Croda Earnings: There Was Slightly Better-Than-Expected EBIT Delivery in a Difficult Market

Narrow-moat Croda’s first-half results were affected by widespread customer destocking, with sales of GBP 881 million and EBIT of GBP 176 million being 6% and 33% lower, respectively, compared with the first-half pro forma results of last year, adjusted for the divestment of the majority of the performance technologies and industrial specialties business last year. This was largely expected, however, after the company issued a profit warning at the beginning of June. The EBIT delivery was even slightly ahead of FactSet consensus of GBP 174 million, which sent shares around 4% higher in early trading. Management reconfirmed 2023 full-year profit before tax guidance of GBP 370 million-GBP 400 million. This is in line with our GBP 397 million forecast, so we don’t expect to make a material change to our GBX 5,400 fair value estimate following today’s announcement. We view shares as fairly valued at current levels.