Croda rallies as it posts jump in first-half profit

Shares in Croda International rallied after the company posted a 7.3% jump in pre-tax profit and said the first half of the year has been encouraging, with the recovery in underlying sales trends that began in the second half of last year continuing.

For the six months ended 30 June, adjusted pre-tax profit came in at £135.7m from £125.3m last year. Sales were up 5.2% at £564.6m from £537.4m, reflecting growth in all sectors and all regions, particularly the Life Sciences division.

Operating margin remained strong at 24.6%, unchanged from last year, while net debt stood at £179.2m from £180.2m.

The speciality chemical ingredients company posted a dividend per share of 31p, up 5.1% from 29.5p in 2014 and said the progress made in the first half was underpinned by its continued focus on innovation and record sales of New and Protected Products.

Chairman Martin Flower said: “We expect to continue to deliver growth through the second half of the year, albeit against a stronger comparator period. Whilst conditions remain uncertain in Europe, we are encouraged by recent growth. Overall, we remain on track to deliver our expectations for the full year and to generate strong returns for shareholders."

Accendo Markets analyst Augustin Eden said: “Shares in Croda have broken up above their moving averages this morning after an encouraging set of results that saw the company’s refocused global organisation deliver better performances across all its business sectors.”

“While the second half of the year will be measured against a stronger comparator period in H2 2014, Croda looks on track to be cleansing the image of the chemicals sector,” he added.

Charles Stanley upgraded Croda to ‘hold’ from ‘accumulate’ in light of the company’s improved performance and the likelihood of a capital return to shareholders.

It said the results were better than expected and a 4% beat at the earnings per share level.

However, Liberum sounded a note of caution. It said although the results appear to show solid growth, it should be remembered that this follows a long period of subdued top-line growth. In addition, it noted that forex headwinds last year have now dissipated.

It added that although growth has returned, this is already reflected in the stock’s valuation.

It rates Croda at ‘hold’ with a 2,520p price target.

At 14:06, shares were up 3.5% at 2,892p.