Speciality chemicals group Croda International PLC (LON:CRDA) was the top FTSE 100 gainer this morning was the firm reported improved sales growth in the first quarter with a “strong and stable profit margin”.
In a trading update, the group that the improving sales trend seen in late 2016 had continued into the first quarter of 2017 and led to constant currency sales increasing by 4.9% year-on-year, driven by "strong organic growth”.
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Croda added that sales on a reported currency basis rose by 19% to £365.5mln, up from £306.8mln at the same stage a year earlier, boosted by the ongoing weakness in sterling since June’s Brexit vote.
It added that the later timing of Easter this year also helped to grow sales in the quarter by 1.5%.
At constant currency, the performance was solid but not as strong
Croda's Personal Care unit saw reported sales growth of 19% in the first quarter of 2017, while its Life Sciences unit sales rose 11%, Performance Technologies sales gained 27% lift, and Industrial Chemical sales rose 15%.
At constant currency, the performance was solid but not as strong, with Personal Care sales up 4.6% year-on-year, Performance Technologies ahead 12%, and Industrial Chemicals sales rising 1.9%, although Life Sciences sales dropped 1.9%.
Croda said its free cash generation continued in the first quarter and net debt reduced from the end of 2016, despite increased capital investment.
On track to deliver continued profitable progress
The group concluded: "We are encouraged by the group's performance in the first quarter and, whilst we expect the exceptional sales growth seen in Performance Technologies to moderate, we remain on track to deliver continued profitable progress through 2017.”
In mid morning trading, Croda shares were 4.6%, or 169p higher at 3,828p.
In a note to clients, Liberum Capital analyst Adam Collins said: “Solid start to year but fullish rating.”
He pointed out:” 1Q revenue growth of 4.9% at constant rates is an acceleration from recent quarters with Personal Care's 4.6% notable but it points out that the timing of Easter boosted by +1.5% and is reaffirming consensus not raising it.
The analyst reiterated a ‘hold’ rating and 3,500p price target on Croda.