Croda (CRDA)

[BullDog]

Any current views here on Croda? Priced above year lows but well below year highs. Not an especially high yielding stock, but I am wondering whether to buy some as a recovery stock? Thanks.

[simoan]

Any current views here on Croda? Priced above year lows but well below year highs. Not an especially high yielding stock, but I am wondering whether to buy some as a recovery stock? Thanks.

I had a quick look recently because Smithson IT started buying it - not that that is ever necessarily a positive sign given their record to date! It didn’t float my boat with EPS forecast of 27% decrease for FY23 and no growth in FY24. On a PER of 27 and FCF yield of 3%, that doesn’t seem a compelling proposition to me.

[BullDog]

Any current views here on Croda? Priced above year lows but well below year highs. Not an especially high yielding stock, but I am wondering whether to buy some as a recovery stock? Thanks.

I had a quick look recently because Smithson IT started buying it - not that that is ever necessarily a positive sign given their record to date! It didn’t float my boat with EPS forecast of 27% decrease for FY23 and no growth in FY24. On a PER of 27 and FCF yield of 3%, that doesn’t seem a compelling proposition to me.

Thanks. I appreciate your opinion. I also noticed that Smithson had recently bought some. But as you say, SSON buying isn't a fantastic buy indicator.

[monabri]

Seems (still) quite expensive ( based on P/E as an initial screen).

Net Margin looks to have reduced to ~10% ( from 30%).

ROCE at 10% ( down from a more respectable 17%).

It benefitted from it's role in supplying pharma product ( encapsulation? ) during Covid and the price spiked. Are we not just seeing a return to 'normal' after a covid boom?

TBH - It's not a company that I follow but I though I'd offer a view based on a cursory look. I don't feel the need to try to time an investment here, not at the moment .

Edit..PER used only as an initial screen as mentioned above!

Edit 2. I dipped a toe into BRBY instead.

[simoan]

Croda is one of those companies that always looks expensive, so that alone shouldn’t prevent holding a position. I like looking at a long term chart because it serves as a good reminder to myself not to sell out of compounders completely. Years ago I had a position bought at something like £17 and dumped the lot at £26 a couple of years later. A lesson well learnt!

Personally, I could see myself buying back in but I would need to see an upturn in profits and cashflow first.

[simoan]

Seems (still) quite expensive ( based on P/E as an initial screen).

Net Margin looks to have reduced to ~10% ( from 30%).

ROCE at 10% ( down from a more respectable 17%).

It benefitted from it's role in supplying pharma product ( encapsulation? ) during Covid and the price spiked. Are we not just seeing a return to 'normal' after a covid boom?

TBH - It's not a company that I follow but I though I'd offer a view based on a cursory look. I don't feel the need to try to time an investment here, not at the moment .

Edit..PER used only as an initial screen as mentioned above!

Edit 2. I dipped a toe into BRBY instead.

You need to remember that when profits reduce, so will ROCE since it’s calculation is based on EBIT and fixed assets will not reduce in line with profit. So this would be expected and you will see the same effect with Burberry! I agree there’s an element of a Covid boost dropping out of the results but I believe there are likely other factors too across other markets they supply.

[simoan]

Seems (still) quite expensive ( based on P/E as an initial screen).

Net Margin looks to have reduced to ~10% ( from 30%).

ROCE at 10% ( down from a more respectable 17%).

It benefitted from it's role in supplying pharma product ( encapsulation? ) during Covid and the price spiked. Are we not just seeing a return to 'normal' after a covid boom?

TBH - It's not a company that I follow but I though I'd offer a view based on a cursory look. I don't feel the need to try to time an investment here, not at the moment .

Edit..PER used only as an initial screen as mentioned above!

Edit 2. I dipped a toe into BRBY instead.

You need to remember that when profits reduce, so will ROCE since it’s calculation is based on EBIT and fixed assets will not reduce in line with profit. So this would be expected and you will see the same effect with Burberry! I agree there’s an element of a Covid boost dropping out of the results but I believe there are likely other factors too across other markets they supply.

It’s probably worth reading the Q3 trading update from October to get a better feel for the outlook if anyone is considering Croda. It doesn’t sound great to me, for such a highly rated company IMHO: https://www.londonstockexchange.com/new ... e/16157451

Fairly obviously, there is more to the drop off in sales and profit than a reduction in supplies to Covid Vaccine manufacturers. I think it’s dangerous to invest in situations like this. Profit warnings seem to follow previous warnings and companies like Croda (and Burberry for that matter) can drop a long way when operational gearing goes into reverse. Of course, it’s possible that a cheaper market valuation will bring out a buyer and another quality company will get taken off the LSE.

All the best, Si

[TheMotorcycleBoy]

I hold. Have done since about 2019.

Up almost 7% at midday. Can't find any RNS or news to explain etc.

Matt

[TheMotorcycleBoy]

Now up 10% over 5 days, no RNSs or news. Uncorrelated to any of the FTSE indexes.

Perhaps someone is thinking of making an acquisition.

[simoan]

Now up 10% over 5 days, no RNSs or news. Uncorrelated to any of the FTSE indexes.

Perhaps someone is thinking of making an acquisition.

We’re in the midst of the US reporting season. I would expect a US peer in the chemical sector has surprised the market with a better than expected quarter. Not a sector I know much about, so couldn’t really suggest any likely names. Might be worth a quick Google!

All the best, Si

[77ss]

Now up 10% over 5 days, no RNSs or news. Uncorrelated to any of the FTSE indexes.

Perhaps someone is thinking of making an acquisition.

We’re in the midst of the US reporting season. I would expect a US peer in the chemical sector has surprised the market with a better than expected quarter. Not a sector I know much about, so couldn’t really suggest any likely names. Might be worth a quick Google!

All the best, Si

Ashland - see:

https://www.sharecast.com/news/risers-a ... 19778.html

[BullDog]

I had a quick look recently because Smithson IT started buying it - not that that is ever necessarily a positive sign given their record to date! It didn’t float my boat with EPS forecast of 27% decrease for FY23 and no growth in FY24. On a PER of 27 and FCF yield of 3%, that doesn’t seem a compelling proposition to me.

Thanks. I appreciate your opinion. I also noticed that Smithson had recently bought some. But as you say, SSON buying isn't a fantastic buy indicator.

What a shame I missed out here. Yield wasn't quite enough for me to click the buy button. Never mind. As one door closes etc.....

[simoan]

Thanks. I appreciate your opinion. I also noticed that Smithson had recently bought some. But as you say, SSON buying isn't a fantastic buy indicator.

What a shame I missed out here. Yield wasn't quite enough for me to click the buy button. Never mind. As one door closes etc.....

I don’t understand? There has been no news from the company so all you’ve missed is a rise in the share price. I find it’s best to ignore such things, especially as it never met your criteria for buying. If you have a successful investment process you have to stick with it. Croda is not even close to meeting any of my criteria for buying currently.

[simoan]

FY23 results announced today https://www.londonstockexchange.com/new ... 3/16349817

Not much to get excited about, unfortunately. The outlook statement is not particularly positive either with a real lack of visibility. It already sounds like they have written off FY24. My bold:

Consumer Care has started the year well and we are cautiously optimistic about the improving demand trend we experienced in January. Within Life Sciences, we expect the non-Covid Pharma business to grow but that destocking will continue in Crop Protection. Demand in Industrial Specialties is expected to remain weak.

Given the ongoing uncertainty in our end markets, the recovery trajectory for each of our business units remains difficult to predict and the range of possible outcomes in 2024 is therefore wider than usual at this stage of the year. Overall, however, the Group expects to deliver mid to high single digit percentage sales growth in 2024, excluding the c.$60m of Covid-19 lipid sales in 2023, with higher sales volumes more than offsetting lower price/mix.

We expect 2024 Group adjusted operating margin to be two to three percentage points lower than 2023 due to the following:

•Different business mix effects year-on-year, with no Covid-19 lipid contribution and continued strong growth in Fragrances and Flavours.

•Low overhead recovery is expected to persist as sales volumes remain depressed in Crop Protection and Industrial Specialties, two of the three businesses with the highest production volumes, alongside Beauty Care.

•To support the return to sales growth, the cost base will reset back to a more normalised level from its low point in 2023. This will include the likely unwind in 2024 of the c.£25m benefit we saw in 2023 from a negligible variable remuneration charge. Some of this will be offset by modest cost savings from our recent reorganisation.

•We will continue to invest to support our long-term strategy. Customer interest in innovation and sustainable ingredients remains strong, despite the current destocking cycle.

Using these assumptions and at current exchange rates, we expect Group adjusted profit before tax to be between £260m and £300m in full year 2024.

Croda will report sales performance quarterly during 2024 and we will provide an update on first quarter trading at the AGM on 24 April 2024. Croda expects to return to its normal cycle of half yearly reporting in 2025.

With our strong balance sheet, improving cash flow and consistent investment in our refocused portfolio, Croda is well positioned to take advantage of the demand recovery when it occurs. We expect the Group's performance to accelerate from 2025, generating continued increasing returns for our shareholders.