Croda's quarterly profits hurt by currency, but underlying trends improve

7th Nov 2014 08:10

Speciality chemicals company Croda reported a drop in quarterly profits due to currency headwinds, but shares rose strongly after underlying trends improved.Pre-tax declined to £55.1m in the three months from 1 July, from £58.7m a year earlier, according to a trading update on Friday.Operating profit fell to £58.1m from £62.1m, hurt by adverse currency translation of £3.5m and an estimated £2m currency transaction cost in the quarter.On a constant currency basis, group sales increased 4%, including 0.6% from acquisitions and strong performances in consumer care and performance technologies businesses.Adverse currency translation of 7.3% affected sales by £19.2m. As a result, turnover declined 3.3% to £259m despite the improving underlying trends."Although market conditions remain challenging in many parts of the world, underlying sales trends improved during the third quarter with growth in both core market sectors," the firm said."The organisational changes introduced earlier in the year are driving better market focus and customer alignment which are helping to deliver improved top line growth."Broker unconvincedAlthough specialty chemicals manufacturer Croda has multiple positive features, even after the recent share price underperformance those are more than fully reflected in the share price, Canadian broker Canaccord Genuity said in a research report sent to clients.Additionally, it expects the firm's future growth rates to disappoint, with negative implications for the stock price.The stock was up 4.5% at 2,358p by 08:29.