UpdateCroda share price rises due to better-than-expected Q3 results

29 October 2009 14:39  [Source: ICIS news]

LONDON (ICIS news)--UK specialty chemicals company Croda saw its share price rise 3.9% following the release of better-than-expected third-quarter results on Thursday.

Croda’s shares were trading at 728.50 pence at 13:42 GMT on the London Stock Exchange, up from the previous closing price of 700.00 pence.

The company said on Thursday that its third-quarter pre-tax profit from continuing operations had increased 31.3% year on year to £31.9m ($52.3m, €35.8m), as severe destocking in its industrial specialties business had ended and sales were improving.

“The result took the year-to-date pre-tax profit above that recorded in the same period in 2008 despite the effects of the recession on industrial end markets and the lack of last year's windfall glycerine profit,” Croda chairman Martin Flower said.

An analyst note from JP Morgan Cazenove said the pre-tax profit came in 20% above its consensus.

“A positive statement suggests that the company has weathered the difficult climate well and that positive trends have continued largely unabated,” the note added.

Croda's sales from continuing operations increased 1.1% year on year to £238.1m, while operating profit from continuing operations increased 23.5% to £34.7m, Croda's Flower said.

The company's performance during the quarter was helped significantly by an impressive improvement in its industrial specialities trading, with third-quarter operating profit in the sector up 47.0% year on year to £9.7m, he said.

“While overall volumes remain down on 2008, the severe destocking in our industrial customer base does appear to have come to an end. Industrial specialities has been trading profitably for four months with a steadily improving trend in both volumes and profitability,” Flower said.

“Croda’s robust and efficient business model, together with the steps we have taken to reduce costs, has enabled the group to overcome tough market conditions,” Flowers said.

In reaction to the results, JP Morgan Cazenove analysts have upgraded their full-year earnings per share (EPS) estimates by 16% for 2009, 13% for 2010 and 3% for 2011.

The note added that the upgrades were primarily driven by an expectation that Croda's consumer care segment will continue to deliver a robust performance, while industrial specialities experiences a gentle recovery.

($1 = £0.61/€1 = £0.90)

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By: Lucy Craymer
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