Devro's profit hurt by investment costs, strong pound

(Adds details, analyst comments, share movement)

By Aastha Agnihotri

March 3 (Reuters) - Sausage-skin maker Devro Plc (LSE: DVO.L - news) 's full-year profit slumped, hurt by costs related to investments in manufacturing technology and the strength of the pound against various currencies.

Shares (Berlin: DI6.BE - news) in the company fell as much as 9 percent and were among the top percentage losers on the London Stock Exchange (Other OTC: LDNXF - news) on Tuesday.

The maker of edible collagen casings for bratwurst, salami and chorizo said pretax profit fell 94 percent to 2.2 million pounds ($3.4 million) for the year ended Dec. 31. Revenue fell 4 percent to 232.3 million pounds.

Devro, which earns only about 10 percent of its revenue in sterling, said its net foreign exchange loss in 2014 compared with 2013 was 4.3 million pounds. It expects a further exchange impact of between 1.0 million and 2.0 million pounds in 2015.

The company said its 2014 effective rate of tax in the Czech Republic was low as it benefited from an investment incentive scheme. However, the benefit is likely to end in 2015 due to the higher profits now generated in the region.

"Whilst underlying momentum is hugely encouraging, the combination of further forex headwind and guidance of higher interest/tax charge means there is about 7 percent downside risk to our full year 2015 EPS," analyst Sahill Shan of N+1 Singer wrote in a note.

The brokerage said it expects Devro's full-year earnings to be closer to 15 pence per share for 2015 versus its earlier estimate of 16.1 pence.

The company, which sells collagen products to food manufacturers and in some markets, local distributors, is moving from higher-cost production lines to new low-cost technology.

Sales volumes of edible collagen grew by 3 percent during the year.

Devro kept its final dividend unchanged at 6.1 pence per share.

The company's shares were down 6.3 percent at 272 pence at 1105 GMT.

($1 = 0.6500 pounds) (Reporting by Aastha Agnihotri in Bengaluru; Editing by Robin Paxton and Anupama Dwivedi)