UpdateUK Croda 2013 operating profit up 3.3% after 'demanding year'

25 February 2014 11:40  [Source: ICIS news]

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LONDON (ICIS)--UK specialty chemicals firm Croda posted full year operating profit for 2013 of £263.3m, an increase of 3.3% compared to the previous year, and sales of £1.08bn (up 2.4%) on the back of higher operating profit on the Performance Technologies segment and a 10.8% increase in sales of new and protected products (NPP), the company said on Tuesday.

By business segments, operating profit grew in all except in Industrial Chemicals, where it remained flat at £10.3m. Operating profit at the Consumer Care division grew 3.2% to £191.3m while at the Performance Technologies segments it grew 5.9% to £63m.

In terms of sales, despite the flat operating profit Industrial Chemicals managed to achieve an increase of 16.9% to 96.7m, while Consumer Care and Performance Technologies saw more modest growth in sales (1.2% to £593.2m and 1.1% to £387.1m, respectively).

According to Croda, Consumer Care suffered the “major negatives” of weak trading in the Eastern Europe, Middle East and Africa (EEMEA) region and adverse currency exchange in Asia, while Performance Technologies having achieved a strong performance I nAsia but also affected by declines in EEMEA and Western Europe. Croda said the Coatings and Polymers had been the only segment within the division to see sales decreasing, although did not disclose the fall percentage.

Finally, Industrial Chemicals jump in sales growth (up 16.9%) was due to the acquisition of a 65% stake at China’s Sichuan Sipo Chemical for £30.3m, but in terms of operating profit the acquired company had a “small contribution” in the second half of 2013.

Shareholders at Croda will see their dividend rise from 59.5 pence (p) in 2012 to 64.5p in 2013, an increase of 8.4%, while earnings per share at continuous operations rose 8.3% to 131.2p, compared to 121.9p achieved in 2012.

Free cash flow was up 38% at £249.0m (£180.5m in 2012) helped by tight control of working capital, the company said.

On the other hand, net debt was reduced by £5.5m in 2013 to £202.2m while capital expenditure was £46.6m (£52.7m in 2012) and the cash effect of Croda’s mergers and acquisitions stood at £54.9m, including inherited borrowings and dividend pay-outs totalling £83.6m.

The London Stock Exchange-listed company said 2013 had brought “demanding market conditions” on the back of currency adjustments and an adverse impact from the company's price/mix, due to higher sales growth for its lower priced products in Perfomance Technologies and Industrial Chemicals. 

“With record sales of new and protected products (NPP) across the business, acquisitions in North America and China, three more research and development (R&D) laboratories, two more customer training centres and further investment in our global sales force, our platform for sustainable, organic growth is much stronger,” said Martin Flower, Croda’s chairman.

Flower said 2014 will see again an adverse currency exchange, adding global trends are “unpredictable” which makes accurate forecasts for the next months difficult.

“While the current year has started in line with our expectations, global trends are unpredictable and our forward visibility remains limited. Currency translation is expected to have an adverse impact on profit growth in 2014. However, we still expect to achieve constant currency sales and profit growth in 2014 characterised by improvement in margins in Performance Technologies, NPP sales growth [and] strong cash generation,” Flower concluded.

By: Jonathan Lopez
+44 208 652 3214

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