Croda International PLC (LSE:CRDA) saw its shares drop 14% in morning trade on Thursday after the specialty chemicals firm warned that lower sales volumes due to customer destocking will impact its profits in the current year.
In an update on its trading for the period ending on 31 May 2023, the FTSE 100-listed group said that in its Consumer Care segment, whilst sales volumes are up compared to the final quarter of 2022, they remain down double-digit percentage compared with the same period last year due to ongoing customer destocking.
However, price increases implemented in 2022 and favorable foreign exchange rates in 2023 have helped offset the impact, resulting in flat revenues compared to the first five months of 2022. Nevertheless, lower sales volumes have kept the operating profit margin at a similar level to the second half of 2022.
In its Life Sciences division, Croda said Crop Protection had a good start to the year, but the business is now facing rapid customer destocking, which was originally expected to occur gradually later in the year. Adverse mix in the year-to-date, including lower sales for Covid-19 applications in the Pharma business, is negatively impacting the operating profit margin of Life Sciences. Shipments of lipid systems to the company's principal Covid vaccine customers are anticipated to happen as planned in the second half of 2023.
As a result of these factors, Croda reported a profit before tax of £143mln in the first five months of the current year, supported by minimal net finance costs. With customer destocking expected to continue in consumer and industrial end-markets throughout the second half of the year and momentum slowing in Crop Protection, the group said it now anticipates its full-year 2023 profit before tax to be between £370mln and £400mln. For full-year 2022, the firm reported a profit before tax of £496.1mln.
Around 9.10am, Croda shares were down 13.9% at 5,182p.