Croda chief to step aside as profits rocket

Mr Humphrey, who started out at the East Yorkshire natural chemicals company as a “management trainee dropout” 42 years ago, will be replaced by Steve Foots, president of Croda Europe.

Despite reporting a 30.1 per cent surge in pre-tax profits to £124.8m during the first six months of the year, shares in Croda closed the day down two per cent at 1,887p, a 39p fall.

“Humphrey is seen as being instrumental in Croda’s success story and it is likely that there will be a negative reaction to this announcement,” said analysts at UBS.

“However, we believe that Croda will continue to deliver attractive growth and that any weakness in the shares...should be taken advantage of.”

Mr Humphrey, who was appointed chief executive in 1999 and spearheaded the group’s transformational acquisitions of Sederma in 1997 and Uniqema in 2006, will stay on as a senior adviser.

“It’s time for a change,” said Mr Humphrey, 60. “I think we’ve achieved a lot in that time.

“We’ve had a succession plan in place for quite some time.

“Croda has had very few chief executives since it became a public company. We’ve consistently tried to promote from within because we have good people and a good culture, and it’s necessary that people understand that culture.

“I don’t think there will be any radical change in strategy.”

Croda is now one of Yorkshire’s biggest listed companies with a market value of about £2.6bn.

Mr Foots has been with the company for more than 20 years, and Mr Humphrey said he was the outstanding candidate from its extensive internal and external search.

“I’ve taken a back step for the past two to three years,” said Mr Humphrey.

“The company has been run by the executive team and I’ve been there in the background offering advice and shouting at them every now and then.”

Mr Humphrey plans to see his family more and travel when he hands over to Mr Foots on January 1.

Analysts at Deutsche Bank said: “Whilst it is disappointing to see the current CEO retiring the timing is not a great surprise, and we note that Steve Foots has been with the company over 20 years and we see him as a good choice to succeed Mike Humphrey and continue to drive Croda’s growth strategy.”

Morgan Stanley analysts added: “Headlines will focus on CEO change, but the ‘new’ man is an old hand at Croda and the hand-over is well anticipated.”

They said: “We see the removal of the uncertainty over the timing of this inevitable hand-over as a positive.” The group, which counts cosmetic giants including Estee Lauder, L’Oreal and Syngenta among its customers, said the second half of its year had started well and it expects to make further progress.

Croda reported a 9.3 per cent increase in sales from continuing operations, which hit £559.6m. That was despite a three per cent fall in volumes, due to tough comparatives a year ago, as it managed to push through surging commodity prices to its customers.

Mr Humphrey said it had seen palm oil, one of its biggest raw materials, more than double in price over the past two years, as demand for the oil as a biofuel eats into global supplies. Despite this, he said the company had continued its successful policy of forcing through price increases.

“We’ve always had the principle that we will drive the cost through and if customers do not wish to accept that then they have the choice not to buy,” he said. “We’ve never shied away from putting our prices up.

“We represent only a small proportion of our customers’ costs.”

Croda now makes only about five per cent of its sales in the UK, and the emerging markets comprise 31 per cent of its business.

Despite the tough economic outlook, Mr Humphrey said Croda is well placed to grow as the expanding middle class in countries such as India and China consume more of its products, and developed economies continue to spend on cosmetics.

“We’ve got an aging population and that seems to get vainer by the day,” he said.

“Whatever amount they have got they are still spending money on looking good and feeling good.”

Croda is investing £10m in a new acrylic polymers plant at Rawcliffe Bridge in Goole, where the company was founded in 1925.

It is also on the hunt for acquisitions.

Croda also announced a new dividend policy, committing to paying 40 to 50 per cent of its earnings back to shareholders through dividends. “Because of our success our dividend has not gone up anything like as fast as our profitability,” said Mr Humphrey. “The best use of that money is to return it to shareholders.”

It also spent surplus cash on buying £25m of its own shares during the first half under its buyback programme.

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