FTSE-listed smart science specialist Croda has told the City profits could slip between 20 and 25 per cent thesis year as trading normalises following unprecedented growth through Covid.
The East Yorkshire business saw sales top £2 billion as profits hit £500 million in 2022. Now in a trading update on the first five months of the year, chief financial officer Louise Burdett has told how pre-tax profits are likely to be between £370 million and £400 million.
In a statement issued to the City, the Cowick Hall-headquartered firm explained how in Consumer Care, whilst sales volumes are up compared to the final quarter of 2022, they remain down double-digit percentage compared with the same period last year “as a result of customer destocking continuing through the second quarter”.
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It said price increases implemented in 2022 and favourable foreign exchange rates so far in 2023 have helped to offset this impact, with revenues broadly flat versus the first five months of last year. However, principally due to the lower sales volumes, operating profit margin has remained at a similar level to the second half of 2022.
In Life Sciences, crop protection started the year well, but the business is now experiencing rapid customer destocking, which was a factor originally expected to materialise more gradually later in the year. Life Sciences' operating profit margin is being negatively impacted by adverse mix in the year to date including lower sales for Covid-19 applications in the Pharma business. Shipments of lipid systems to principal Covid vaccine customers are expected to occur as planned in the second half of 2023.
A total of £143 million pre-tax profit was generated in the first five months of the year, “supported by minimal net finance costs”. It is the first full year without the industrial division too, having sold it to Cargill.
Ms Burdett added: “With customer destocking in consumer and industrial end-markets now expected to continue into the second half year and momentum moderating in Crop Protection, full year 2023 Group profit before tax is now expected to be between £370m and £400m.”
First half results will be published in late July.
Shares fell 14 per cent from 6,032p to 5,150p on Friday, as the update was released, narrowing to 12 per cent (5,300p) by close. Monday’s early trading saw them back up by a further 2.81 per cent to 5,422p.
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