Devro has increased underlying profits by 12 per cent thanks to a surge in sales of sausage skin casings in North America and parts of Asia.
Revenue came in at £230.2 million for 2015, slightly behind the £232.3 million recorded in 2014, a slip that the company blamed on foreign exchange currency movements.
The business was helped by restructuring that took older collagen casing-making capacity and jobs out of its Scottish factories, along with the outsourcing of some operations in Australia. These delivered savings of £5.8 million, better than expected.
Lower production and raw materials costs and an improvement in pricing helped underlying pre-tax profit to rise from £26.1 million to £29.2 million. There was a positive contribution from PV Industries, the Netherlands-based collagen gel supplier that Devro bought for £6.8 million in October.
Peter Page, the chief executive, said that long-term growth prospects remained strong. Sales volumes rose 1 per cent in spite of a 16 per cent dip in sales in Russia and the surrounding markets. Japan was up by 7 per cent, southeast Asia grew 13 per cent, while Latin America, after stripping out a decline in Brazil, showed a 5 per cent increase. Continental Europe and North America grew by 3 per cent.
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Devro said it had experienced some capacity constraint towards the end of the year as part of the transformation of its manufacturing footprint.
Mr Page said that large-scale investments on new plants in China and the United States were on course to come to fruition this year, as were the benefits of a £50 million site in South Carolina. Devro expects to save about £8 million, as it also intends to shut down the old plant adjacent to the new building.
In China, where Devro is spending £60 million in Jiangsu province, the installation of machinery is to begin in the next few months, with the factory pencilled in to begin operation in the second half of this year.
Mr Page said: “China is about adding capacity and giving us bridgehead into the world’s largest market. We see plenty of opportunity for our type of casing.” Cost benefits from the China plant are expected to become more prominent from 2017, with Mr Page hopeful that the site will be running at full capacity next year.
Devro’s net debt increased sharply from £69.2 million to £125.5 million, principally because if its investment in manufacturing.
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Nicola Mallard, analyst at Investec, kept a “buy” rating on the stock but lowered the target price from 362p to 360p. Devro, which still employs 400 in Scotland across Moodiesburn and a second factory in Bellshill, held its dividend steady at 8.8p. The shares 1½p to 311½p.