Croda ends tough first half in line with revised expectations

The FTSE 100 firm said that on a statutory basis, sales were down 21.9% at £880.9m, while operating profit tumbled 54.9% to £130.2m.

Profit before tax experienced a substantial decline of 79.8% to £128.7m, and basic earnings per share fell 83.8% to 63.1p.

The board did, however, leave the ordinary dividend per share unchanged at 47p.

On an adjusted basis, however, Croda's sales and profitability figures painted a slightly more positive picture.

Adjusted sales mirrored the statutory results at £880.9m, but operating profit was reported at £175.8m, for a smaller decline of 41.5%.

The operating margin stood at 20%, down 6.6 percentage points, and profit before tax was £174.3m, a decrease of 39.6% on the year.

Basic earnings per share showed a 40.1% reduction, reaching 92.9p.

Despite the challenging circumstances, Croda managed to improve its free cash flow significantly, recording an increase of 262.1% to £76.4m, although its net debt widened by 5.4% to £349.3m.

Croda reported a 6% decline in pro forma sales, adjusted for the divestment of the majority of performance technologies and industrial specialities, which it put down to customers reducing inventory levels in the consumer, crop, and industrial markets.

However, the company said it was able to maintain flat sales in the consumer care sector, despite a strong prior period.

In life sciences, sales showed growth of 8%, excluding the impact of the prior period's £62m in Covid-19 lipid sales.

Conversely, the industrial specialties sector faced a challenging period, with a 20% decline in sales when accounting for the PTIC divestment in the prior period.

Despite some ongoing challenges, Croda said it remained confident in its future performance, reaffirming its full-year 2023 guidance.

“The speed and scale of the post-Covid stocking and subsequent destocking has been unprecedented, leading to a decline in first half sales volume and also impacting profit margin,” said chief executive officer Steve Foots.

“Despite this difficult market backdrop, it is testament to the strength of the Croda business that consumer care delivered sequential improvement on the second half of 2022, driven by customer demand for innovation and sustainability.

“Excluding the impact of Covid-19 lipid sales in the prior period, we also saw growth across all areas of Life Sciences.”

Foots said that, with continued low visibility, the company was “taking some actions” to protect profitability ahead of conditions returning to normal, while continuing to leverage its balance sheet to invest in future growth.

“The confidence we have in Croda's strategy is undiminished and the opportunities ahead remain very exciting for our business.”

Reporting by Josh White for Sharecast.com.