Croda’s chemical attraction still strong
The specialty ingredients manufacturer has seen its shares jump to a three month high
UK based specialty ingredients manufacturer Croda International has seen its shares jump to a three month high of more than 2,700p, following a Deutsche Bank recommendation. Croda shares have risen steadily throughout the financial crisis from a 2009 low of 466p – almost a 480% return for investors, helped by strong growth from its European cosmetics and healthcare operations.
Though the rate of Croda’s top-line growth has decelerated, Deutsche Bank wrote in a note to clients that it views the slowdown “as cyclical rather than structural and expects sales growth to accelerate driven by a resumption of growth in Crop Care and Personal Care”.
The topline growth perspective is important: yes, Croda sales have slowed but margins are up; clearly the company is chasing outright profitability rather than outright sales, though the company itself is equally keen on the innovation spin.
Almost 25% of the company’s sales are in emerging markets, which is a trend likely to accelerate in the future. The company has also been on the acquisition trail recently, snapping up a 65% stake in China’s Sichuan Sipo Chemical, a fatty acid products maker, for £38m in July. Meanwhile, in May, the company acquired the Specialty Products business of US based Arizona Chemical. The acquisition added a portfolio of oil gelling polymers to Croda’s business while also expanding its footprint in the polymers arena.
Croda chemicals criss cross just about every industry, from beauty to cars, so the company is not hostage to the gusts and squalls of any one industrial cycle. It has also tapped into the sustainability trend – 70% of its raw materials are natural raw materials.
Meanwhile, would-be investors have even more motivation for optimism: Croda Chief Executive Steve Foots recently upped his personal stake in the company.
