The FTSE 100 may be near record-highs but not all stocks have been participating. Indeed, one of its constituents now sits at an 11-year low, having crashed 25% in 2025 alone.
Post-Covid blues
The stock in question is speciality chemicals producer Croda (LSE: CRDA). Its mission-critical ingredients are found in dozens of products across the beauty, pharmaceutical, and agricultural industries.
During the height of the pandemic, when pharmaceutical companies were manufacturing huge quantities of vaccines, sales of Croda’s lipids sky-rocketed. A subsequent collapse of that market has been the number one reason behind the stock losing three-quarters of its value.
Turnaround potential
The business may not be a household name but do not let that fool you. This year it marked its centenary.
Earlier this year, it laid out a five-point plan to improve earnings and returns. These were a blend of growth and cost-saving initiatives.
One area that the business has really struggled with is seeing a return on investment from its many acquisitions. The acquisition of Solus in 2023, is one such example.
Solus manufactures a portfolio of biotechnology-derived active ingredients for beauty care and pharmaceuticals, most noticeably ceramides. This is a high-growth, high-margin business.
Ceramides have become one of the most talked about active ingredients in beauty products today. A form of lipid, they keep skin hydrated, supple, and firm.
However, to date, the business has failed to capitalise on the commercialisation opportunities from the acquisition. To address this, it has exited all existing distribution agreements, and instead its sales network is selling ceramides in every location around the world.
In its H1 results back in July, it reported that ceramide sales had increased by 50%. This is encouraging, but it is starting from an extremely low base.
Local and regional customers
Many of the markets the chemicals specialist operates in are evolving. One recent trend, which plays very well to its strengths, has been the emergence of greater numbers of local and regional competitors within beauty and pharmaceuticals. These businesses are gobbling up market share from established brands.
Such a trend has been particularly pronounced across Asia and emerging markets. In beauty, this includes companies like Boticario and Quala in Brazil, Arma in Egypt, Kolmar in Korea, and Milbon in Japan.
Innovation is the name of the game in the beauty industry. Being a smaller player provides Croda with a distinct competitive advantage, as it seeks to expand its global footprint among such a growing cohort.
Dividend
A falling share price has pushed the dividend yield up to a respectable 4.4%. That is above both its long-term average and that of the FTSE 100, too. But can it sustain it?
Its stated aim is to return 40%-50% of earnings through the cycle to shareholders. But, in order to increase the dividend, that figure was pushed up to 66% of earnings in H1 2025, eroding free cash flow. Clearly, if earnings do not begin to show positive momentum, then this is not sustainable.
Nevertheless, when I look at the bigger picture, I believe there are reasons to be optimistic. I definitely see it as a stock worthy of further research by investors.
