Croda’s pre-tax profits increase by 40 pc

NATURAL chemicals company Croda International reported a strong start to 2011 with record sales and profits in both its consumer care and industrial markets.

The Snaith-based company said pre-tax profits from continuing operations rose 40 per cent to £60.7m in the three months to March 31.

Following the upbeat statement, the group’s shares closed up just over seven per cent last night.

The group’s shares rose 125p to close the day at £18.98.

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Croda reported “robust demand” across all its global operations.

Chairman Martin Flower was confident about the future when he addressed shareholders at the group’s annual general meeting yesterday.

“We are pleased with the performance to date and are confident of reporting further progress throughout 2011,” he said.

The FTSE 250 company, which makes chemicals for cosmetics, healthcare and home care industries, said average prices increased in the first quarter as it passed on significant raw material cost increases.

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“We have implemented further price increases where necessary in April,” said Mr Flower.

Chemical makers have been battling against the rising cost of raw materials and have been passing it on to customers.

Recently, the largest United States chemical maker Dow Chemical Co also raised prices for highly sought-after products in tight supply.

Croda’s group sales rose by 13.2 per cent to £277.9m despite adverse currency translation of 2.4 per cent.

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Overall volumes were slightly down as the group continues to reposition its industrial specialities operations away from lower price and higher volume products towards more niche, speciality business.

On a segmental basis, consumer care operating profits rose 22.2 per cent to £42.4m with personal care, health care and crop care all reporting significant sales and profit growth.

Industrial specialities reported robust profit growth of 63.7 per cent to £18.5m during the three month trading period despite the volume decline and adverse currency movements.

Net debt was reduced by £5.3m since the year-end to £215.1m despite an unfavourable currency movement of £1.5m.

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Analyst Jeremy Batstone-Carr at Charles Stanley described the group’s performance as “another outstanding quarter”.

“Croda has delivered another strong trading update,” he said. “Average product prices increased over the quarter as significant raw material costs were passed on.

“Contrary to our expectations consumer care proved the strong performer. We believe that these results are sufficiently strong to edge up our 2011 pre-tax estimate.”

The upbeat trading update follows record results for 2010 as Croda benefits from a growing demand for cosmetics.

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Croda said that growth across all parts of the business led to “significant” cash generation which allowed the group to increase the 2010 dividend by 63 per cent to 35p.

The group has plans for a share buyback programme in 2011 while it will also look out for suitable acquisitions. It expects to buy back shares worth about £50m this year.

Despite the fact that 95 per cent of its sales are outside the UK, the group says its corporate DNA is in Yorkshire and it hopes to keep it that way.

“We are a global company, but our roots are firmly in Yorkshire,” said Croda’s chief executive Mike Humphrey.

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The company was founded in 1925 to make lanolin from wool grease, a natural by-product of the wool industry.

More than 80 years on, virtually every cosmetic and toiletry company in the world uses Croda’s products.

Wherever possible, Croda uses renewable natural raw materials, such as wool grease, rapeseed oil, coconut oil and a whole variety of plants.

Croda supplies ingredients to skin care and cosmetics companies such as L’Oreal, Chanel, Clarins, Estée Lauder, Boots and Procter and Gamble.

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Croda increased Mr Humphrey’s pay and benefits package by 2.5 per cent to £1.26m after the group posted an annual 112 per cent profits rise last year.

The group’s pre-tax profits rose to £192.3m in 2010 while sales rose 21 per cent rise to £1bn.

Mr Humphrey’s £560,000 salary was matched with a bonus of the same value, the maximum possible award.