Croda sees ‘volatile’ trade as consumer care sales fall

NATURAL chemicals group Croda International insisted third-quarter trading was “robust” despite weakness in Europe, where sales in its dominant consumer care division are on the slide.

The Goole, East Yorkshire-based group said month-on-month trading has been “volatile”. It was on target in July and August but sales weakened in September. Continuing turnover for the quarter rose 0.5 per cent to £256.5m, from £255.2m a year earlier. Pre-tax profits were up 4.4 per cent to £59.3m.

But shares in the group, which supplies companies including Procter & Gamble, Unilever, L’Oreal and Estée Lauder, slid 29p to 2,172p as the update missed expectations.

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Liberum Capital analyst Adam Collins said Croda’s third-quarter results were “poor”, with third-quarter earnings five per cent lower than consensus. “Both the main divisions have come in light, consumer care and performance technologies,” he said.

Croda also revealed the sale of its loss-making Italian business in Cremona. The business, acquired with Uniqema in 2006, makes fatty acids and glycerine products and was sold for the value of its working capital – thought to be a few million pounds.

Chairman Martin Flower said: “Quarter four has started well. However, with the market remaining weak, particularly in Europe, and currency headwinds, we expect a similar performance in quarter four to that seen in the third quarter.

“Looking further forward, the board remains confident that Croda has the right strategy for continued growth.”

The FTSE 100 company derives more than half its sales from its consumer care division. It said set against “a very strong quarter in 2011”, sales there were down 2.7 per cent to £140.9m due to slow personal care sales, especially in Europe. However, the division’s health care and crop care sales increased, and operating profits lifted 5.7 per cent to £44.2m.

A spokesman said there are “no structural issues with the business”. “It’s just been a little bit more volatile,” he said. “Traditionally you would see things come back after the summer period in the third quarter and they did not.”

Europe, battling a sovereign debt crisis and sluggish consumer sentiment, has been weighing on Croda throughout 2012. The company said all other major regions experienced growth.

Its strongest growth came from lower value products in performance technologies and industrial chemicals divisions, where sales were up 2.5 per cent and 16.1 per cent respectively, year-on-year.

Despite tough markets and the adverse impact of currency, Croda emphasised its continued growth, with cumulative operating profits up 8.2 per cent at £193.5m this year. “This continues to vindicate our strategy of concentrating on high-value, niche markets,” said the company.