LONDON (SHARECAST) - Speciality chemicals manufacturer Croda Interntional has announced the sale of its Italian business as it reported a positive start to the fourth quarter despite the market remaining weak, particularly in Europe.
As for the third quarter, trading was robust considering the depressed market conditions, the firm said, with underlying group sales up 3.2% compared to 2011.
This, however, was not enough to please investors, who were expecting higher operating profits, with shares down nearly four per cent at 2,116p by mid-afternoon.
Operating margins climbed to 23.3% from 22.3% in 2011, and consequently continuing operating profit increased 4.7% to £59.7m (2011: £57.0m) and continuing pre-tax profit increased 4.4% to £59.3m (2011: £56.8m).
The falling share price may also have been because of the company's warning that month to month trading has been "volatile", saying sales were in line with expectations in July and August, but that trading weakened in September, which is usually a strong month for the firm.
Turnover declined in Europe, but experienced growth in all other major regions. Volumes were up 8.9% overall but the strongest growth came in lower value products in Performance Technologies and Industrial Chemicals (which were weak in the third quarter of 2011). As a result average selling prices dropped by 5.7%.
Against a "very strong" third quarter in 2011, Consumer Care sales were down 2.7% due to slow Personal Care sales, particularly in Europe. Health Care and Crop Care both saw sales increase in the three month period. Performance Technologies sales were up 2.5% at £94.7m (2011: £92.4m).
Industrial Chemicals performed strongly with sales up 16.1% to £20.9m (2011: £18.0m). Profits in this sector increased 40.0% to £2.1m (2011: £1.5m).
In a statement the firm said: "Despite the soft trading environment in Europe and the currency headwinds, our operating profit for the year to date at £193.5m is 8.2%, ahead of a strong 2011 comparative period. This continues to vindicate our strategy of concentrating on high value, niche markets with innovative technologies, supplying to customers both large and small around the world."
Martin Flower, Chairman of Croda added: "Quarter four has started well. However, with the market remaining weak, particularly in Europe, and currency headwinds, we expect a similar performance in quarter four to that seen in the third quarter. Looking further forward, the Board remains confident that Croda has the right strategy for continued growth."
At the end of the period net debt had been reduced by £5.8m to £202.2m.
The Italian business, which is based in Cremona, was sold to a private company located in Italy for a consideration "equivalent to the value of its working capital". Completion of the sale is expected to take place before the year-end. In the first nine months of the year it had a turnover of £25.4m (2011: £32.2m) and made an operating loss of £0.1m (2011: operating profit £4.1m).