Croda International Plc · LSE:CRDA
Croda International — H1 2023 Earnings Presentation
37 slides from Croda International's earnings presentation, Jul 25, 2023
Slide 1: 2023 half year results
Croda International Plc 2023 half year results 25 July 2023
Slide 2: Disclaimer
Disclaimer Cautionary statement Alternative Performance Measures (APMs) This review is intended to focus on matters which are relevant to the interests of We use a number of APMs to assist in presenting information in this statement in shareholders in the Company. The purpose of the review is to ass
Slide 3: Agenda
Agenda 01. CEO overview 02. Finance review 03. Strategic progress 04. Questions Smart science to improve lives™ 3
Slide 4: 01 Overview
Croda International Plc 01 Overview Steve Foots Chief Executive Officer Smart science to improve lives™ 4
Slide 5: Performance in line with revised expectations
CEO overview Performance in line with revised expectations Headlines Continued investment • Destocking across consumer, crop and • R&D investment; Asia focus industrial markets • Scaling Pharma capacity • Lower volume impacting margin; temporary • Completed Solus Biotech acquisition cost measures to
Slide 6: Resilient sales in Consumer Care and Life Sciences
CEO overview Resilient sales in Consumer Care and Life Sciences Consumer Care Life Sciences Industrial Specialties Market context Market context Market context Rapid post Covid-19 stocking and destocking Rapid crop customer destocking in Q2; some More pronounced destocking than crop. unprecedented i
Slide 7: Consumer Care improving despite prolonged destocking
CEO overview Consumer Care improving despite prolonged destocking Significant inventory correction Sequential improvement in Consumer Care Customer 31 Dec 22 inventories higher than before Covid-19 (stock days)* Consumer Care volumes (3-month moving average) L'Oreal Colgate Henkel Unilever Estee Lau
Slide 8: Investing in strategic priorities for near and medium-term growth
CEO overview Investing in strategic priorities for near and medium-term growth Strengthen Consumer Care Expand Life Sciences Proactive M&A – Solus Biotech Doing the basics brilliantly Near-term growth: Improving customer experience • Ceramides for Beauty Actives • New online order portal • Phospholi
Slide 9: 02 Finance review
Croda International Plc 02 Finance review Louisa Burdett Chief Financial Officer Smart science to improve lives™ 9
Slide 10: Group performance in line with revised expectations
Finance review Group performance in line with revised expectations Adjusted results Pro forma estimates H122 % change £m H123 H122 % change (pro forma) (pro forma) Sales 880.9 1,127.3 (21.9)% 936 (6)% Operating profit 175.8 300.4 (41.5)% 261 (33)% Operating margin 20.0% 26.6% (6.6)ppts 28% (8)ppts P
Slide 11: Sales supported by positive price/mix and FX
Finance review Sales supported by positive price/mix and FX Sales, £m Reported change (22)% (17)% 9% (18)% 3% 1,127 Pro forma reported change (6)% 936 881 H122 PTIC divestment H122 pro forma Price/mix Price / mix Volume Currency translation H123 Pro forma H122 estimated results have been adjusted fo
Slide 12: Profit impacted by lower volume and phasing of CV-19 lipid sales
Finance review Profit impacted by lower volume and phasing of CV-19 lipid sales Adjusted operating profit, £m Reported change (42)% (13)% (34)% 1% 300 261 176 Pro forma reported change (33)% H122 PTIC divestment H122 pro forma Constant currency Currency translation H123 change Pro forma H122 estimat
Slide 13: Resilient sales in Consumer Care and Life Sciences
Finance review Resilient sales in Consumer Care and Life Sciences Consumer Care Life Sciences* Industrial Specialties Group +8% +0% Change in sales (%) Ex. CV-19 (8)% (6)% (20)% Change in operating Ex. CV-19 profit (%) (21)% (23)% (39)% (33)% (62)% Operating margin (%) 20.9% 23.8% 6.8% 20.0% Reporte
Slide 14: Resilient sales in Consumer Care
Finance review Resilient sales in Consumer Care Sales, £m Reported change +0% • Resilient sales performance despite continued destocking • Positive mix (+4%) and annualisation of prior year price +10% (14)% increases (+6%) supporting price/mix • Volume down 14% versus H122 – of which 10 ppts estimat
Slide 15: Life Sciences sales lower due to phasing of CV-19 lipids
Finance review Life Sciences sales lower due to phasing of CV-19 lipids Sales, £m Reported change (8)% • Prior period included $62m of CV-19 lipid sales (2)% • Sales up 8% excluding CV-19 lipid sales (9)% • Rapid destocking in Crop Protection in Q2 +3% Constant currency change (11)% 303 Business uni
Slide 16: Operating margin impacted by lower volume and mix
Finance review Operating margin impacted by lower volume and mix Consumer Care, operating margin (%) Life Sciences, operating margin (%) (9)ppts (4)ppts (8)ppts 3ppts 26.6% 20.9% 36.0% 23.8% H122 Volume leverage Price/mix H123 H122 Volume leverage Price/mix H123 • Volume recovery should support impr
Slide 17: Improved free cash flow
Finance review Improved free cash flow Cash flow, £m H123 H122 EBITDA 219.2 343.9 Working capital (9.7) (183.8) • Improved free cash flow • Lower working capital outflow Net capital expenditure (76.1) (61.8) more than offset lower profit Interest & tax (47.3) (73.4) and higher capex • Pharma investm
Slide 18: FY23 outlook
Finance review FY23 outlook Adjusted profit before tax Capital expenditure • £170 – £180m in FY23 • £370 – £400m • Heightened capex supporting multi-year Pharma • Assumes no improvement on H1 run rate investment programme Currency assumptions Working capital • PBT guidance based on prevailing FX rat
Slide 19: 03 Relentless execution of strategy; well placed for recovery
Croda International Plc 03 Relentless execution of strategy; well placed for recovery Steve Foots Chief Executive Officer Smart science to improve lives™ 19
Slide 20: Portfolio realigned with exciting megatrends
Strategic progress Portfolio realigned with exciting megatrends Megatrends Technology trends Portfolio change Solus Biotech Health & wellbeing Strengthen Consumer Sustainable Care ingredients Feeding the planet Expand Biosector Life Sciences Move to biologics Living Industrial sustainably Refine Spe
Slide 21: Creating bigger niches and higher growth
Strategic progress Creating bigger niches and higher growth 7 dynamic businesses Bigger niches Well balanced portfolio Pharma Beauty Actives Industry niche CAGR Crop Anti-ageing 9% Seed Beauty Care H123 Beauty Actives Salon hair care 4% 2025 Beauty Care Sun care 4% F&F F&F Home Care Niche fabric car
Slide 22: Why we are successful – significant sources of growth
Strategic progress Why we are successful – significant sources of growth Beauty Actives Beauty Care F&F • Enhanced portfolio • Sustainability leader • Focused on high-growth markets Strengthen • Biotech-enabled • Go-to-market partner • Delivering synergies to grow • Unrivalled claims substantiation
Slide 23: Enhanced Beauty Actives portfolio with new claims
Beauty Actives Enhanced Beauty Actives portfolio with new claims Enhanced portfolio for faster growth Unrivalled science-based performance claims • >15,000 customer/product Volume Wrinkles and skin relief combinations • Moving to biotech and lower carbon • Filing c10 biotech patents each year • Comm
Slide 24: Increasingly biotech-derived
Beauty Actives Increasingly biotech-derived Peptides for anti-ageing New peptide applications Plant cell culture for UV damage NEW IN H1 NEW IN H1 NEW IN H1 T0 +2 months Peptide – powering Boots No 7 Future Renew BB-Biont – powering Deciem anti-acne solution Mel[o]stem – fades age spots caused by th
Slide 25: Sustainability leader benefiting customer scope 3 carbon
Beauty Care Sustainability leader benefiting customer scope 3 carbon #1 in sustainable surfactants Biodegradable hair care EXPANDED NEW IN H2 • Renewable ECO gathering pace • Bio-based and low aqua-toxicity • Rapid growth of carbon-neutral conditioning agents sulfate-free range • Proprietary PEG & P
Slide 26: Rapid development in Fragrances
Fragrances and Flavours Rapid development in Fragrances Great growth in all main regions Synergies building 20% • Excellent growth across all categories • Croda-enabled growth accelerating and established regions • Number and size of projects increasing 9% 7% 4% • Strong momentum in Middle East • Ne
Slide 27: Investing for faster Consumer Care growth in Asia
Consumer Care Investing for faster Consumer Care growth in Asia NEW New manufacturing New sales EXPANDED New R&D South Korea Existing Shanghai, China NEW IN 2025 NEW IN 2025 F&F / Actives production, EXPANDED Guangzhou, China New production site, Dahej, India Singapore EXPANDED F&F creative centre,
Slide 28: Investing in Pharma to balance near and long-term growth
Pharma Investing in Pharma to balance near and long-term growth Growth; High CAGR Small molecule Biologics >50% Emerging; Biosector vaccine adjuvants CAGR Stem ACQUIRED 2018 >20% Cell Gene Editing RNA Solus Biotech Established; Key – Croda technology platforms CAGR ACQUIRED 2023 8-10% Gene Growth Th
Slide 29: Exciting proprietary bioprocessing aids and phospholipids for protein and small molecule delivery
Pharma – Protein and Small Molecule Delivery Exciting proprietary bioprocessing aids and phospholipids for protein and small molecule delivery Croda’s new bioprocessing aids NEW Phospholipids from Solus Biotech NEW Market need - sustainable Market need alternative to current bioprocessing - Pharma-g
Slide 30: …with new adjuvant systems launched through partnerships and innovation
Pharma – Adjuvant Systems …with new adjuvant systems launched through partnerships and innovation Only independent supplier with full portfolio of adjuvants required for new prophylactic and therapeutic vaccines Heritage adjuvants New adjuvants NEW NEW NEW Heritage portfolio Exclusive partnership Ex
Slide 31: …with a nucleic acid delivery platform growing rapidly
Pharma – Nucleic Acid Delivery …with a nucleic acid delivery platform growing rapidly World-class mRNA vaccines mRNA therapeutic Gene editing Avanti research for infectious diseases vaccines for cancers therapeutics Example: Influenza Example: Cancer Immunotherapy Example: Genetic Heart Disease Grow
Slide 32: …all supported by global investment to scale the business
Pharma …all supported by global investment to scale the business NEW EXPANDED Cowick Hall, UK EXPANDED NEW Lamar, US Leek, UK Denmark Iksan, South Korea Princeton/Atlas Point, US Shanghai, China EXPANDED EXPANDED NEW Alabaster, US Campinas, Brazil Hyderabad, India Investment delivering portfolio bre
Slide 33: Key takeaways
Strategic progress Key takeaways • Continued strategic progress despite challenging environment • Ongoing investment for future growth • Consumer Care improving; exciting progress in Life Sciences • Actions to protect profitability • Well positioned when environment normalises • Confidence in strate
Slide 34: 04 Questions
Croda International Plc 04 Questions Smart science to improve lives™ 34
Slide 35: 05 Additional financial information
Croda International Plc 05 Additional financial information Smart science to improve lives™ 35
Slide 36: Currency exposure
Additional financial information Currency exposure Currency translation Favourable profit impact in H123 as Sterling remained weaker against the US$ and Euro despite strengthening through the period H123 average rates: - US$1.234 (H122: US$1.301) - €1.141 (H122: €1.189) Average annual impact: - £1m
Slide 37: IAS 19 retirement benefits
Additional financial information IAS 19 retirement benefits £m 30 Jun 2023 31 Dec 2022 Market value of assets 933.1 969.3 Value of liabilities (839.1) (869.2) Surplus pre tax 94.0 100.1 Deferred tax (22.0) (24.8) Surplus post tax 72.0 75.3 Reported currency except where stated. Smart science to impr