Croda profits hit by weak consumer demand in Europe

Manufacturing in the laboratory with chemicals

Interim results for natural based speciality chemicals manufacturer, Croda, have revealed a drop in profits and sales.

Results for the first half of the year show adjusted pre-tax profit fell by 5.9% to £125.3m and sales decreased 4.5% at £537.4m.

The dent is a result of weak consumer demand in Europe but the Yorkshire-based firm remains optimistic, maintaining its new structure will foster future growth.

The chemical manufacturer refinanced its core banking arrangements, setting up a £400m debt facility with several banks until 2019.

The move has boosted the group’s total committed facilities to £485m.

Croda’s interim dividend is now 29.5p, an increase of 1.7%.

Croda chairman, Martin Flower said: “Our performance in the first half of the year was behind our initial expectations as weak consumer demand in Europe impacted the business, particularly in Personal Care.

“Despite this, we saw strong underlying revenue growth from New and Protected Products, leading to improved margins in both our core divisions.

“Differentiated products also made progress although demand for commodity products in the tail was much weaker.

“In addition, we have made good progress in a number of growth markets, especially Asia which achieved 8% underlying sales growth.

“We expect the new organisation structure to deliver sustained sales growth in future.

“Robust cash generation continues to underpin investment in R&D, new technologies and capacity and a number of new growth initiatives in health and skin actives will come on stream in the second half.

“While we still expect to achieve underlying profit progress in 2014, as outlined in our pre-close trading statement, pre-tax profits are now expected to come in below those attained in 2013.”

Group chief executive Steve Foots added: “Adverse currency effects are expected to be at similar levels in quarter three to those seen in the second quarter.

“However, we do expect to make underlying sales and profit progress in the second half and beyond as the new technologies we have developed come on stream and our momentum in the growth economies continues to build.

“We remain confident that our strategy and our chosen markets will deliver future growth.”