Devro PLC Trading Update (4060H)
November 15 2018 - 2:00AM
UK Regulatory
TIDMDVO
RNS Number : 4060H
Devro PLC
15 November 2018
15 November 2018
Devro plc
Trading Update
Devro plc, one of the world's leading manufacturers of collagen
products for the food industry, issues the following trading update
for the period 1 July to 31 October 2018 ("the period").
Trading Performance
We have seen strong volume performances in the period, notably
in North America, Latin America, and South East Asia. However
Russia has been challenging and we have seen some continued
weakness in Japan.
Production performance at our US plant has maintained its
significant improvement over prior year, and the efficiencies are
now amongst the highest across the group. The focus is now on
increasing speeds to further improve the output from the plant.
Our China plant continues to perform well. As previously
indicated our focus now is on improving the pricing for the
products from this plant and we continue to see double digit
percentage growth in the average selling price for Nantong
product.
The launch of the new Fine Ultra product platform for
Continental Europe, Japan and South East Asia will deliver modest
sales volumes in 2018. It is expected to be a key driver for growth
in 2019 and beyond.
Overall edible casing sales volumes for the period were lower
than our previously stated expectations, due to a greater than
anticipated adverse impact from Russia's economic and currency
environment, and the slightly lower than anticipated ramp-up rate
of our new Fine Ultra platform. As such full year edible casing
volumes are now expected to be unchanged compared with prior
year.
Operating Profit/Balance Sheet
Year to date underlying operating profit was higher than the
equivalent period last year as improved price/mix (particularly in
China), manufacturing efficiencies (particularly in the US) and
good progress on cost saving actions for Devro 100, more than
offset the modestly lower overall edible casing sales volumes and
currency headwinds.
Our expectations for the full year remain broadly unchanged as
growth in underlying operating profit is expected to be underpinned
by a continued improvement in price/mix, especially related to
China and Latin America, and the delivery of cost savings. The
Devro 100 savings from production costs are expected to more than
offset the energy and wage inflation which was highlighted in
previous announcements. In addition, further savings from operating
costs are now being delivered. Currency continues to be a headwind,
as previously guided.
The year-end net debt to underlying EBITDA covenant ratio is
expected to remain at 2.1 times, in line with December 2017.
Other Strategic Actions
Building on previous transformation activities, and reflecting
our global ambition to be recognised by our customers as their
preferred partner for collagen casings and gels, we have reviewed
our operating cost base and will be re-prioritising resource
allocation to align with our strategic priorities and ensure
delivery of the additional savings of GBP2m-GBP4m as guided with
the first half results. A global commercial director, spanning all
sales areas, has been appointed to better align our commercial
activities across the group and to drive our growth ambition.
ENDS
Contacts:
Devro plc
Rutger Helbing Chief Executive Officer Tel: 020 3865 7637
Jackie Callaway Chief Financial Officer Tel: 020 3865 7637
FTI Consulting
Richard Mountain / Nick Tel: 020 3727 1340
Hasell
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END
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