US, Germany and China, had been "tough".
He said the process was virtually complete, and that the costs involved had been in line with forecasts. Around half of the staff affected have left the business, with the rest due to depart by the end of March.
Mr Page said the changes mean company is now well placed to build on the £30m it has invested it its plants in Moodiesburn and Bellshill in recent years, signalling that Devro remains committed to manufacturing in Scotland in the long term.
He said: "Scotland has some pretty unique manufacturing technology, therefore has a range of products that our other factories, even the new factory in China, won't match.
"It has a number of niches or specialist markets that it can supply. Every factory we have is now operating to its strength."
More broadly, Devro reported that its company-wide three-year transformation plan was on track. The buildings for its new plants in China and the US, where an inefficient plant in South Carolina has been a major drag on profits, management time and product performance, are now complete.
Those factories, which are being developed to align capacity with demand, will be up and running in 2016.
On trading, Mr Page noted growth in the US, Germany Japan and China, but said sales were flat in the UK and Australia.
The decline in volume in Russia was not as acute as anticipated.
Devro recommended a final dividend of 6.1p per share, taking the total for the year to 8.8p, in line with last year's payout.
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