Blackfriar: ‘Glamourous’ Croda deserves a presence at the top table

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Blackfriar gets very excited when the FTSE quarterly reshuffle comes around – especially if there’s the prospect of another Yorkshire company joining the FTSE 100 leading list of British companies.

Step forward natural chemicals group Croda International, the company that put Snaith on the map.

Yorkshire has a long list of companies that once graced the FTSE 100 with their presence, but it doesn’t make good reading.

Perhaps the less said about Bradford & Bingley (nationalised following a run on the bank) and Halifax (merged with Bank of Scotland, which subsequently came a cropper during the credit crunch), the better.

As for KCom (then known as Kingston Communications), Drax, Northern Foods, Persimmon and Provident Financial, their market caps fell too low to stay in the top flight index.

Perhaps the only happy stories are Asda and Yorkshire Water’s parent Kelda. Asda was taken over by American giant Wal-Mart and reported impressive figures this week while Kelda went private and now regularly features in Ofwat’s top three water companies.

This has left Morrisons the sole Yorkshire representative in the FTSE 100, which for a region that boasts over 60 listed companies isn’t impressive.

Still based on this week’s record results, Croda should be joining its Yorkshire stablemate at the next reshuffle.

Croda has a market cap of around £2.7bn, which would make it the 95th largest company in the FTSE All Share.

Now, you may be reading this and thinking “Hmm, Croda, I’ve not really heard of them.”

That’s because Croda likes to keep a low profile. However it is actually rather a glamorous company.

It supplies global skin care and cosmetics giants including L’Oreal, Chanel, Clarins, Estée Lauder and Procter and Gamble.

Croda is the company that makes the natural ingredients that stop women (and more recently men) getting wrinkly, old, flabby, hairy, red and spotty.

Croda’s pre-tax profits rose 26 per cent to £242.2m in the year to December 31.

New chief executive Steve Foots said that despite the economic hardship, people are still spending money on their appearance.

“We’re not seeing any sign of trading down anywhere,” he told Blackfriar

Mr Foots believes that consumers are more willing to trade down on food than beauty products.

“People want to look good,” he said.

“It’s the feel-good factor, like lipstick during the war.”

While Croda is still doing well in Europe and the US, the real growth lies in Latin America and Asia.

Brazil is leading the charge. The country that gave its name to a certain style of lady waxing is clamouring for Croda’s ingredients and China and India are not far off as disposable incomes rise in both countries.

This year Croda is launching an anti-ageing product Resistem which uses plant stem cell technology to reduce wrinkles, redness and promote a glowing complexion.

Its other new product is Crodasone Cystine which straightens hair without the need for very high temperature hair straighteners.

Croda is very cash-generative and raised its final dividend by a mouthwatering 20 per cent to 30.25p.

While Croda’s health and beauty interests should continue to spearhead growth, analysts are also pointing to the less glamorous, industrial side of the business as another potential money spinner.

Croda is a credit to Yorkshire and Blackfriar looks forward to it joining the FTSE 100 at the next reshuffle.

For a region staking so much on the green energy revolution, Drax’s decision to scrap plans for two biomass plants is a clear blow to Yorkshire.

The North Yorkshire-based plant pulled the plug on two of three 300 mega watt (MW) ‘green’ power stations planned for Yorkshire, blaming low subsidies.

Christabel Cowling, of advisers Ernst & Young, calls the decision a “potentially significant blow to the development of the UK bio-energy sector”. “It also creates another obstacle for the Government and their ambitious 2020 mandatory renewable energy targets,” she said.

But crucially, Drax has not dropped biomass-burning plans altogether, and plans to convert its giant plant into a mainly biomass-fuelled generator.

The cash-strapped Government is understandably wary about committing to a subsidy regime which would tie it into supporting biomass plants for the next couple of decades. So its decision to support co-firing over dedicated biomass plants seems a painful but pragmatic solution in an austere financial climate.

It adds another renewable fuel to the mix, but ensures we don’t get too hooked on biomass. It also extends the lifespan of Drax – a vital and versatile power asset.