Croda Earnings: Shares Down as Profitability Is Likely to Remain Depressed in 2024

Narrow-moat Croda reported 2023 adjusted profit before tax of GBP 309 million, in line with its October 2023 guidance and company-compiled consensus. On a year-over-year basis, adjusted profit before tax was down 33%, hit by customer destocking in beauty care and crop protection, as well as lower covid-19 lipid sales. The 2024 outlook shared by management points to continued pressure on profitability. The company expects volume weakness to continue in crop protection as inventories remain elevated for all major customers compared with prepandemic levels and demand for industrial specialties will remain subdued. Furthermore, management expects the positive operating leverage impact from volume recovery in consumer care to be more than offset by accelerated growth of the lower-margin flavors and fragrances business and lack of high-margin covid-19 lipid sales.