Share Dealing
WI stock picks: Cost-cutting chemistry is catalyst for Croda
Joe McGrath, 02 August 2010
Rising dividends and mouth-watering pre-tax profits in the latest results may have led some investors to think things can’t possibly get any better at Croda International.
But analysts believe there is still significant worth in the chemical manufacturer for those investors looking for growth.
The company confirmed a reduction in net debt of £19 million to £270 million in its latest interim results and continuing profits before tax of £96.2 million for the first half of 2010 – up from £46.3 million on the same period last year - a rise of 107.8 per cent.
Now, with the company having benefitted from the weak pound and the falling prices of raw materials, analysts believe further growth will come from the recent cost-cutting initiatives and group diversification.
Nick Raynor, investment analyst at The Share Centre, said as well as cutting cost, Croda has also reduced its debt and the company has high hopes for the remainder of the year.
He explained, ‘All divisions within the company have shown improvements during the first half of the year as profits doubled to £96.2m and sales rose to over £510m.
‘The recent decision to increase the interim dividend by 50 per cent will also be of interest to investors and although the share price does look high at 1250 pence, we still feel Croda is one for investors seeking growth to consider.’
Investors should also keep in mind the comments from Croda’s chairman, Martin Flower during the recent interim results presentation.
Flower said the group is now set to benefit from the acquisition of Uniqema in 2006 so while prior year comparatives will get tougher in the second half, further profit progress is expected.
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