TIDMCRDA
RNS Number : 3268D
Croda International PLC
26 April 2017
26 April 2017
Trading Update for the First Quarter 2017
Improved sales growth with strong and stable profit margin
Croda International Plc ('Croda' or the 'Group'), the speciality
chemical company that creates high performance ingredients and
technologies relied upon by industries and consumers globally,
today updates on its trading during the first quarter 2017, ended
31 March 2017 ('Q1' or 'the quarter').
Improved sales growth - constant currency sales up 4.9%
The improving sales trend seen in the fourth quarter of 2016 has
continued in Q1. Constant currency sales increased by 4.9%, driven
by strong organic growth. Reported currency sales increased by
19.1% to GBP365.5 million (Q1 2016: GBP306.8m), reflecting
Sterling's continued weakness. The later timing of Easter is
estimated to have benefited sales by approximately 1.5%.
Constant currency sales across the three principal sectors (the
'Core Business') rose by 5.3%. Personal Care delivered an
encouraging return to sales growth, Life Sciences grew excluding
APIs and Performance Technologies produced an exceptionally strong
performance. Innovation continued to drive growth of New and
Protected Products ('NPP'), with our Open Innovation programme
increasing to nearly 300 partners and new external funding secured
alongside our own investment. Return on sales in the Core Business
was strong and stable, with profit growing in line with the Board's
expectations.
Strong growth in Asia and Europe supported by improving trend in
the Americas
The Core Business saw Asia sales increase by 11% in constant
currency. Personal Care benefited from the conversion of
distributor sales to our direct selling model and Performance
Technologies expanded across the region. The market in Europe
remained robust with constant currency sales up 8%, reflecting
momentum in all three sectors and the timing of Easter. Our actions
to improve performance in North America are showing progress, with
constant currency sales only 1% lower and up 3% excluding the
adverse effect of lower API sales. The weak sales trend in Latin
America continued to moderate, with constant currency sales flat on
the prior year.
Return to sales growth in Personal Care
Q1 saw encouraging top line progress in Personal Care, which has
now seen five successive months of growth. Constant currency sales
increased by 4.6%, driven by a record sales performance in our
market-leading Actives business, with growth in our bio-technology
platform and from last year's encapsulation delivery systems
acquisition, where we are investing in new capacity. Sederma
launched the latest member of its flagship Matrixyl(R) range of
anti-ageing peptides - Matrixyl(R) Morphomics(TM) . The Personal
Care sales performance was supported by a return to modest growth
in the Specialties business, through completion of our distributor
exit programme; investment in our innovation-rich hair, solar and
skin portfolio, including the launch of the latest Solaveil(TM)
Clarus transparent sunscreen for Asian-led trends; and continuing
development and differentiation of our heritage formulation
ingredients. Top line performance in the Americas also stabilised.
Growth continued to be strong in our regional and local customers,
supported by increasing collaboration with the new independent, or
'Indie', customers.
Continued progress in Life Sciences
As expected, sales in Life Sciences were 1.9% lower in constant
currency, reflecting the final tough prior year comparator for our
North American API contract, where sales have now stabilised at the
anticipated, reduced level. Excluding this contract, constant
currency sales rose 2.2%. The remainder of the Health Care business
delivered good growth, led by demand for high purity excipients for
complex drug delivery systems, supported by new data packages for
an expanded range of pharmaceutical applications. Sales in Crop
Care were broadly unchanged whilst profitability is benefiting from
a richer product mix. This included innovation collaboration with
agrochemical customers in Crop Protection, leveraging our drift
reduction technology.
Incotec benefitted from pricing and cost synergies, together
with our investment in a new R&D centre in the Netherlands,
driving innovative seed enhancement solutions.
Excellent growth in Performance Technologies
Performance Technologies had an exceptional start to 2017 with
Q1 sales growth of 11.7% in constant currency, reflecting healthy
market demand. Robust sales in Lubricants were supported by strong
export sales from the UK in Polymer Additives. A surge in demand in
GeoTechnologies reflected a recovery in oil production, although
product mix remains soft. Momentum in Asia and North America
continued to reduce the sector's concentration in European markets.
MyCroFence(TM) , our patented antimicrobial coatings solution, was
commercially launched and Incroslip(TM) SL, our novel slip
additive, secured food contact approval. Both projects offer
exciting development potential.
Robust financial platform
Croda's superior free cash generation continued in Q1 and net
debt reduced from year end, despite increased capital investment.
Construction of our industry-leading biosurfactants plant remains
on track for commissioning towards the end of 2017. Our financial
platform is robust and supportive of future growth and continued
shareholder value creation.
Outlook affirmed
As set out at our full year results in February, our priorities
for 2017 are to drive profitability through a greater focus on
premium, faster growth niches; improve performance in less
differentiated markets; and progress towards our return on sales
targets in Performance Technologies and Incotec. We are encouraged
by the Group's performance in the first quarter and, whilst we
expect the exceptional sales growth seen in Performance
Technologies to moderate, we remain on track to deliver continued
profitable progress through 2017.
Q1 sales growth data
Constant
Reported currency
Q1 2017 versus sales sales
Q1 2016 % %
-------------------------- ---------------------- -----------------------
Personal Care 19.3 4.6
Life Sciences 11.4 (1.9)
Performance Technologies 26.5 11.7
-------------------------- ---------------------- -----------------------
Core Business 19.6 5.3
Industrial Chemicals 15.1 1.9
-------------------------- ---------------------- -----------------------
Group 19.1 4.9
-------------------------- ---------------------- -----------------------
Excluding the impact of the acquisition of Inventiva, Personal
Care sales increased by 19.2% at reported currency. There were no
other acquisition impacts in Q1.
Further information
A conference call for investors and analysts will be held at
0830 BST on 26 April 2017. Dial in
+44 20 3139 4830, conference ID 45591147#.
For enquiries contact:
Croda: Conleth Campbell,
VP Investor Relations +44 1405 860551
Teneo Blue Rubicon: Charlie
Armitstead +44 20 3603 5220
Non statutory financial terms and other definitions are as
follows:
Constant currency sales: external sales by country of
destination translated at the prior year period's average exchange
rates, including the impact of acquisitions. Sales in Latin America
are primarily based in US dollars, which is used as the functional
currency for constant currency sales translation.
Return on sales or profit margin: adjusted operating profit
divided by sales.
Free cash flow: as presented in the Finance Report of the 2016
full year results.
Core Business: comprises Personal Care, Life Sciences and
Performance Technologies.
API: Active Pharmaceutical Ingredient.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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