Profits down 33% at chemicals firm

Croda International announced full-year profits down 33% to £308.8m, in line with a profit warning it issued in October.

The Goole chemicals firm said sales were down 11% as customers reduced inventory levels across multiple markets, and adjusted operating margin was down from 25% to 18.9% as it geared down for lower volumes and lower Covid-19 lipid sales. Chief executive Steve Foots pointed out it had enjoyed two record years after the pandemic.

The firm said it retained a strong balance sheet, with £169.5m working capital, and free cash flow up 5% to £165.5m, and it was well positioned for market recovery.

It was prioritising investment in Asia, particularly China and India, where sales had grown 12%. It had invested in new R&D labs in Shanghai and would commission  a new manufacturing plant in India in 2025.

It said it had made excellent progress building industry-leading positions in high-growth life sciences markets.

Nevertheless, it said ongoing uncertainty in end markets made predictions for 2024 difficult, but it expected to deliver mid to high single digit growth in 2024, with profits between £260, and $300m.

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.

“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.”