ii view: chemicals maker Croda offers 2025 optimism
Producing speciality chemicals for industries from beauty care to pharmaceuticals and agriculture. We assess prospects for this FTSE 100 company.
25th February 2025 15:38
by Keith Bowman from interactive investor
Full-year results to 31 December
- Currency-adjusted revenue down 0.8% to £1.63 billion
- Adjusted pre-tax profit down 12% to £260 million
- Adjusted net debt down 1% to £532 million
- Final dividend of 63p per share
- Total dividend for 2024 up 0.9% to 110p per share
Guidance:
Expects full-year 2025 adjusted pre-tax profit of between £265-and £295 million.
Chief executive Steve Foots said:“2024 was another transitional year, following two years of unprecedented demand in 2021 and 2022, with an industry-wide reset from 2023. While sales growth was lower than we hoped in a subdued-demand environment, proactive actions to rebase costs and drive efficiencies enabled us to deliver profits in line with our guidance.
“We are accelerating our efforts with an enhanced focus on costs and efficiency which, combined with increased innovation and the growth potential of recent investments, underpin our confidence in delivering earnings growth and improving returns in the future.”
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ii round-up:
Speciality chemicals maker Croda International (LSE:CRDA) today guided towards a potential increase in profits for the year ahead as it continued to focus on product innovation and reducing costs.
The maker of ingredients for items including consumer care products, crop fertilisers and medical drugs expects adjusted pre-tax profit for the 2025 year ahead of between £265 million and £295 million. That’s potentially up from 2024’s £260 million.
Shares for the FTSE 100 company rose 1% in UK trading having come into these latest results down by more than a third over the last year. That’s worse than a one-quarter fall for rival Victrex (LSE:VCT) over that time. The FTSE 100 index is up almost 13% over the last year.
Consumer care-related sales, and led by Asian growth, rose 7% to £920 million during 2024, pushed by demand for fragrances and flavourings.
Drug or Life Science sales fell 14% to £504 million as demand for lipids used to make Covid vaccines retreated. Divisional growth did, however, return during the second half when adjusting for Covid-related sales. Industrial Speciality sales improved 2% to £203 million.
Ongoing innovation pushed new and protected products up to 35% of total 2024 sales from 2023’s 33%. A push to cut £25 million of costs during 2025 comes as part of an initial two-year £40 million programme.
A final dividend of 63p per share, payable to eligible shareholders on 28 May, leaves the total payment for 2024 up 0.9% at 110p per share.
ii view:
Started in 1925, the Yorkshire-headquartered company today employs over 5,500 people. The Consumer Care division accounted for most sales during 2024 at 56%, followed by Life Sciences at 31%, and Industrial Specialities, after a previous part business sale, at 12%. Geographically, Europe, the Middle East and Africa generated 39% of 2024 revenues, North America 27%, Asia 23% and Latin America the balance of 11%.
For investors, the positive impact of the pandemic has made for tough after year comparatives. Inflation and the incremental costs of group investments are expected to be headwinds going forward. Environmental concerns for man-made chemicals persist, while currency moves can hinder performance.
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More favourably, a focus on product innovation and reducing costs is ongoing. Signs of improved customer demand are evident. Diversity in both business type and geographical region exists, while a record of more than 20 years of consecutive annual dividend increases and leaving the shares on a forecast future dividend yield of around 3.5%, should not be ignored.
In all, potential trade tariffs and the uncertain global economic outlook give room for caution. That said, exposure to likely areas of growth, such as life science drugs, and a consensus analyst estimate of fair value sat at over £43 per share offer grounds for hope.
Positives:
- A diverse product and customer base
- A progressive dividend policy
Negatives:
- Uncertain economic outlook
- Subject to currency movements
The average rating of stock market analysts:
Strong hold
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