Croda remains confident despite profit hit

WEAK consumer demand in Europe has dented profits and sales at Croda, but the group remains optimistic that its new structure will deliver growth in the future.

In its interim results for the six months to the end of June, the Goole-based speciality chemicals giant said adjusted pre-tax profit decreased by 5.9% to £125.3m and reported sales were down 4.5% at £537.4m.

The East Yorkshire-based manufacturer has a consumer care division, performance technologies area and industrial chemicals division.

Chairman Martin Flower said: “Our performance in the first half of the year was behind our initial expectations as weak consumer demand in Europe impacted the business, particularly in Personal Care.

“Despite this, we saw strong underlying revenue growth from New and Protected Products, leading to improved margins in both our core divisions. Differentiated products also made progress although demand for commodity products in the tail was much weaker. In addition, we have made good progress in a number of growth markets, especially Asia which achieved 8% underlying sales growth.
 
“We expect the new organisation structure to deliver sustained sales growth in future.
 
“Robust cash generation continues to underpin investment in R&D, new technologies and capacity and a number of new growth initiatives in health and skin actives will come on stream in the second half.
 
“While we still expect to achieve underlying profit progress in 2014, as outlined in our pre-close trading statement, pre-tax profits are now expected to come in below those attained in 2013.”

Group chief executive Steve Foots added that market trends remain difficult to read and visibility remains limited.

“Adverse currency effects are expected to be at similar levels in quarter three to those seen in the second quarter. However, we do expect to make underlying sales and profit progress in the second half and beyond as the new technologies we have developed come on stream and our momentum in the growth economies continues to build. We remain confident that our strategy and our chosen markets will deliver future growth,” he said.

The business has refinanced its core banking arrangements, putting in place a £400m debt facility with a number of banks which runs to July 2019, taking the group’s total committed facilities to £485m.
 
Croda’s interim dividend has been increased by 1.7% to 29.5p.