Latest news with #Croda
Telegraph
13-05-2025
- Business
- Telegraph
This undervalued Yorkshire firm is highly prized by global businesses
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest. Any company with a history of growth in its annual dividend that dates back to the late 1990s must have something to it. Throw in a share price that is down by 70pc from its peak and sits no higher than nine years ago and this column's interest is further piqued. A turnaround programme designed to rectify a slump in profits and returns on capital is the next building block to the investment case, and then comes a set of first-quarter results to suggest that maybe, just maybe, a depressing run of profit downgrades is ending to complete the set. The company is Croda, a Yorkshire-based specialist in chemicals and ingredients, and patient investors might like to give it a second look Following 2022's disposal of its industrial chemicals unit, Croda has three main areas of focus: consumer care, life sciences and industrial specialties. Its laboratories develop ingredients for pharmaceutical, personal care and beauty, crop care and industrial companies. The FTSE 100 index member may often sell small quantities of its niche products, but they are of very high value to its customers, who often cannot do their own work and serve their own clients' needs without them. This strong position conveys at least some degree of pricing power to explain why Croda still makes a double-digit percentage operating margin after a difficult spell since 2022, where the headlines are grabbed by falling profits and that tumbling share price. Contrarian investors will now want to find out why the profits and share price are in such a tailspin and to see if the situation can be rectified. Three things stand out, and are by no means irreversible. First, profits earlier this decade were boosted by demand for lipid nanoparticles, an ingredient that helps to improve the efficacy of the Messenger RNA (mRNA) vaccines developed by the likes of Pfizer and Moderna in the fight against Covid. Not surprisingly, demand here has dropped sharply in the past couple of years. Second, Croda has made acquisitions and boosted capacity through heavy investment and failed to make the most of the expenditure. Since its purchases of Spanish fragrances and flavours firm Iberchem and American lipids expert Avanti in the 2020s, Croda's return on capital has all but halved. Increases in costs have outstripped advances in revenues and shared manufacturing capacity has been under-utilised, leading to poor overhead recovery and profit margin erosion. Finally, Croda's shares were simply overvalued at their peak. The perception that the company was a reliable compounder with a track record of steady profit and dividend growth, coupled with a long period of interest rates at almost zero, drove the shares to £104 and a forward price-to-earnings (PE) multiple of almost 40. An increase in interest rates, lower profits and a derating on the stock as perception changed and earnings were seen as less than dependable then combined to produce the grinding share price decline. Chief executive Steve Foots and his team are now looking to improve overhead recovery and capacity utilisation, galvanise product innovation and drive through cost efficiencies to improve the top line, control expenses and enhance returns from the past few years' acquisitions, capital investment and research and development expenditure. It is still very early days and risks remain. Neither the current febrile macroeconomic environment nor strength in sterling are helpful and business visibility remains low. The forward PE multiple is still 24 times, assuming that Croda can successfully hit its profit guidance for 2025, and that is still a very hefty premium to the FTSE 100, even after the long share price slide. At least that multiple could be deceptive, since it may be based on a lowly earnings per share figure (EPS) after the woes of the past few years. Croda's peak EPS was 272p, achieved in 2022, which excludes an additional capital on the sale of the industrial chemicals business. Croda trades on just 11 times that figure. It would be unwise to assume that Croda gets back to that level of earnings power any time soon, given that 2024's outturn was just 143p, but a resumption of positive earnings momentum, and return of investor confidence in the business model, could lead to the ideal combination of the market willingly paying higher multiples of higher profit forecasts, to the benefit of the share price. In the meantime, net debt is relatively low, and interest cover is very good, so the balance sheet is not a source of any additional pressure. The dividend may not grow quickly for a year or two, at least, but a forward yield of 3.5pc may help investors to stay patient.
The Guardian
23-04-2025
- Business
- The Guardian
Reckitt Benckiser shares fall as investors prepare for Trump tariff impact
Shares in the maker of Dettol and Nurofen slid 6% on Wednesday as investors braced for the impact of Trump's tariffs. The FTSE 100 consumer goods business Reckitt Benckiser, which is based in Slough and makes products including Durex condoms and Harpic bleach, said it was 'closely monitoring' the evolving situation around trade tariffs and possible effects on its supply chain. But its share price dropped 6% in early trading on Wednesday after senior management warned volatile market conditions could affect the sale of its lagging cleaning products business. The group has put its Essential Home division, which includes brands such as Cillit Bang and Air Wick, up for sale. Net revenue in this part of the business dropped by 7% on a like-for-like basis in the first three months of the year to £482m, compared with a 3% rise in the core part of the group. The chief executive, Kris Licht, told analysts in an investor call that while the company was encouraged by buyer interest expressed in the business, 'we recognise that market conditions may impact this timeframe'. Chris Beckett, of the fund management business Quilter Cheviot, noted that difficult market conditions could make it difficult for potential buyers to raise money to buy the business, 'especially for private equity firms trying to raise finance in the current bond market'. Elsewhere, the chemicals maker Croda's shares jumped by as much as 9% on Wednesday after it said it would pass higher costs associated with tariffs on to its customers. The FTSE 100 company, which sells chemicals to other businesses for a huge variety of consumer goods such as skin cream, shampoo and suntan lotion, said that while its local manufacturing and procurement model was well balanced and helped limit its direct exposure to tariffs, it would apply a 'tariff surcharge' to cover any further incremental costs. The comments, combined with a reported 9% rise in revenue at constant currency to £442m, sent Croda to the top of the FTSE 100's biggest risers on Wednesday. The chemical specialist said it recognised that the political and economic environment was now 'less predictable', but it still expected to report an annual adjusted pre-tax profit between £265m and £295m this year. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion While big companies are scrambling to keep up with the potential costs and changing parameters of Trump's trade war, the US administration has now suggested that its tariff standoff with China could de-escalate. On Tuesday, Trump told a White House news conference that high tariffs on goods from China would 'come down substantially, but it won't be zero'. It helped spark a broad rally in global stock markets, with the US blue chip S&P 500 index rising by 2.5%. The rally also spread to Europe on Wednesday, with the UK's FTSE 100 index up 1.4%.
Yahoo
09-03-2025
- Business
- Yahoo
Down 33% in a year! Are these 3 beaten-down FTSE 100 stocks now in deep value territory?
FTSE 100 stocks have done well lately, but as ever, there are exceptions. I've picked up three companies that have all fallen around 33% in the last year. Their shares are significantly cheaper as a result, but does that make them bargains? The first is Spirax Group (LSE: SPX), a specialist in steam management systems and peristaltic pumps. Sadly, its shares ran out of steam several years ago. To my surprise, they still look relatively expensive trading at a price-to-earnings (P/E) ratio of nearly 24. That's well above the FTSE 100 average of around 15. This either suggests investors still have high expectations for future performance, or that Spirax needs to unwind further to qualify as a true bargain buy. I suspect the latter. It did enjoy a barnstorming start to 2025, with its shares surging 20% in January. This was powered by hopes that a Chinese economic recovery could boost demand for its industrial steam systems. But the rally didn't last. The share price is sliding again. Broker Shore Capital recently flagged structural threats, including the impact of generative AI and lengthening replacement cycles. Uncertainty in the global economy isn't helping either. Despite increasing its dividend for 55 consecutive years, Spirax yields just 2.22%. Hardly compelling. Right now, I wouldn't consider buying. Pest control specialist Rentokil Initial (LSE: RTO) grabbed my attention during last year's short-lived French bedbug panic, as I wondered if it might benefit. I'm glad I didn't scratch the itch to buy it though, because its shares continue to stink out the FTSE 100. They're down 16% in the past month alone, after a poor set of results published on Thursday (6 March). They included an 8.1% drop in full-year adjusted pre-tax profit to £703m. Revenue rose just 1.1% to £5.4bn. North American operations were supposed to be a big growth driver but have underperformed in practice. With the US economy still bumpy, a turnaround may take time. Rentokil is cheaper than Spirax, with a P/E of 16, but after last year's narrow squeak I won't let this infest my portfolio now either. The dividend yield is a modest 2.66%. Speciality chemicals company Croda International (LSE: CRDA) is the third of my 33% fallers. Full-year results, published on 25 February, disappointed, with adjusted pre-tax profit down 11.6% to £273m. Operating margins slipped from 18.9% to 17.2%, prompting the board to launch a £25m cost-cutting plan. Croda's shares spiked above 10,000p during the pandemic, as panicked customers stockpiled chemicals, pulling forward demand. But today, they stand at 3,242p, with customer demand still 'subdued'. Despite the slump, Croda still isn't in deep-value territory, trading at a P/E of 23. This is another dividend stalwart, having hiked payouts for 27 consecutive years. Today, it yields 3.4%. It still doesn't tempt me. All three may well recover when the wider economy picks up, but they don't look primed for a rapid rebound today. I can see better value elsewhere on the FTSE 100 right now. The post Down 33% in a year! Are these 3 beaten-down FTSE 100 stocks now in deep value territory? appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Croda International Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Motley Fool UK 2025 Sign in to access your portfolio
Yahoo
25-02-2025
- Business
- Yahoo
FTSE 100 Live 25 February: Energy bills rise, Smith & Nephew results top forecasts
07:58 , Graeme Evans FTSE 100-listed Croda International, the East Yorkshire-based speciality chemicals firm, today reported a decline in annual profits to £260 million. The fall of 11.6% on a constant currency basis followed a slower than expected recovery in sales, with annual revenues down slightly to $1.6 billion. Chief executive Steve Foots said: "2024 was another transitional year, following two years of unprecedented demand in 2021 and 2022, with an industry-wide reset from 2023.' With volumes higher in 2024 and price and mix headwinds likely to diminish, he expects Croda's consumer care and life sciences divisions to grow sales in 2025. In addition, operational efficiencies should largely offset inflation and the incremental costs of investments coming online. Overall for 2025, Croda sees adjusted profit between £265 million and £295 million at constant currency. 07:24 , Graeme Evans Energy bills for millions of households are set to go up by a bigger than expected 6.4% from April. Industry regulator Ofgem said the cap on gas and electricity prices would have to rise largely because of higher wholesale prices. It will add around £111 to the average household bill, or about £9.25 per month, increasing it to £1,849. The new cap covers the three month period to June when it will be set again. Read more here 07:22 , Graeme Evans Smith & Nephew boss Deepak Nath today said the medical equipment maker's transformation is on track after reporting a strong finish to 2024. The FTSE 100 company, which is under pressure from activist investor Cevian, said fourth quarter revenues rose 8.3% on an underlying basis. The full-year figure of $5.8 billion came in 5.3% higher, while the trading profit margin improved to 18.1% from 17.5% in 2023 amid Nath's 12-point plan to make S&N a higher growth company. He expects the margin to strengthen in the second half of this year as the impact of China headwinds reduce and operational savings are delivered. Nath said: "There is much more to be done, but we have made solid progress fixing the foundations and expect a step-up in returns in 2025, including significant margin expansion. 'We are confident that this will be the year when transformation starts to unlock substantial value for our shareholders." Trading profit for the year rose 8.2% to a bigger than expected $1.05 billion. 07:02 , Graeme Evans The selling pressure on US markets continued last night after the S&P 500 index followed Friday's big reverse with a decline of 0.5%. The Nasdaq Composite lost 1.2% amid jitters ahead of the release of quarterly results by semiconductor giant Nvidia after Wednesday's closing bell. The FTSE 100 index is set for another lacklustre session after closing unchanged at 8659 last night. IG Index futures are pointing to a 0.1% decline. Mining stocks were among those under pressure during trading yesterday, offset by another strong performance by defence firm BAE Systems. Asia markets also struggled today as the Hang Seng index has fallen by 1.6% and the Nikkei 225 by 1.4%.
Yahoo
23-02-2025
- Business
- Yahoo
How much would someone need to invest in Greggs shares to target a £1,000 monthly passive income?
When it comes to earning passive income in the stock market, I think there's one thing that gives some investors a big advantage over others. It's having time on their side. Being able to be patient can increase returns dramatically. And shares in FTSE 250 bakery and food retailer Greggs (LSE:GRG) are a good illustration of this. Over the last 12 months, Greggs has distributed 59p in dividends per share. So to earn £12,000 a year – or £1,000 a month – before dividend taxes, an investor would need 20,339 shares. At today's prices, that costs £424,271 (leaving aside stamp duty). That's a lot – and I suspect few of us have that amount knocking around right now. Greggs however, has grown its (regular) dividend by 161% over the last decade. And if it does this again, 7,643 shares will be enough to generate £1,000 a month by 2035. The current share price means that costs £159,127. That's still a lot, but much less than the £424,271 it costs to start earning that amount of passive income straight away. The big question is whether Greggs will keep growing its distributions at the same rate over the next 10 years. Dividends are never guaranteed, but I think this one's especially uncertain. Over the last 10 years, the company's increased its store count by just over 54%. If it does that again, it'll be operating around 4,031 outlets. The trouble is, even Greggs isn't anticipating that level of expansion. Its manufacturing base is currently set up for around 3,500 stores, which is quite a bit lower. If the business stops expanding, it might find itself with more free cash. But while this might boost the dividend in the short-term I don't see it as conducive to long-term growth. I think UK investors looking for passive income should consider opportunities beyond Greggs. Croda International's (LSE:CRDA) one that looks attractive to me. The company makes chemicals that help pesticides stick to plants, make moisturisers smooth, and help drugs get to where they're needed. And its products are very well-protected. The risk is that sales volumes can be highly volatile. With agriculture, for example, the price of wheat can have a big influence on demand and Croda has no control over this. Despite this, the company has a very strong track record of increasing its dividend consistently. And I think it has a competitive position that will allow it to keep doing this over the long term. Not all investors are able to take a long-term approach to passive income. But I think those who are have a big advantage. With the right businesses, all shareholders have to do is wait as the returns grow. And that can mean they eventually get a lot more in dividends with less invested at the start. The post How much would someone need to invest in Greggs shares to target a £1,000 monthly passive income? appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Croda International Plc and Greggs Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Motley Fool UK 2025 Sign in to access your portfolio
