Today’s Falling Knife: Croda plc Fails To Excite

Croda plc (LON:CRDA) continues to see slow growth in a subdued trading environment.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Croda International (LSE: CRDA), the marketing and technology company that produces and sells speciality chemicals, today released a subdued interim management statement, sending the shares down 7% in early trade.  Turnover was up 4.4% to £267.9m with underlying sales up 0.8%.  Group pre-tax profits increased 5.4% to £58.6m in the quarter.

The consumer care segment saw sales up 3.2% to £145.4m with strong sales in Western Europe and North America but sales continuing to decline in Eastern Europe, Middle East and Africa.  Crop Care continued to see double digit growth in Europe. 

Performance technologies sales were up just 0.4% to £95m and the comparatively minor industrial chemicals segment continued to see strong growth with turnover increasing 31.6% to £27.5m, bolstered by the acquisition of Sipo in July 2013.

Should you invest £1,000 in Croda right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Croda made the list?

See the 6 stocks

Cash generation was good in the quarter with net debt falling £8.6m to £213.7m. This was despite a £45.6m increase in borrowings due to the acquisition of 65% of the equity of Sipo in the quarter.

Commenting on the outlook, Martin Flower, Chairman of Croda said: 

“Croda has continued to generate a steadily improving underlying sales performance through every quarter of this year despite challenging market conditions. We continue to benefit from the strong demand for innovation and remain particularly encouraged by the progress that Croda is making in Asia and South America. However, with currencies continuing to weaken and market conditions expected to remain subdued, fourth quarter profits are likely to be similar to quarter three. Looking ahead, the Board remains confident that Croda’s strategy will continue to deliver progress into 2014 and beyond.”

Croda has performed well in recent years with earnings per share growth averaging 38% for 3 years until the last full set of results which saw growth slow to 8%.  This trading update suggests current year growth will be around 4% which is a concern for growth investors considering the price to earnings ratio is approaching 20 times.

The market has reacted badly initially with a 7% drop in the share price this morning.  The shares are now 15% down on the April 2013 high of 2,846 pence.  Was this an overreaction or has Croda come to the end of a growth spurt which saw a 375% gain in 5 years?  The company’s debt position is low at 8% of market capital but then the tangible assets are even lower at 4%. 

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Barry does not own shares in Croda.

More on Company Comment

Hand of person putting wood cube block with word VALUE on wooden table
Company Comment

Value has been building behind the Diageo share price

Despite the business growing, the Diageo share price first reached its current level just over 19 months ago and hasn't…

Read more »

Older couple walking in park
Investing Articles

5 stocks to buy for high and rising dividend income

I can see a host of shares to buy on the FTSE 100 offering me exceptional levels of income. Here…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

I don’t care if FTSE 100 shares fall further, I’m buying them today

I'm happy to go shopping for FTSE 100 shares today, even though I accept that they could have further to…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

Rolls-Royce shares are down 18% in a month and I’m finally going to buy them

Investors who bought Rolls-Royce shares have been repeatedly disappointed, but I'm willing to take a chance on them before they…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

How I’d invest £10k in a Stocks and Shares ISA today

Now looks like a good time to buy cheap FTSE 100 shares inside a Stocks and Shares ISA. These are…

Read more »

Black father holding daughter in a field of cows
Investing Articles

Today’s financial crisis is the perfect moment to buy cheap shares

I'm building a portfolio of FTSE 100 stocks by purchasing cheap shares whenever I see an opportunity. There's a good…

Read more »

Long-term vs short-term investing concept on a staircase
Investing Articles

I’d buy Tesco shares in October to bag their 5.4% yield 

Tesco shares have fallen lately but I think this makes them attractively valued for a dividend stock I would aim…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

I would do anything to hold Diageo in my portfolio (but I won’t do that)

Diageo is one of my favourite stocks on the entire FTSE 100 and I'd love to hold it, but one…

Read more »