Devro Plc (LON: DVO) are set to close one of its two Lanarkshire factories causing the loss of 90 jobs. The collagen maker has faced slower sales and stagnated European growth.
This morning, the collagen and sausage skin producer announced plans to cut its Bellshill factory.
The announcement follows plans to increase manufacturing at its other Lanarkshire site in Moodiesburn, which received a £2 million investment boost.
The closure of this plant may lead to financial costs of £15 million helping contribute cost savings of £5m.
Chief executive Rutger Helbing said: “Scotland will remain strategically important to Devro’s global operations. However, the collagen market is evolving and we must look at how we manage our business and stay competitive.Decisions like this are never easy. I know this will be an uncertain time for many colleagues, their families and the wider community.Our priority now is to ensure we have the right support in place for those who may be affected by these plans.”
Additionally, Devro released a trading update & manufacturing footprint review this morning.
Sales momentum increased during the third quarter and grew by 1% in collagen casings.
Devro identified that growth was seen in North American and Chinese trading, where growth was driven by sales in snacking categories.
However, this growth was offset by tough market conditions in Europe following Brexit and weaker sales in Japan.
The trading update speculated for future sales saying “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 £7 million in FY 2019. We continue to expect the covenant net debt / underlying EBITDA ratio to be around 2x at 31 December 2019″
Devro are one of many firms who are struggling to stimulate business in Europe, and the fact that expectations have been lowered shows the lack of consumer confidence in Europe. This has also affected firms such as Collagen Solutions (LON: COS).
Currently, shares of Devro are trading at 1,682p per share observing a 0.36% slip 22/10/19 10:45BST.