- Group performance 'in line' with expectations
- Pro forma sales down 6%
- Full year 2023 guidance reaffirmed
Shares in speciality chemicals maker Croda International (CRDA) were up more than 5% in morning trading to £59.44 despite the firm reporting an 80% fall in pre-tax profit to £128.7 million for the six months ending 30 June 2023 compared to £636.5 million in the same period last year.
Croda shares have are down 15% over the past year and lost as much as 13% in a day on 9 June 2023, when the company issued a profit warning along with a particularly bearish trading update.
Investors seem to have ‘fallen back in love’ with the company – as demonstrated by its unexpected share price gains in morning trading – reassured by chief executive Steve Foots confirming full-year pre-tax profit guidance of between £370 million and £400 million.
Foots also said the firm would maintain its dividend at 47p ‘reflecting confidence in future performance.’
TOUGH FIRST HALF
There is no denying the chemicals company had a tough first half, with pro forma sales falling 6% as customers reduced inventory levels in consumer, crop and industrial markets.
Sales in the industrial specialities division fell 20%, but on the plus side sales in the life sciences division were up 8% excluding $62 million prior period Covid-19 lipid sales.
‘The speed and scale of the post-Covid stocking and subsequent destocking has been unprecedented, leading to a decline in first half sales volume and also impacting profit margins’ conceded Foots.
‘Despite this difficult market backdrop, it is testament to the strength of the business that consumer care delivered sequential improvement on the second half of 2022 driven by customer demand for innovation and sustainability.’
EXPERT VIEW
Analysts at Berenberg said in a research note published in June that they expected a ‘return to form’ for the chemicals company in 2024.
‘We expect volumes to return to growth in 2024. We are encouraged by the growth in the pharmaceutical portfolio ex-COVID-19, given downgrades in the last few months at contract development and manufacturing organisations with biologics exposure (for example Lonza and Catalent).’
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