Blackfriar: Resilient Croda has that youthful look about it again

The Snaith-based group, which is knocking at the doors of the FTSE 100, was hammered by the global economic slump and sterling’s strength against both the euro and the dollar.

At the start of the global recession it appeared to be fairly immune – people were feeling the economic pinch, but that didn’t mean they were willing to give up their rejuvenating lotions and potions.

However, as the crisis dragged on, consumer spending on cosmetics and toiletries took a bashing.

The group has soldiered on over the past few years, but now its focus on innovation is leading it back to former glories.

Croda, which counts L’Oreal, Unilever and Procter & Gamble among its biggest customers, is working on an array of new inventions.

This week it said that strong global demand for anti-wrinkle creams boosted half-year sales and profits as more people turn to science to beat the signs of ageing.

Sales of new, patented products increased by over 20 per cent year-on-year to a record 26 per cent of group sales.

One of Croda’s key products is Matrixyl, which is the core ingredient in Boots’ Protect & Perfect Serum.

Matrixyl recently won the ‘25 Years of Innovation’ award, which recognises products that have had the greatest impact on the personal care market in the last quarter-century.

The group is constantly coming up with new Matrixyl formulations and the latest Protect and Perfect range includes Matrixyl 3000 Plus, which according to Boots is a combination of the most powerful form of Matrixyl plus a next generation peptide that work together to help restore more youthful looking skin.

Croda is now moving into the hair care market with a new product called Apiscalp which reduces dandruff and scalp problems such as itchiness. The product, which comes from celery cells, is part of a growing pipeline of new products.

Creating new wonder drugs from plants is one of Croda’s specialities. Forget tinkering around in the laboratory, Croda likes to return to nature.

The group’s new acne treatment Sebuless comes from the lilac plant.

Sebuless slows down sebum (the oily substance secreted by the sebaceous glands) production, thereby reducing acne among those prone to it.

Croda said that all the big companies are looking into Sebuless and it expects it to be branded into big name products.

It also has high hopes for a new, high purity Omega 3 product that boosts heart health and a new product for air fresheners that controls the release of the fragrance.

On the industrial side, Croda is working on Phase Change Materials, which can be used in air conditioning units and clothing. These absorb heat when you’re warm and give out heat when you’re cold.

Analysts at Morgan Stanley said in a note: “It’s tough to find anything in European chemicals delivering organic growth of more than five per cent, let alone the six per cent reported in the second quarter. Incidentally, this is materially higher than the 1.7 per cent organic growth reported by (rival) Givaudan in the second quarter.

“Croda is delivering superior organic growth, at higher returns and margins and has cash return ahead in store for investors.”

Analyst Martin Evans at JP Morgan added: “With four per cent growth in personal care in the second quarter, up from 1.8 per cent growth in the first quarter, Croda appears firmly back on track. From here, the second half, although seasonally weaker, is likely to see continued progress, as Europe recovers and further progress is seen in new and protected products.”

Despite the downturn, Croda has invested in innovation and its operations overseas. It has had a rough few years but has maintained its course and is now set to reap the benefits.