A beautiful world for Croda as group sees no let-up in demand

The Snaith-based company has seen little impact from the recession as consumers continue to splash out on beauty and anti-ageing creams.

Chairman Martin Flower told shareholders at yesterday’s AGM: “I am pleased to report that we achieved record group results in the first three months of 2012, driven by our highest ever quarterly sales and profits in both consumer care and performance technologies.”

Sales from continuing operations rose 4.7 per cent to £291.0m.

The group saw sales growth in all the major geographical areas it operates in and volumes were much improved on last year.

Operating profits from continuing operations rose 8.0 per cent to £65.8m and pre-tax profits from continuing operations increased 7.2 per cent to £65.1m, higher than analysts’ expectations of £64.6m.

Analysts James Dawson, at Charles Stanley, said: “Croda has issued a confident trading statement for the three months to March 31.

“The group has reported sales growth and further margin improvement as consumer care and performance technologies drove the business. Given the strong start to 2012, management expressed confidence in ‘another year of progress for Croda’. We reiterate our accumulate recommendation.”

The shares closed down 0.9 per cent, a fall of 20p to 2238p, yesterday on profit taking following a strong run over the past few weeks.

Mr Flower said that all business areas within consumer care saw “very good growth”, resulting in a sales uplift of 9.2 per cent to £159.7m and a 13.7 per cent increase in operating profits to £48.2m.

Performance technologies sales increased by 2.9 per cent to £106.9m, in line with expectations, and operating profits increased by 1.2 per cent to £16.3m.

“This was an encouraging result against very strong comparatives in the first quarter of 2011 when we experienced profit growth of 56.3 per cent,” said Mr Flower.

Industrial chemicals, which the group said accounts for less than two per cent of group operating profit, saw an 11.9 per cent fall in sales to £24.4m due to slow demand in Europe.

This led to a 45.8 per cent fall in operating profits to £1.3m.

Croda has no plans to dispose of the industrial chemicals business as it is still profit-making.

The group said raw material costs have started to rise and it has begun to introduce price increases across a number of product areas.

While 70 per cent of Croda’s products use natural raw materials, the other 30 per cent comes from petro-based materials where prices have risen.

Net debt fell by £45.2m to £185.9m on strong cash generation and a £15.9m final receipt from the 2008 sale of its Chicago business.

“The board believes that these results represent a strong start to the year and we remain confident that 2012 will be another year of progress for Croda,” said Mr Flower.

Analyst Adam Collins, at Liberum Capital, put a buy recommendation on the shares and said: “Croda’s first quarter results were three per cent ahead of consensus in terms of revenues and two per cent ahead at the EBIT level.

“The stand-out performer again was the consumer care division The full-year consensus is around £263m so with £65m achieved in the first quarter, Croda appears on track, given little seasonality.

“The shares are not cheap at 17x current year consensus EPS, but these are solid results.”

Croda said that despite the economic hardship, people are still spending money on making themselves feel better about their appearance.

In 2011, Croda’s best performance was in Latin America where sales grew by 11 per cent and Europe, where sales grew by nine per cent. Sales in North America grew by a more modest four per cent after the group parted company with a major distributor.

The company believes that emerging markets could make up half the business in the next six years.

Croda is famous for its innovative new product launches and this year these will include anti-ageing product Resistem, which uses plant stem cell technology to reduce wrinkles, redness and promote a glowing complexion.

Croda, which supplies companies such as L’Oreal, Chanel, Clarins, Estée Lauder, Boots and Procter and Gamble, said all the big major cosmetics industries are looking at Resistem.

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

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