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Croda profits decline on COVID-19 impacts, higher M&A costs

March 05/2021

MOSCOW (MRC) -- Croda International says its pretax profit decreased 10.9% in 2020, to USD375.5 million, and operating profit was 9.3% lower,  said Chemweek.

Pretax profit was 1% below analysts' consensus estimate and operating profit exceeded consensus by 0.4%. Sales edged up by 0.9%, to GDP1.39 billion, driven by a recovery in fourth-quarter sales in personal care and performance technologies, and double-digit growth in life sciences in the second half of 2020. Profits reflected “an adverse mix in both personal care and performance technologies, where demand for higher-value-add products was most impacted by the pandemic,” as well as higher costs related to Croda’s M&A activity in 2020, the company says. Fourth-quarter figures have not been disclosed.

Steve Foots, CEO of Croda, says that the company’s financial performance was resilient, despite the inevitable drop in demand caused by the pandemic. “Our strong financial platform has allowed us to make further progress positioning the business to focus on the fast-growth markets of the future, capitalizing on emerging trends in existing and adjacent markets,” Foots says. “We have made significant investments to accelerate delivery of our strategy, notably the acquisitions of Avanti and Iberchem, so that life science and consumer markets now represent over 80% of Croda’s profit generation."

Life sciences posted higher sales and profit in 2020, driven by a strong performance in the health-care and seed-enhancement segments. Sales in reported currency grew by 14.6%, to GDP401.6 million and adjusted operating profit increased 21%, to GDP129.4 million. The company says that its life sciences business is moving from consumer health to patient health by accelerating innovation and organic investment to strengthen specialty excipients, vaccine adjuvants, and lipid delivery.

Sales of the company’s personal care business declined 1.9%, to GDP475.9 million, and adjusted operating profit decreased 15.8%, to GDP136.5 million. A reduction in consumer demand for products associated with "going out" and an interruption of sales channels by COVID-19 reduced the business’s sales, the company says. Croda expects “sales and profit to improve when lockdowns lift, luxury channels re-open, and with the significant cross-selling opportunities provided by the Iberchem acquisition.” The company says it is strengthening consumer care through investing in personal-care innovation to meet its customers’ sustainability requirements. 

Performance technologies’ sales were down 3.2%, to GDP416.4 million due to the impact of COVID-19 especially in the second quarter of 2020, which led to temporary closures of automotive and industrial plants, the company says. In the second half of the year, the business saw steady recovery, with fourth-quarter sales “encouragingly ahead of prior year,” Croda says. Adjusted operating profit declined 22.2%, to GDP54 million. “With a recovery accompanied by growth in renewable technologies and sustainable solutions, the sector should become less cyclical as sales growth and better margin return,” the company says.

Croda says it is cautiously optimistic for 2021, but unable to provide a near-term outlook due to the continued COVID-19 restrictions and the uncertainty they create. The 2020 exit rates for the consumer-care and performance-technologies businesses were encouraging, but it remains difficult to make predictions, Croda says. Life sciences are expected to stay strong, it says. “The benefits of recovery, together with the full-year impact of Avanti, Iberchem, and our Pfizer-BioNTech COVID-19 vaccine contract, are expected to support profitable growth across the business,” Croda says.

As per MRC, Croda International (Goole, UK) says it has entered a partnership with Sentient Science (Buffalo, New York), an asset management and software services company, for the recommended use of Croda’s Rewitec additives for wind turbine gearboxes and main bearings.

We remind, Croda says it has completed the acquisition of the entire issued share capital of flavors and fragrances company Iberchem Group (Murcia, Spain) from investment company Eurazeo.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers" inventories as of 1 January, 2020). Supply of exclusively PP random copolymer increased.
Author:Anna Larionova
Tags:petroleum products, PP, PE, neftegaz, petrochemistry, Croda Europe, Croda Kemial.
Category:General News
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