Croda shares surged higher on Wednesday after the speciality chemicals group maintained its outlook, as first-quarter sales rose following a tough year for the company.
First quarter sales rose to £442 million, representing an 8% increase on a reported basis compared with the previous year and a 9% improvement in constant currency terms.
The robust sales growth stemmed primarily from higher sales volumes, whilst the price/mix headwinds experienced throughout 2024 have begun to abate.
Croda said the group’s adjusted profit before tax for the first quarter aligned with management expectations.
The company provided insight into its cost management and progress toward achieving £25 million in cost savings this fiscal year, while simultaneously identifying additional opportunities to deliver operational efficiencies.
Croda shares were 9% higher at the time of writing.
“Speciality chemical producer Croda has seen its recovery gain further momentum in the first quarter with volumes driving high-single digit sales growth. But given the prevailing macro-economic confusion that’s been brought about by exchanges in the rapidly evolving trade-war, investors will be more focussed on the outlook,” said Derren Nathan, head of equity research, Hargreaves Lansdown.
“Croda’s focus on bespoke formulations means it’s deeply embedded with its customer base. Its broad manufacturing footprint also helps to provide some mitigation against tariffs. The company’s planning to pass on any incremental costs to customers too and with alternative sources of supply limited in many cases, it may be something clients will just have to accept.”
Nathan continued to explain that, although the outlook remains unchanged, it should be viewed as a significant win, given the impending disruption from trade tariffs.
“After a robust start to the year, the outlook remains unchanged, which is likely to come as a relief to shareholders who have seen the stock price fall 19% so far this year. But it’s a little too early to give the all-clear,” Nathan said.
“Croda’s game plan rests heavily on improved utilisation within its plants, so things could unravel quickly if demand takes a dip. Some end products, such as those in the life-sciences division, are less sensitive than others to economic conditions, but in the consumer segment things could still become challenging. The weakness in the valuation offers an opportunity to gain exposure to a quality company with a focussed strategy, but in the short-term, the ride could get more bumpy yet.”