In its trading update for the year to 31 December 2019, Devro reported that full year edible collagen volume sales were flat, delivering overall volume growth of 1% in the second half.
It said that “slightly lower than anticipated H2 volumes, less favourable country mix combined with a smaller than expected FX benefit due to the strengthening of sterling” resulted in the business expecting to report underlying operating profit for the year in the range of £39 - £40m.
Devro said it continues to execute its growth plans as set out in its ‘3Cs strategy’, defending and building upon its strong market positions in mature markets such as North America, Continental EU, UK & Ireland, Japan, Australia & NZ, and targeting to increase its share in emerging markets like Latin America, Russia & East, Middle East & Africa, South East Asia, China.
Emerging market growth
The business reported that after a slower start in the first half of 2019, overall volumes in emerging markets grew 13% in the second half and 7% for the full year.
Whilst overall volumes in North America grew 7%, growth during the fourth quarter was not as strong as expected for Devro, specifically impacted by a longer than anticipated Christmas shutdown at a key customer.
Market conditions in Japan and Europe continued to be challenging for the business as previously guided while in Europe, itsaw weak market sentiment, with lower promotional activity due to higher pork prices and the impact of de-stocking by some of its distributor partners, which Devro expects to continue into H1 2020. As a result, overall sales in mature markets declined 3% in the year.
It added that “cost saving initiatives continued to deliver well and we will achieve £7m savings in FY 2019” and “proposed plans for the closure of the Bellshill site in Scotland remain on track”.
The statement also stated: “In 2020 we expect to achieve strong volume growth in emerging markets. In our mature markets we expect good volume growth in the North American snacking market and, whilst we anticipate a continuation of the challenging market conditions in Europe (particularly in the first half of 2020), we expect overall Group volumes to be ahead of 2019.”