November 10, 2016 / 10:07 AM / 2 years ago

Sausage-skin maker Devro's stock plunges after profit warning

Nov 10 (Reuters) - Shares in Devro Plc plunged more than 25 percent after the British sausage-skin maker warned that 2017 core operating profit would be lower than expected due to a drop in sales volumes in Latin America related to plant upgrades.

The company, which makes edible collagen casings, said on Thursday it expected sales volumes next year to be about 10 percent lower than previously thought, mainly in Latin America, due to a programme to upgrade its manufacturing processes.

The Americas accounted for about 27 percent of total Devro’s total revenue in 2015, according to the company’s annual report.

The company said sales volumes in Russia and South East Asia had improved since July but total volume was little changed from the first half of 2016.

Devro is in the final phase of a three-year program to upgrade its factories. The company said in August that Latin America was “most significantly impacted” by the programme, which began in 2014.

Investec analysts said in a client note that while Devro was accelerating some restructuring plans to help mitigate the volume impact, “the backdrop remains challenging”.

The broker firm trimmed its 2017 pretax profit estimate by 20 percent and slashed its price target to 270 pence from 332 pence. Devro shares were down 21.5 percent at 176.8 pence at 0944 GMT on the London Stock Exchange. (Reporting by Rahul B in Bengaluru; Editing by Ted Kerr)

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