US Edition In these difficult times, consumers are prepared to make their own sandwiches and sacrifice taxis for the bus. But will women, and an increasingly large number of men, be prepared to give up their beloved moisturiser and anti-wrinkle cream?
Croda International, which supplies ingredients for high-end cosmetics sold by luxury brands such as Chanel and Estée Lauder, is betting they won’t. “We appeal to two things that will never go away – vanity and ageing,” says Croda chief executive Mike Humphrey.
A while back, the company took the decision to focus only on high-end products. Even if the unthinkable happens and women spurn luxury brands of face creams for own-brand equivalents, Croda could still be quids in. Cazenove analyst Martin Evans says companies like Boots and Tesco outsource the manufacturing process, which could allow the Yorkshire-based company to charge a higher margin.
Citigroup greeted yesterday’s results with a research note titled Another set of solid data as the company produced a 73pc leap in pre-tax profits to £24.6m, way above expectations. Croda’s focus on innovation, including the intellectual property rights to some of the key “anti-wrinkle” elements in face creams, should allow it to stay at the front of the pack. On just over 10 times earnings it's well worth a play. Buy.