Profit falls 33% at Croda, Yorkshire chemicals giant

Shares of Croda International, the Snaith, East Yorkshire-based FTSE 100 speciality chemicals giant, fell as much as 4% after it said its 2023 adjusted profit before tax fell 33% to £308.8 million “in line with updated expectations.”

Further, Croda said it expects a lower group adjusted profit before tax in full year 2024 of “between £260m and £300m.”

The firm reported £1.694 billion in sales for 2023, down 18.9% from the 2022 figure of £2.089 billion.

Croda has proposed a small increase in its full year dividend to 109p a share (2022: 108p).

In its outlook, Croda said: “Consumer Care has started the year well and we are cautiously optimistic about the improving demand trend we experienced in January.

“Within Life Sciences, we expect the non-Covid Pharma business to grow but that destocking will continue in Crop Protection. Demand in Industrial Specialties is expected to remain weak.

“Given the ongoing uncertainty in our end markets, the recovery trajectory for each of our business units remains difficult to predict and the range of possible outcomes in 2024 is therefore wider than usual at this stage of the year.

“Overall, however, the group expects to deliver mid to high single digit percentage sales growth in 2024, excluding the c.$60m of Covid-19 lipid sales in 2023, with higher sales volumes more than offsetting lower price/mix.

“We expect 2024 group adjusted operating margin to be two to three percentage points lower than 2023 due to the following …

“Different business mix effects year-on-year, with no Covid-19 lipid contribution and continued strong growth in Fragrances and Flavours …

“Low overhead recovery is expected to persist as sales volumes remain depressed in Crop Protection and Industrial Specialties, two of the three businesses with the highest production volumes, alongside Beauty Care …

“To support the return to sales growth, the cost base will reset back to a more normalised level from its low point in 2023. This will include the likely unwind in 2024 of the c.£25m benefit we saw in 2023 from a negligible variable remuneration charge. Some of this will be offset by modest cost savings from our recent reorganisation …

“We will continue to invest to support our long-term strategy. Customer interest in innovation and sustainable ingredients remains strong, despite the current destocking cycle …

“Using these assumptions and at current exchange rates, we expect group adjusted profit before tax to be between £260m and £300m in full year 2024.”

Croda CEO Steve Foots said: “Our performance this year reflects the prolonged destocking and weaker macro environment that has followed two record years post the pandemic.

“Despite the financial impact of this ongoing uncertainty, the technology trends that will drive our future growth have not changed with a continued transition to sustainable ingredients and biologics.

“We have successfully realigned our portfolio with these megatrends and our strategy is delivering with continued customer demand for innovation and sustainable ingredients.

“In Consumer Care, sales of new and protected products increased, and F&F outperformed once again.

“In Life Sciences, our Pharma business is leading the industry in biologics drug delivery with more partnerships and product launches strengthening our pipeline.

“Despite the challenging macroeconomic backdrop, we have continued to invest for the future, adding biotech-derived active ingredients to our portfolio through our acquisition of Solus Biotech and expanding capacity in Pharma whilst maintaining strict capital and cost discipline.

“With our strong balance sheet, improving cash flow and consistent investment in our refocused portfolio, Croda is well positioned to take advantage of the demand recovery when it occurs.

“We expect the group’s performance to accelerate from 2025, generating continued increasing returns for our shareholders.”