By Kristy Dorsey
Devro served up improved profits for 2020 as demand from emerging markets more than offset declines in the UK, Ireland and Europe caused by Covid disruptions and distributor destocking.
The Moodiesburn-based maker of sausage skin and food casings showed improvement at both statutory and underlying levels despite a slight dip in revenues to £247.6 million during the 12 months to the end of December.
On a statutory basis, Devro made a pre-tax loss of £21.8m in 2019 after absorbing costs from the closure of its manufacturing facility in Bellshill, along with the revaluation of sites in the US and China. The combined one-off impairment amounted to £45.9m.
On an underlying basis that excludes those exceptional charges, pre-tax profit in 2020 rose to £35.4m against £33.1m previously, with earnings and operating profit also higher. The company also cut its net debt to £109.5m, compared to £123.8m a year earlier.
READ MORE: Lanarkshire manufacturer overcomes coronavirus challenges
Chief executive Roger Helbing welcomed the company’s progress in terms of both trading performance and strategic priorities, thanking staff for their “huge effort” amid challenging circumstances. He said the board anticipates further improvement in 2021, including “another year of good free cash generation”.
Devro employs more than 2,000 people across sites in the US, the Netherlands, China, Czech Republic, Australia and the UK, and has set its sights on expansion from a regional business to a global operation. With its Chinese factory in Nantong employing 160 people, it was among the first UK businesses forced to adapt operations in response to last year’s coronavirus outbreak.
“Encouragingly, the year has started positively, although caution remains as many of the Covid-19 related challenges experienced in 2020 are still evident,” Mr Helbing said.
“Despite this we expect to make further progress in 2021 driven by our sales pipeline actions, solid underlying demand and the ongoing benefits of operational improvements. Devro is well-positioned for the future.”
Across its emerging markets, which now account for 28 per cent of group revenue, all sales areas except the Middle East and Africa contributed to the improved performance. Volumes in Latin America surged by 76%, followed by gains of 16% in Russia and Eastern Europe and 14% in Southeast Asia.
READ MORE: Devro delays dividend payment in ‘precautionary’ move
The combined 13% increase across all emerging markets contrasted with a 5% volume decline in mature markets. This was led by a 16% fall in Europe, with the UK and Ireland down by 9%.
All were impacted by declines in demand from the food service sector as lockdown measures to control the spread of Covid-19 led to the closure of restaurants, sporting and entertainment events. Continental Europe was also hampered by distributor destocking in the first half of 2020.
The trend across its mature markets is improving, Devro said, with the 6% decline in the first half of last year slowing to 3% down in the second six months.
Overall, the drag from the pandemic is estimated to have knocked approximately 2% off volume sales in 2020. Adjusting for this, Devro said it would have otherwise delivered within its targeted long-term range of 2-4% growth.
Having caught up on dividend payments that were delayed last year as the company assessed the impact of Covid-19 on its business, Devro has proposed a final dividend of 6.3p per share for a total of 9p for 2020, in line with the previous year. The firm’s shares closed yesterday’s trading more than 9% higher at 194p.
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