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Croda's currency curse

RESULTS: Croda's business model is working well, but currency issues will hit profits  
February 25, 2014

Croda (CRDA) clocked up another year of record sales, margins and profit. It had a better-than-expected fourth quarter, too. But, while management still expects Croda to grow at constant currency in 2014, the strong pound is likely to have a big impact on the chemical company's reported numbers.

IC TIP: Hold at 2,504p

Indeed, using forex rates from December for all of 2013 would have wiped £9m off the bottom line. As it was, underlying pre-tax profit grew 5 per cent to £251m, driven by record margins at both the consumer care division, where adjusted operating profit grew 3 per cent to £191m, and performance technologies, up 6 per cent to £63m. At least that shows Croda's business model - launching new products with better returns - is working.

Individually, the products are not blockbusters, but collectively they make a big difference, and sales of new and patented products (NPP) jumped 11 per cent. In consumer care, demand for Croda's products that carry active ingredients grew fastest. But Omega 3 sales fell, crop care was flat and fewer big customers changed the chemistry in new personal care products. Research suggests they may do this year, when Deutsche Bank expects adjusted pre-tax profit of £278m - giving adjusted EPS of 145p (from 131p in 2013).

CRODA (CRDA)

ORD PRICE:2,504pMARKET VALUE:£3.4bn
TOUCH:2,501-2,507p12-MONTH HIGH:2,846pLOW: 2,205p
DIVIDEND YIELD:2.6%PE RATIO:19
NET ASSET VALUE 304p*NET DEBT:48%

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20090.83914321.5
20101.001929535
20111.0323812055
20121.0523812259.5
20131.0825013164.5
% change+2+5+8+8

Ex-div: 30 Apr

Payment: 30 May

*Includes intangible assets of £239m, or 176p a share