Sales increase but Croda hurt by subdued markets

The Snaith-based company, which provides ingredients for international beauty firms such as L’Oreal and Estee Lauder, said underlying sales rose 0.8 per cent in the five months since the beginning of July.

It said fourth-quarter profits are likely to be similar to figures in the third quarter.

The company, which also makes chemicals for crop care and home care products, said that the significant devaluation of the Japanese yen and Indian rupee had reduced the benefits of currency translation. Asia-Pacific accounts for about a quarter of the company’s sales.

Pre-tax profits rose 5.4 per cent to £58.6m during the period.

JPMorgan Cazenove analyst Martin Evans said: “With underlying sales growth of only 0.8 per cent in the third quarter and a six per cent pre-tax miss versus consensus, investors are likely to punish Croda, again.”

Adam Collins, at Liberum Capital, said: “Group EBIT missed expectations by five per cent primarily because sales and margin development in performance technologies was disappointing. We recently downgraded from ‘Buy’ to ‘Hold’ and on current estimates, which will be trimmed, we see modest downside to fair value.”

Croda said that innovation-led sales were very strong with double digit growth in new and patented products. However, it saw near double digit declines in relatively low margin but high volume commodity and manufacturing sales.

Personal care sales improved with strong sales in Western Europe and North America, although it saw declines in Eastern Europe, the Middle East and Africa.

It said crop care made progress following its return to growth in June. The division reported strong double digit turnover increases in Europe, but growth was more modest elsewhere.

Health care sales were also up in the quarter compared with the same period in 2012.

The industrial chemicals division was boosted by the £38m acquisition of Chinese chemicals firm Sipo in July.

Sipo, a natural speciality chemicals manufacturer based in Sichuan Province, makes environmentally friendly lubricants for cars, vans and trucks.

Croda is keen to tap into strong demand from emerging markets at a time when Europe has been hit by economic hardship and weak orders for agricultural products.

Croda’s chief executive Steve Foots said: “Part of our plan is to move closer to our customers, particularly in emerging markets. Around 24 per cent of our sales are in emerging markets. We see opportunities to grow that. It helps to move manufacturing out to one of our fastest growing markets.