Croda quarterly sales surge on weak sterling

The FTSE 100 firm said its innovation strategy was continuing to have an impact, with ‘New and Protected Products’ accounting for 27.6% of year to date sales, up from 26.4% a year earlier.

The quarter also benefited from Incotec, the seed enhancement business acquired in December 2015, the board reported.

Third quarter sales continued broadly in line with first half year trends and profit was in line with the board’s expectations, with sales rising by 20.1% to £315.3m.

With over 95% of sales outside the UK, Croda said the improvement largely reflected favourable currency translation, with the impact of weaker sterling increasing sales by 17.6%.

Year-to-date sales increased by 11.7% to £924.0m, with a favourable currency translation impact of 9.3%.

Underlying sales in the core business slowed slightly against the second quarter, down 2.5% in the third quarter and 1.2% lower year-to-date, with the board blaming the adverse impact of lower pricing for its generic Omega 3 API.

“Personal Care continued to benefit from a richer product mix, with sales growth in Sederma, our skin actives business, supported by the launch of two new products - Visiblan and Mediatone; growth in our broad spectrum sun care ingredients; and record NPP sales, with strong progress in Asia, where customers are increasingly sophisticated in their innovation needs,” Croda’s directors said in a statement.

“We have identified a number of new opportunities for Inventiva, our recently acquired encapsulation technology business.

“Construction of our North American biosurfactant project is progressing, with first production scheduled in 12 months time.”

Sales for personal care in the quarter increased by 16.4% with constant currency sales down 1.9%.

The lower sales at constant currency reflected the short term impact of reducing inventories as part of the company’s programme to increase customer proximity by transferring customers in Asia from local distributors to direct sales.

“Sales in Life Sciences rose 36.4% in the third quarter with constant currency sales up 19.6%.

“Underlying sales decreased by 8.2%, impacted by lower sales from our generic API contract in North America, due to reduced end market pricing.

“Excluding this contract, underlying sales in the remainder of Life Sciences rose 3.6% in the quarter, and we continue to focus on growing our diversified, IP-rich delivery systems across Health Care, Crop Protection and Seed Enhancement.”

The company’s Health Care business saw double digit sales growth in the quarter in high purity excipient delivery systems.

It said regional growth was strong in Europe, supported by developing business in Asia and Latin America.

New Omega-3 API sales were also progressing well, doubling last year's sales value in the year to date.

“In a sluggish market, Crop Care also showed underlying sales growth, particularly in North America and Asia, supported by success in our collaboration partnerships with multinational customers and growing NPP.

“The integration and repositioning of Incotec is nearing completion,” the board added.

“This will focus and streamline the business to improve margin and deliver growth in future years.”

The improving trend in the company’s Performance Technologies division continued, with reported sales up 18.0% in the quarter and constant currency sales returning to growth, up 0.3%.

“The business is developing closer ties with North American and Asian customers and is delivering more innovation across all markets.

“The quarter saw an excellent performance in Coatings and Polymers, which included the registration of MyCroFenceTM, a novel non-leaching antimicrobial technology acquired in 2014,” the board said.

“Geo Technologies continued to see top line recovery [and] the Performance Technologies operating margin continues to improve, moving towards our medium term target of 20%.”

Sales in the Industrial Chemicals arm increased 10.2%, with constant currency sales declining by 6.2% in the quarter.

The board put that decline down to its programme to reduce the proportion of low value-add co-stream products and tolling contracts in the sector, adding it continued to develop NPP to expand its range of value added products.

“Demand remains subdued in a number of our end markets, while profitability continues to be strong, supported by improved product mix and innovation.

“We expect to deliver our profit expectations for the full year and sterling weakness continues to benefit our reported results,” the board concluded.