Croda Hands $192 Million to Investors in Special Dividendby
Company proposing to pay shareholders 100 pence per share
Dividend to bring Croda's leverage to mid-point of target
Croda International Plc, the world’s second-largest producer of cosmetics ingredients, plans to return 136 million pounds ($192 million) to shareholders by paying its first special dividend in the company’s 91-year history.
The board is proposing a 5.3 percent increase in the annual dividend to 69 pence, plus an additional payout to investors of 100 pence a share, the Snaith, northern England-based company said in a statement on Tuesday. The move will bring Croda’s leverage to the mid point of the company’s target range of one to 1.5 times net debt to earnings before interest, taxes, depreciation and amortization.
Croda has historically hoarded cash. The last time investors got a bumper payout was in the early 1980s when the company used a large increase in its annual dividend to fend off a takeover approach from Burmah Castrol. The return of cash coincides with record sales and pretax profit after Chief Executive Officer Steve Foots expanded in Asia and increased the number of patented active ingredients used in anti-aging moisturizers and other products.
“We’ve got a very cash generative model,” Foots said in a phone interview. “Asia and sustained strong innovation are the key two things that are resonating around the company.”
Shares of Croda rose the most in six months, climbing as much as 4.5 percent. The stock traded 3 percent higher at 29.45 pounds as of 1:37 p.m. in London.
Handing cash back to shareholders -- as well as giving Croda’s small-deal scout and chief technology officer, Keith Layden, a wider role overseeing the Life Sciences division --doesn’t mean that acquisitions are off the agenda, Foots said. Since taking the helm four years ago, Foots has driven expansion in Asia, which now accounts for one-fifth of sales. The U.K. company is investing in an industrial factory in Indonesia to produce more consumer-facing products to tap local demand.
Demand for so-called new and protected products is increasing at four times the speed of Croda’s underlying sales, and they now account for 26.1 percent of total revenue. Pretax profit was 254.7 million pounds in 2015, compared with 235.4 million pounds. Sales jumped 3 percent to 1.08 billion pounds. Analysts had predicted profit of 253.4 million pounds and revenue of 1.15 billion pounds.
Croda said markets will remain challenging this year. It’s suffering from a slowdown in Brazil, where the company has had to restructure operations and cut jobs. To improve margins and sales, Foots said he’s exiting seven distribution agreements outside of Europe and North America to directly access 800 customers via its own sales and marketing forces.