Shares in Devro, which has manufacturing plants at Moodiesburn and Bellshill in North Lanarkshire, dropped 11.9p, or 3.54%, to 324.1p as City analysts cut their profit expectations in the wake of the firm's update on its trading performance since July 1. The share price fall cut Devro's market capitalisation by £19.7m to £537m.
However, the shares finished well above their intra-day low of 300p. And shares in Devro have enjoyed a strong run, having ended 2011 at 257.8p, and having traded below 200p in summer 2010.
Devro, citing continuing growth in sales volumes in Japan, Europe, and the Americas, said its board "remains confident in the continuing growth of the business".
The company, which has a worldwide workforce of about 2100 including around 500 employees in Scotland, revealed it had been hit by a weakening of the Czech koruna, by rising raw material costs and by "extended" periods for the commissioning of production plant as it proceeds with a £35m investment programme.
Devro told the stock market: "As a result of the combination of adverse currency movements, continuing increases in raw material costs and extended plant commissioning periods, overall full-year operating profits are expected to be slightly below our original expectations but ahead of last year."
Investec, Devro's house broker, cut its forecast of the company's 2012 pre-tax profits from £43.5m to £42m after the trading statement. It now predicts Devro will make operating profits, or earnings before interest and tax, of £43.1m in 2012, up from £42.7m in 2011.
Numis Securities cut its forecast of Devro's 2012 pre-tax profits by £2.4m to £41.8m. It reduced its pre-tax profit predictions for both 2013 and 2014 by £2m, to £46.2m and £50m respectively.
Referring to the rise in Devro's costs, Numis noted the cost of animal hides had been boosted in the third quarter by strong Chinese demand and a lower cattle slaughter rate in South America.
Investec cut its forecast of Devro's 2013 pre-tax profits by £1m to £46.5m, declaring inflation in hide costs may continue into 2013.
It is forecasting Devro's sales will rise to £243.6m this year, from £227.7m in 2011.
Referring to its investment in production, Devro told the stock market: "New lines are now running successfully in Scotland, Australia, USA and Czech Republic. Further capacity is on track for completion in 2013. With new capacity in production and a full order book, the group is looking at a strong end to the year and the board remains confident in the continuing growth of the business."
Devro chief executive Peter Page said: "Our business is well positioned for the future, with good demand from a global customer base."
Nicola Mallard, analyst at Investec, said: "We have seen headwinds from currency, as well as prolonged commissioning periods on new capacity – not the Czech project which is running smoothly – and inflation in hide costs."
She declared 2012 "was always going to be a transition year as new capacity was installed", and added: "We expect solid growth to resume in FY13 (full year 2013) and beyond."
Devro said chairman Steve Hannam yesterday bought 12,594 shares, jointly with his wife Jean, at 317.6097p per share. This £40,000 purchase took his stake to 223,622 shares, equivalent to 0.135% of the company.
