Croda International Plc’ share price down, reduces profit forecast amid strengthening pound and weaker margins

The second-biggest cosmetic ingredients supplier in the world – Croda International Plc – made a statement reducing its annual profit projection. The company said that it expects its pretax profit for the current financial year to decrease below the level posted last year. The shares of the company dropped as much as 9.5%, the largest intraday decline in almost three years.

As reported by Reuters, one of the analysts working at JPMorgan Cazenove – Mr. Martin Evans wrote in a note to customers, saying: “Croda has published a negative pre-close trading update highlighting the pressure the strong sterling is exerting on earnings.”

One of the main reasons for the company to cut its profit forecast was the stronger performance of the British pound combined with the relatively weak demand in Europe. Recently, weaker sales of industrial chemicals and a “slightly less favorable” product mix in consumer preferences also led to deterioration of the margins over the second financial quarter.

According to Crodas statement, if the British pound remained as strong as it has currently been, the currency translation and transaction effects would have inevitably reduced its 2013 pretax profit that amounted to 251.4 million pounds (427.6 million dollars) by about 19 million pounds.

One of the analysts, who work at N+1 Singer – Mr. James Tetley commented for Bloomberg: “Whilst the escalation of currency headwinds should come as no surprise, it is disappointing to downgrade forecasts again. It is clear that stubbornly subdued conditions in Europe are a factor.”

Croda International Plc was losing 7.81% to trade at 2,218 pence per share by 13:33 GMT, marking a one year change of -1.86%. According to the information published on the Financial Times, the 18 analysts offering 12-month price targets for Croda International Plc have a median target of 2,650, with a high estimate of 3,200 and a low estimate of 2,030. The median estimate represents a 10.14% increase from the last price of 2,406.