Strength of the pound to hurt Croda’s profit growth

The Snaith-based company, which provides ingredients for international beauty firms such as L’Oreal and Estee Lauder, reported a five per cent increase in pre-tax profits for the year to December 31 to £250m.

Sales over the year rose 2.4 per cent to £1.08bn.

Croda’s chief executive Steve Foots said: “These are demanding market conditions.

“With exchange rate fluctuations it’s volatile for anyone with a UK business.

“The pound is strong against the euro and the dollar. Japan against sterling is particularly penal. It’s swings and roundabouts. Sometimes we gain, other times we don’t.”

Croda, which makes chemicals used in cosmetics, pesticides and detergents, said currency translation had a negative effect on its earnings during the fourth quarter of 2013.

For the first three quarters of the year, the effect had been positive in most of the company’s markets.

The company makes about 36 per cent of its sales from emerging markets.

Croda reported weak demand in eastern Europe, the Middle East and Africa.

Despite this Mr Foots said the group saw strong growth in its new products.

These included a new crop product that reduces drift, ensuring that spray lands on crops instead of being blown about by the wind.

It has also brought out a new skin care range using excipient technologies that make the skin feel silky, smooth and lightly moisturised.

Despite the currency drag, Croda said it expects to achieve “constant currency sales and profit growth” this year.

“It’s been a solid year,” said Mr Foots.

“This is a workmanlike performance from Croda. It’s improving. We’re improving the quality of the business and selling more high margin products.”

The company raised its final dividend to 35.50p per share from 32.75p.

Jonathan Jackson, head of equities at Killik & Co, said: “The company generated cash flow of £249m and raised the dividend by 8.4 per cent to 64.5p.

“The group notes that, while the current year has started in line with management expectations, global trends are unpredictable and forward visibility remains limited.

“Currency translation is expected to have an adverse impact on profit growth in 2014.

“However, constant currency sales and profit growth in 2014 will be driven by improved margins in Performance Technologies, new product sales growth and strong cash generation.”