Devro to invest in £50m China factory

By Georgi Gyton

- Last updated on GMT

Devro plans to invest £50m into Chinese manufacturing site
Devro plans to invest £50m into Chinese manufacturing site

Related tags Investment Czech republic Southeast asia Pork Processing equipment & plant design

Scottish collagen casing firm Devro is to invest £50m (US$83.8m) in a new manufacturing facility near Shanghai, China.

The company, which produces edible casings for a range of foods, including sausages, has also recently completed an upgrade of its factory in the Czech Republic, as it continues to expand its manufacturing footprint overseas.

Work on the new site in Nantong is due to start in the first half of 2014, with commissioning to begin in 2015, and space added to expand in line with future market demand, said Devro.

It put the total value of the world market for edible collagen casings at around £650m (US$1bn), up 7% during 2013.

Steve Hannam, chairman, Devro, said: "Devro made considerable progress in 2013, despite a more difficult trading background, as we completed the upgrade at our world-class facility in the Czech Republic and established the programme of investment at our plant in the US."

He said these investments, coupled with the decision to invest in the Chinese market, would ensure the business was in a strong position to "benefit from significant opportunities in the growing global casings market".

According to an analysts note from Nicola Mallard at Investec in the UK, the market for edible casings in China has been growing by 40% year-on-year since 2002, and could account for half the global demand by 2015.

Devro reported a pre-tax profit of £37.5m for the full year ended 31 December 2013, down 4.5%. Revenue rose 1% from £241.1m in 2012 to £242.7m last year, with ebitda up 4% to £60.6m.

A reduction in operating profit in the Americas primarily related to "US manufacturing issues",​ while the decline in its Asia-Pacific business was affected by a change in the sales mix towards emerging markets such as China, and adverse foreign exchange movements, it said.

Around 41% of Devro’s total sales now come from emerging markets – up from 38% in 2012. Volumes increased most significantly in Latin America (+21%), and south east Asia (+16%).

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