One of a number of UK exporters struggling under the weight of a strong pound, Croda International (CRDA) last month warned that its full-year reported profits would fall short of last year's. The group's interim sales figures certainly bear out the negative translation effects. But, perhaps, a more pressing concern is slowing underlying profit growth. Adjusted operating profits of £132m were 5 per cent down year-on-year, and only 0.5 per cent to the good even with currency effects discounted.
All three divisions - consumer care, performance technologies and industrial chemicals - reported sales growth on a constant currency basis. The first has provided the bulk of growth in recent years: Croda is now one of Europe's largest producers of cosmetic ingredients, particularly at the more profitable upper tier of this market - anti-wrinkle agents and the like. Worryingly, it was this division that led the slowdown, with revenues up just 0.3 per cent at constant currencies.
Some customers in continental Europe have reportedly been sourcing cheaper ingredients. Weak consumer confidence means this may only be a cyclical, as opposed to a structural, issue for the group. Nevertheless, management has decided to reorganise Croda's sales and research operations along divisional lines in a bid to sharpen the focus on growth.
Deutsche Bank predicts 2014 pre-tax profits of £239m (from £251m in 2013) and EPS of 126p (from 132p in 2013).
| CRODA INTERNATIONAL (CRDA) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,167p | MARKET VALUE: | £2.9bn | |
| TOUCH: | 2,167-2,168p | 12-MONTH HIGH: | 2,761p | Low: 2,095p |
| DIVIDEND YIELD: | 3.0% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 318p* | NET DEBT: | 46% | |
| Half-year to 30 June | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 563 | 133 | 68.1 | 29.0 |
| 2013 | 537 | 125 | 64.5 | 29.5 |
| % change | -5 | -6 | -5 | +2 |
Ex-div: 27 Aug Payment: 30 Sep *Includes intangible assets of £239m, or 176p a share | ||||
