A very brief but in line AGM update from Devro this morning. As anticipated underlying trading conditions remain mixed but there is positive news around growth investment, especially government approvals around the new China facility. This removes a key area of uncertainty. We do not envisage consensus expectations changing on the back of today’s update. We remain positive as we see structural growth of the collagen market and Devro’s re-positioning of the business to capitalise on emerging market growth as supportive of EPS growth recovering in the next 3 years. The shares have been weak in recent weeks primarily on the back of soft Viscofan Q4-15 LFL’s and a tempering of its FY16 expectations. We understand most of Viscofan’s short-term trading challenges revolve around high exposure to the weak Brazilian market and increased competition in the non-collagen artificial casing categories. Devro is much less exposed to both these issues. We stay at Buy with a 350p 12m TP.
