Croda International PLC on Tuesday reported a hefty drop in annual profitability, amid weaker sales, and it warned of further weakness in 2024.

Chief Executive Steve Foots said: ‘Our performance this year reflects the prolonged destocking and weaker macro environment that has followed two record years post the pandemic’.

The Yorkshire-based speciality chemicals firm said pretax profit fell by 70% to £236.3 million in 2023 from £780.0 million in 2022. Basic earnings per share declined 74% to 122.5 pence from 465.8p.

On an adjusted basis, pretax profit fell 38% to £308.8 million from £496.1 million before.

For 2024, Croda said it expects adjusted pretax profit to be between £260 million and £300 million, meaning it will be down on 2023.

Croda said its adjusted operating margin narrowed to 18.9% in 2023 from 25% the year prior. This was due to the negative operating gearing impact from lower sales volumes, lower Covid-19 lipid sales, and a negative mix impact from strong fragrances and flavours sales.

Croda said adjusted operating margin is expected to be two to three percentage points lower in 2024 than 2023.

In 2023, sales dropped 19% to £1.69 billion from £2.09 billion in 2022.

Sales fell 11% on a pro forma basis as customers reduced inventory levels across multiple markets, Croda said.

Consumer Care sales fell 1%, with underlying sales down 11% in Beauty Care, 1% lower in Beauty Actives and Home Care, and up 18% in the lower-margin F&F business.

Life Sciences sales were 5% lower, excluding Covid-19 lipid sales.

Sales in the Pharmaceuticals business rose 3%, in Seed Enhancement by 9%, but Crop Protection sales dipped 19% due to continued destocking.

Pro forma sales slumped 35% in Industrial Specialities reflecting destocking and reduced demand.

Croda said given the ongoing uncertainty in end-markets, the recovery trajectory for each business unit remains ‘difficult to predict’ and the range of possible outcomes in 2024 is therefore ‘wider than usual’ at this stage of the year.

Overall, the company expects to deliver mid to high single digit percentage sales growth in 2024, excluding the around $60 million of Covid-19 lipid sales in 2023, with higher sales volumes more than offsetting lower price and sales mix effects.

Foots said: ‘With our strong balance sheet, improving cash flow and consistent investment in our refocused portfolio, Croda is well positioned to take advantage of the demand recovery when it occurs’.

‘We expect the group’s performance to accelerate from 2025, generating continued increasing returns for our shareholders’.

Croda edged up its dividend by 0.9% to 109p per share from 108p.

Shares in Croda fell 1.8% to 4,817.00 pence each in London on Tuesday morning.

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