24th Jun 2014 06:40
LONDON (Alliance News) - Speciality chemicals company Croda International PLC Tuesday warned that it now expects to report lower pretax profit than previously hoped in both its second quarter and in 2014 as a whole, due to the strength of the pound and weakness in its industrial chemicals business.
In April, the company had said it expected its performance in the second quarter to end-June to be similar to that of the first quarter when it reported a pretax profit of GBP65.2 million. However, it now expects the second quarter figure to be about 8% below that.
"The modestly improving underlying sales trend seen in recent quarters in our core consumer care and performance technologies divisions has continued into the current period, though market conditions remain subdued especially in Europe," the company said in a trading update.
"However, sales were weaker in industrial chemicals. In addition, greater transactional currency costs and a slightly less favourable product mix in consumer care than that seen in the first quarter mean that quarter two margins are now likely to be lower than quarter one," it warned.
It said that the recent further strengthening of sterling had wiped GBP6.5 million of its second quarter pretax profit compared with the year-earlier period, and about GBP1.5 million compared with the first quarter.
It said that if sterling remains at current levels for the whole of 2014, the impact would be to wipe about GBP19 million off the GBP251.4 million pretax profit it reported in 2013.
"Whilst we still expect to achieve underlying profit progress in 2014, pretax profits are now expected to come in below those attained in 2013," it said.
"The board remains confident in the long term strategy of the group and its medium term targets remain unchanged," it added.
On a further positive note, it said operating cash generation in the second quarter of 2014 id expected to have been "very strong".
By Steve McGrath; [email protected]; @SteveMcGrath1
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