Croda Lowers Profit Outlook Due to Weak Demand in Beauty Care Business

Croda, a leading supplier of ingredients to global cosmetic majors such as Estee Lauder and Unilever, has revised its annual profit outlook downward. The company cited destocking and weak demand, particularly in its key beauty care business in North America, as the primary reasons for the adjustment. As a result, Croda’s shares in the FTSE 100-listed UK specialty chemical group dropped by as much as 11.5% to their lowest level since April 2020.

The global beauty products market has been grappling with sluggish demand throughout the year, with a slow recovery in duty-free and travel destinations, especially in China. Additionally, consumers have been cutting back on non-essential purchases due to high inflation, while companies face challenges in protecting profit margins amid rising costs.

Croda’s consumer division, which serves the beauty, fragrance, and home care markets, contributes to half of its annual revenues. The company reported lower-than-expected sales volume in its beauty care business during the third quarter, with the North American market failing to recover from weakness observed in the previous quarter.

To mitigate the impact of these challenges, Croda has implemented various cost-cutting measures since June. These include optimizing production through plant shutdowns and reduced shift patterns. The company has been strategically shifting its focus to its life sciences and consumer divisions after selling a significant portion of its performance technologies and industrial chemicals division to commodities group Cargill Inc last year.

While Croda now expects its 2023 group adjusted profit before tax to be in the range of £300 million to £320 million ($366-$391 million), analysts had previously estimated an average of £369.6 million. The company had initially projected a profit range of £370 million to £400 million.

Croda’s revised profit outlook reflects the challenges faced by the beauty care industry and the broader retail sector. The company remains committed to navigating these headwinds and capitalizing on opportunities in its other divisions.