Why Croda’s seed enhancement business is providing food for thought
Croda (CRDA) £46.40
Gain to date: 6.4%
Original entry point: Buy at £43.47, 15 February 2018
Chemicals business Croda (CRDA) has enjoyed further share price gains following a recent capital markets event, which focused on its small yet exciting seed enhancement business Incotec.
Incotec was acquired in 2015 and focuses on maximising seed performance through a range of services, including disinfection, film coating, encrusting, pelleting and analytical quality testing.
This will improve the quality of vegetable and field crops, which is essential as agricultural productivity must increase by 60% over the next 30 years, according to Croda.
The shares could gain further momentum following a trading update on 25 April, which may reveal more sales growth in its personal care division.
Numis analyst Kevin Fogarty is impressed by Incotec’s seed enhancement tech, highlighting Croda is targeting a market worth $2.5bn, which is growing at 6% compound annual growth rate.
While Incotec is only a £50m revenue business at present, Fogarty notes Croda plans to boost growth by capitalising on macro themes of global population growth and threats to food production.
Croda is aiming to double the revenue base to approximately £100m and drive profit margins to over 20%, marking a substantial jump from Incotec’s initial margins of 10%.