The share price of the FTSE 100-listed Croda International PLC (GB:CRDA) declined yesterday after the company issued another profit warning. The company reduced its profit outlook for the full year after it reported lower sales numbers in its trading update for the third quarter ended on September 30, 2023.
This marks the company’s second profit warning this year, citing a difficult economic environment for its business. The company revised its full-year 2023 adjusted pre-tax profits to a range of £300 million to £320 million, a notable reduction from the earlier guidance of £370 million to £400 million.
The share price traded down by 7.27% on Monday, placing it among the top fallers on the FTSE 100 list. Year-to-date, the stock has fallen by over 30%.
Croda International is a leading manufacturing company, supplying specialty chemicals to Consumer Care and Life Sciences markets.
Let’s take a look at some of the numbers.
Third Quarter Trading Update
In its third quarter, the company experienced weaker demand for its products and posted lower sales volumes than expected. The company stated that its consumers have been reducing their ingredient inventories in end-markets like consumer care, crop, and industrial. In its Life Sciences segment, sales are anticipated to show improvement in the first half of 2024. Meanwhile, the Industrial segment is expected to experience sustained weakness in demand due to global conditions.
As a result of declining volumes, Croda has implemented various cost-saving measures in June to safeguard profitability. These measures include stricter control over fixed costs, optimization of production through plant shutdowns and reduced shift patterns, and simplifying business processes and working methods.
Looking ahead, the company anticipates that there will not be any significant improvement in its sales in the fourth quarter as well. The company will publish its fourth quarter and full-year earnings report for 2023 in February 2024.
What is the Share Price Forecast for Croda in 2023?
Analysts observe that despite the company’s diversification across multiple sectors, its financial performance has been adversely impacted. Lower volumes, coupled with increased costs, have exerted significant pressure on profit margins. However, it also remains well-positioned for a rebound when conditions improve, driven by its various measures to improve profitability.
Yesterday, analyst Charlie Webb from Morgan Stanley reiterated his Buy rating on the stock, predicting 18.8% growth in the share price.
On TipRanks, CRDA stock has a Moderate Buy rating based on four Buy and five Hold recommendations. The Croda share price target is 6,087.5p, which is 37% higher than the current trading levels.
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