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Devro shares get a grilling after sausage casing maker's profit warning

It's likely operating profit in 2017 will be lower than expected and recently built sites in the US and China won't be put to full use yet
November 14, 2016

It all went off with a bang at sausage skin maker Devro (DVO) last week but not in a good way.

IC TIP: Buy at 182p

Management has said while expectations for full-year operating profit remained unchanged, challenging conditions in Latin America and changes being made to its manufacturing footprint would have an impact on margins.

Not only this, but its new factories in China and the US are fully operational but, based on current sales trends, the group doesn't reckon it will need the extra space right away. This will have a further impact on margins, and underlying operating profits for 2017 will also be lower than expected. An additional £3m of exceptional costs will be incurred in the 2016 financial year, on top of the £8m already expected. The shares responded by falling a fifth.