DEVRO (DVO) 181.4p

Loss to date: 5.3%

Original entry point: Buy at 191.5p, 6 September 2018

Food products company Devro (DVO) has repaid our faith with full year results showing significant progress on a number of fronts.

Revenue was essentially flat at £253m even though there was an improvement in pricing to its customers, the big food companies, and in the product mix.

Volumes were up in the key North American, Latin American and South East Asian markets. But China revenue was down 8% because it discontinued imports of legacy products. Russia and Japan were particularly bad regions for the company in 2018.

There were improvements in manufacturing across all the firm’s sites but in particular the US where production yields are now among the highest in the group.

Sales this year are likely to be weighted towards the second half and volumes are expected to show a marked increase as the new ‘Fine Ultra’ product platform goes live in Europe, Japan and South East Asia.

Meanwhile continued crunching of costs should be enough to offset rising raw material, salary and energy prices and the firm reckons it is ‘well placed to make good progress in 2019’.

The company’s twin aims this year are to keep delivering on margin expansion and to generate enough free cash flow to pay down some of the additional debt it took on last year to finance its working capital.

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