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LONDON BRIEFING: Croda profit slumps amid weak market, destocking

27th Feb 2024 07:45

(Alliance News) - Stocks in London are called lower on Tuesday, following some weakness on Wall Street ahead of the week's US economic data.

"It feels like there is a moment of calm and silence in the aftermath of major tech earnings, investors will decide whether this rally deserves to continue higher straight away. The week brings some important economic data to the table," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

The US will release its latest economic growth figures on Wednesday, with personal consumption expenditures - which contains a key inflation metric - to follow on Thursday.

"Favourable data – meaning resilient but not abnormally strong growth, coupled with softening inflation, would allow the market bulls to surf on the 'goldilocks' wave. If that's the case, we could see the stock market rally continue, and to broaden to sectors other than the technology stocks," the analyst continued.

On Tuesday, investors will pay close attention to latest US durable goods orders data at 1330 GMT, as well as a consumer confidence reading from the world's largest economy at 1500 GMT.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: called down 10.3 points, 0.1%, at 7,674.00

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Hang Seng: up 0.9% at 16,777.38

Nikkei 225: closed marginally higher at 39,239.52

S&P/ASX 200: closed up 0.1% at 7,663.00

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DJIA: closed down 0.2% at 39,069.23

S&P 500: closed down 0.4% at 5,069.53

Nasdaq Composite: closed down 0.1% at 15,976.25

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EUR: flat at USD1.0848 (USD1.0849)

GBP: flat at USD1.2678 (USD1.2676)

USD: down at JPY150.50 (JPY150.81)

Gold: up at USD2,034.07 per ounce (USD2,028.18)

Oil (Brent): up at USD82.73 a barrel (USD82.18)

(changes since previous London equities close)

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ECONOMICS

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Tuesday's key economic events still to come:

10:00 CET eurozone money supply

13:40 GMT UK Bank of England Deputy Governor Dave Ramsden speaks

08:30 EST US durable goods orders

08:55 EST US Redbook index

09:00 EST US house price index

10:00 EST US consumer confidence

10:00 EST US Richmond Fed manufacturing index

10:30 EST US Dallas Fed services index

09:05 EST US Federal Reserve Vice Chair Michael Barr speaks

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UK shop price inflation ebbed to an almost two-year-low in February, numbers showed. According to the latest British Retail Consortium-NielsenIQ shop price index, annual shop price inflation ebbed to 2.5% in February, from 2.9% in January. The reading was also short of the three-month average inflation rate of 3.3%. "Shop price annual growth is its lowest since March 2022," the BRC said. The non-food inflation rate was unmoved at 1.3% in February, below the 3-month average rate of 2.0%. Food price inflation eased to 5.0% in February, from 6.1% in January, below the three-month average rate of 6.0%.

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German shoppers are heading into March feeling slightly more optimistic about their future income but consumer morale remains low overall as a downturn in Europe's largest economy drags on, a key survey said Tuesday. Pollster GfK said its forward-looking survey of around 2,000 people stayed roughly stable at minus 29 points for March, after the previous month saw a sharp drop to minus 29.6 points. Although income expectations rose following wage hikes across different sectors, shoppers remain pessimistic about the German economy and their propensity to make large purchases was largely unchanged from a month ago, GfK said in a statement. As a result, respondents' willingness to save climbed to the highest level since June 2008, according to GfK which published the survey with the Nuremberg Institute for Market Decisions.

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BROKER RATING CHANGES

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Barclays raises Flutter Entertainment to 'overweight' (equal weight) - price target 20,000 (15,300) pence

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COMPANIES - FTSE 100

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Medical technology firm Smith & Nephew reported slightly stronger-than-expected annual results. In 2023, revenue climbed 6.4% to USD5.55 billion from USD5.22 billion a year before. The topline figure beat company-compiled analyst consensus of USD5.53 billion. Trading profit increased to USD970 million from USD901 million, beating consensus of USD966 million. Pretax profit rose to USD290 million from USD235 million. S&N proposed a final dividend of 23.1 cents per share, bringing the annual total to 37.5 cents, unchanged from the prior year. For 2024, S&N is guiding for underlying revenue growth of 5.0% to 6.0% or reported revenue growth of 4.6% to 5.6%, with trading profit margin of at least 18.0%, which would be a step up from 2023's 17.5%. "Our investment in innovation continues to deliver, with almost half of our 2023 growth coming from products launched in the last five years. We were pleased to add major launches in robotics, shoulder arthroplasty and negative pressure wound therapy to the portfolio during the year," said CEO Deepak Nath.

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Croda International said 2023 saw "strategic delivery in a challenging macroeconomic environment". The chemicals firm said sales fell 19% year-on-year to GBP1.69 billion from GBP2.09 billion, with the year hit by prolonged destocking and a weak macroeconomic environment. Company-compiled consensus had expected GBP1.71 billion for 2023. Pretax profit slumped by 70% to GBP236.3 million from GBP780.0 million, though the prior year saw GBP356.0 million in divestment profit. Adjusted pretax profit fell 33% to GBP308.8 million from GBP463 million. Croda increased its dividend by 0.9% to 109.0 pence from 108.0p a year before. "Consumer Care has started the year well and we are cautiously optimistic about the improving demand trend we experienced in January. Within Life Sciences, we expect the non-Covid Pharma business to grow but that destocking will continue in Crop Protection. Demand in Industrial Specialties is expected to remain weak," Croda said. For 2024, excluding Covid lipid sales, it expects mid-to-high single digit sales growth, with higher sales volumes to more than offset lower price/mix. However, its adjusted operating margin is expected to be two to three percentage points lower than 2023, resulting in an adjusted pretax profit between GBP260 and GBP300 million.

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COMPANIES - FTSE 250

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Asset manager abdrn reported a pretax loss of GBP6 million in 2023, narrowed substantially from GBP612 million the prior year. Net operating revenue fell 4.0% to GBP1.40 billion from GBP1.46 billion. Assets under management and administration fell 1% or so to GBP494.9 billion from GBP500.0 billion the year before, "with net outflows in Investments and Adviser partly offset by positive market movements and continued net inflows in ii," abrdn noted. Net outflows over the year worsened to GBP13.9 billion from GBP10.3 billion in 2022. abrdn declared a final dividend of 7.3p, bringing the annual total to 14.6p, unchanged year-on-year. "We are taking action to rebuild and grow profit in our Investments business. We have sharpened our focus on improving investment performance, streamlined our fund range, reduced costs by GBP102 million in 2023, exceeding our GBP75 million target," said CEO Stephen Bird.

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OTHER COMPANIES

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On the Beach Group announced it has signed a long-term distribution agreement with budget airline carrier Ryanair. OTB customers will be able to access Ryanair's low fare flights as part of their holiday packages with "full price transparency", while continuing to have access from OTB's flexible payment plans, customer perks and Air Travel Organisers' Licensing protection. "We are excited to have entered into this transformational partnership with Ryanair. This will improve the booking and travel experience for our customers selecting Ryanair flights, while ensuring we can continue to provide customers with best value package holidays...Importantly, this agreement enables both parties to move on from outstanding litigation and we look forward to working closely with our new partner," OTB CEO Shaun Morton said. OTB had previously sued Ryanair for some GBP2 million over refunds paid after flights were cancelled or changed.

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By Elizabeth Winter, Alliance News deputy news editor

Comments and questions to [email protected]

Copyright 2024 Alliance News Ltd. All Rights Reserved.

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