Shares in Croda International (CRDA) were marked down more than 4% in morning trade to £45.68 after the chemicals maker issued a profit warning pinned on a difficult global economic backdrop.

The FTSE 100 company’s second earnings alert this year accompanied an update on third quarter trading for the period from 1 July to 30 September 2023.

Croda warned it now expects full year 2023 adjusted pre-tax profits to be ‘between £300 million and £320 million’, a significant downgrade from the previous £370 million to £400 million guidance range.

The company explained: ‘Customers have continued to reduce their ingredient inventories in consumer care, crop and industrial end markets, due to a combination of destocking and a weaker demand environment. This has continued to depress sales volumes and our overall performance for the period was therefore weaker than originally anticipated.’

THE EXPERT’S VIEW

Russ Mould, investment director at AJ Bell said: ‘A profit warning from Croda hints at the difficult global economic backdrop. Chemicals firms tend to be sensitive to fluctuations in GDP and a combination of destocking and weak demand adds up to a toxic mix for the business.

‘Being diversified across different industries has not spared Croda from pain and its relatively high level of fixed costs means lower volumes will result in a hit to margins.’

Looking ahead, Croda said there were ‘no indications of a significant rebound to come in the fourth quarter’.

In June, the chemicals giant warned of weaker-than-expected trading in the first five months of the year.

Croda, whose shares are down over 31% year-to-date, will report results for the year ending 31 December 2023 on 27 February 2024.

LEARN MORE ABOUT CRODA

Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Sabuhi Gard) and the editor of the article (James Crux) own shares in AJ Bell.

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