Shares in diversified chemical producer Croda ticked up on results which showed a dramatic recovery in fortunes through the latter half of 2009, with full-year underlying pre-tax profits of £106m marking another record performance.
The consumer care segment, mostly supplying inputs for personal and healthcare products such as Omega 3s, saw fourth-quarter operating margins improve 120 basis points to 23.2 per cent and operating profits rise by 10 per cent to £26.5m. But the real bounce back came in industrial specialities, where operating margin recovered from an abysmal recession-induced 1.3 per cent 12 months earlier to 6.6 per cent in the fourth quarter 2009. Chief executive Mike Humphrey says he expects this progress to continue toward the stated segment target margin of 10 per cent.
The industrial specialities business continues, as planned, to shrink sales of bulk fatty acids and glycerine, where Croda has no pricing power but inherited a substantial yet non-core footprint with the acquisition of Uniqema in 2006. Continuing turnover across these commodities fell from £165m in 2008 to £136m, and Mr Humphrey is aiming to reduce this in time to around £50-60m. Exceptional charges of £29m reflected the closure of a UK glycerine plant, in line with this aim. Meanwhile strong cash generation helped reduce net debt by £109m.
Broker UBS expects full-year adjusted EPS of 62.7p (2009: 50p).
| CRODA (CRDA) | ||||
|---|---|---|---|---|
| ORD PRICE: | 894p | MARKET VALUE: | £1.2bn | |
| TOUCH: | 893-895p | 12-MONTH HIGH: | 898p | LOW: 452p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 115p* | NET DEBT: | 182% | |
| Year to 28 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | 306 | 50.6 | 25.6 | 13.4 |
| 2006 | 480 | 17.2 | 5.1 | 14.3 |
| 2007 | 805 | 55.2 | 29.7 | 15.8 |
| 2008 | 911 | 96.3 | 48.0 | 19.8 |
| 2009 | 916 | 89.2 | 41.8 | 21.5 |
| % change | +1 | -7 | -13 | +9 |
Ex-div: 28 Apr Payment: 3 Jun *Includes intangible assets of £202m, 148p per share | ||||
