Devro PLC Trading Update & Manufacturing Footprint Review (6238Q)
October 22 2019 - 1:00AM
UK Regulatory
TIDMDVO
RNS Number : 6238Q
Devro PLC
22 October 2019
22 October 2019
Devro plc
Trading Update, Outlook and Global Manufacturing Footprint
Review
Devro plc ("Devro" or the "Group"), 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 30 September
2019 (the "period" or "Q3").
Trading Update and Outlook
Sales momentum improved during Q3 2019 with 1% volume growth in
collagen casings (H1 2019: -1%). During the period we saw good
trading in North America, where we benefited from continued growth
in snacking categories, and also in China, due to continued strong
growth albeit at margins below the average for the Group. These
positive performances were offset by a further deterioration in
market conditions in Continental Europe and weaker than expected
sales in Japan. As anticipated, UK & Ireland and Australia saw
similar trends to H1 2019.
We continue to expect a modest acceleration of volume growth in
Q4 2019 with full year volume growth expected at c.1%. Our cost
saving initiatives are progressing well and we are confident of
achieving our guidance of GBP7 million in FY 2019. We continue to
expect the covenant net debt / underlying EBITDA ratio to be around
2x at 31 December 2019.
Our expectations for the full year remain broadly unchanged as
growth in underlying operating profit through higher volumes,
delivery of costs savings and positive FX will be offset by adverse
country/product mix, lower revenues from other products and energy
and wage inflation which was highlighted in previous
announcements.
Global Manufacturing Footprint Review
In line with our strategic priorities, the Group has undertaken
a review of its global manufacturing footprint with the aim to
pursue further efficiency improvements, as well as to align
available capacity to the Group's growth ambitions.
As a result of this review we are proposing to close our
Bellshill site in Scotland and, consequently, to increase the
portfolio of products manufactured in our Moodiesburn site in
Lanarkshire and relocate some of the Bellshill's manufacturing
assets within the wider Group. Following consultation, we expect
Bellshill to close during 2020 with the loss of c.90 employees. An
exceptional cost of GBP15m (GBP10m of cash) will be incurred (2019:
GBP11m exceptional profit and loss charge, GBP1m exceptional cash
charge; 2020: GBP4m exceptional profit and loss charge, GBP9m
exceptional cash charge). The investment associated with these
actions is within our longer-term capital programme and, as such,
our capital expenditure guidance for FY 2020 (GBP18m) remains
unchanged. This review has identified annualised cost savings of
GBP5m to be fully realised in FY 2021.
Additionally as part of the global manufacturing footprint
review and the intended closure of Bellshill the Group is analysing
its ongoing supply strategy. This is expected to result in non-cash
exceptional impairment charges in FY 2019, primarily relating to
partial write-downs of the China and US plants. These plants
continue to be an integral part of our global footprint and the
revised supply strategy will enhance the agility and flexibility of
the Group's supply chain whilst staying focussed on our long-term
growth ambitions.
ENDS
Contacts:
Devro plc
Rutger Helbing Chief Executive Tel: 020 3865 7637
Officer
Jackie Callaway Chief Financial Tel: 020 3865 7637
Officer
FTI Consulting
Richard Mountain / Tel: 020 3727 1340
Nick Hasell
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END
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