Croda International Plc · LSE:CRDA
Croda International — FY2018 Earnings Presentation
34 slides from Croda International's earnings presentation, February 2019
Slide 1: Croda International Plc 2018 Full Year Results
Croda International Plc 2018 Full Year Results February 2019 Innovation you can build on™
Slide 2: Cautionary statement and definitions
Cautionary statement and definitions Cautionary statement This review is intended to focus on matters which are relevant to the interests of shareholders in the Company. The purpose of the review is to assist shareholders in assessing the strategies adopted and performance delivered by the Company a
Slide 3: Our Performance
Our Performance Steve Foots – Group Chief Executive Innovation you can build on™
Slide 4: 2018 Full year results
2018 Full year results Performance Highlights Strategy Delivery Sales Top line momentum continues ✓ Margin Greater innovation driving increased margin ✓ Profit Growing faster than sales ✓ Cash generation Improved free cash flow ✓ Acquisition BioSector expands high value Health Care ✓ Shareholder ret
Slide 5: Delivering sustained sales and profit growth
Delivering sustained sales and profit growth Continued top line ‘Value over volume’ Strong EPS growth momentum Reported currency sales Return on sales Basic EPS Group +1.0% 24.7% 190.2p +3.8% +50 bps +8.8% Constant currency sales Year on year change EPS growth Core Business constant currency Record
Slide 6: Consistent top line momentum
Consistent top line momentum Strong consumer sales With growth across all Sixth consecutive year of growth regions NPP growth +6.8% +6.7%* 28.2% 27.5% +9% 23.4% +7% 20.5% +4%* +2.8% +3% +3.5% +1.4% +1% -0.7% 2012 2014 2016 2018 Asia Latin America Europe America Technologies Personal Life Sciences Pe
Slide 7: Personal Care: Strong sales growth & robust margin
Personal Care Strong sales growth & robust margin Strong sales growth Robust margin Growth in all 3 businesses ▪ High single digit % growth Grow the Core Return on sales in Beauty Actives +6.8% ▪ Solid growth in Beauty Effects +4.9% ▪ Improved MNC 32.9% engagement in Beauty Formulation -40 bps ▪ Rec
Slide 8: Life Sciences: Fast growth & technology-led acquisitions
Life Sciences Fast growth & technology-led acquisitions Growth driven by strong Strong margin despite Plant Strong growth offsets API high purity excipient sales Impact investment exit +3.1% ▪ Health Care sales Grow the Core Return on sales maintained – API contract exit fully replaced +2.8% ▪ Suppo
Slide 9: Performance Technologies: Superior growth in profitability
Performance Technologies Superior growth in profitability Third year of Transition to higher value Driving ‘value over volume’ double digit % profit growth products +15.0% Grow the Core Return on sales ▪ Lower margin products exited – volume 8% lower 18.7% ▪ Market-leading profitability achieved +22
Slide 10: Financial Performance
Financial Performance Jez Maiden – Group Finance Director Innovation you can build on™
Slide 11: Sustained top and bottom line growth
Sustained top and bottom line growth Reported Constant £m 2018 currency currency reported change change Sales 1,386.9 1.0% 2.9% Operating profit 342.5 3.1% 5.8% Net interest (11.0) 7.6% 5.9% Profit before tax 331.5 3.5% 6.2% IFRS profit before tax 317.8 1.2% Adjusted EPS 190.2p 6.3% 8.8% Proposed or
Slide 12: Growing the Core
Growing the Core Early stage sales in Sales £m technology-led Constant currency sales +2.9% acquisitions -1.9% 8.8 (26.2) +1.0% 38.0 (6.8) 1,373.1 1,386.9 2017 reported Industrial Core Business Technology Currency 2018 reported Chemicals underlying investments translation Technology investments are
Slide 13: Profit growth ahead of sales growth
Profit growth ahead of sales growth Cost investment in technology-led Adjusted operating profit £m acquisitions +7.5% -1.7% (5.6) -2.7% (8.9) +3.1% 24.8 332.2 342.5 2017 reported Underlying growth Technology Currency translation 2018 reported investments Technology investments are IonPhasE, Plant Im
Slide 14: Improved profit across the Core Business
Improved profit across the Core Business Adjusted operating profit £m +15.0% (62.8%) (2.7) 11.3 (8.9) +3.1% +4.9% 3.0 7.6 342.5 332.2 2017 reported Personal Care Life Sciences Performance Industrial Currency 2018 reported Technologies Chemicals translation Constant currency 14 Innovation you can bui
Slide 15: Strong EPS growth driven by sales & margin
Strong EPS growth driven by sales & margin Basic EPS, p Constant currency PBT +6.2% +0.4% 2.6% -2.5% +6.3% +2.9% +2.9% 190.2 179.0 2017 EPS Sales growth Operating margin Interest Tax rate FX 2018 EPS reported reported 15 Innovation you can build on™
Slide 16: Robust financial platform supported by reducing capital investment
Robust financial platform supported by reducing capital investment Net capital investment reducing Free cash flow increasing £157m £103m Bio £92m £33m Other £99m £155m £65m £70m 2017 2018 2017 2018 Leverage broadly flat Minimal pension deficit 1.1x 1.0x 2017 2018 £12m £21m £382m £426m 2017 2018 Leve
Slide 17: Additional financial information
Additional financial information ▪ ECO start up ▪ Technology investments ▪ IFRS 16 ▪ Currency translation ➢ 2018 average rates: $1.334/£1, €1.130/£1 17 Innovation you can build on™
Slide 18: Investing for the Future
Investing for the Future 18 Innovation you can build on™
Slide 19: Stretching the Growth: Relentless innovation
Stretching the Growth Relentless innovation Premium Niches R&D Smart Partnering INVESTING IN INNOVATION Sustainability Technology acquisitions Digitalisation Stretching the Growth across our 3 core sectors 19 Innovation you can build on™
Slide 20: An established, powerful organic R&D model
An established, powerful organic R&D model… Highlights R&D Locations North • Doubled R&D facilities in America Western Europe last 4 years 6 in 2018 14 in 2018 • Moving closer to customers 2 Asia with local solutions in 2014 8 Pacific in 2014 9 • 34 laboratories across 17 in 2018 countries Latin 4 A
Slide 21: …supplemented by a powerful innovation model
…supplemented by a powerful innovation model Input Input Output Organic R&D • Growing NPP • Increased IP Culture of • Higher margins Innovation • Stronger cash generation & returns Technology Open Investment Innovation 21 Innovation you can build on™
Slide 22: Croda innovation – keeping a step ahead
Croda innovation – keeping a step ahead Accelerating number of Growing sales from new technologies Technology Investments (TI) 4 1 2013 2018 2013 2018 Increasing number of Significant innovation pipeline Open Innovation (OI) partners 463 R&D OI TI £398m 71 2013 2018 >20% current sales* *Management’s
Slide 23: Innovation in Personal Care
Innovation in Personal Care Accelerating in premium market niches Organic growth - Crystalide™ Infraveil™ IR protection ▪ Preserves skin ▪ Patented new transparency infra-red ageing protection ▪ Improves skin surface quality ▪ Independently validated by recognised experts Doubling NPP sales in six y
Slide 24: Innovation in Life Sciences
Innovation in Life Sciences Investing in high value niches Incotec profit doubled since acquisition Creating global R&D scale in Crop ▪ Invested in technology ▪ Mid-single digit sales & manufacturing growth ▪ Acquired technology ▪ Expansion in USA, synergies delivered Latam and Asia ▪ Seed enhanceme
Slide 25: Innovation in Performance Technologies
Innovation in Performance Technologies Improved performance through value add Introducing sustainable fabric protection Building in fast growth Smart Materials ▪ Superior performance - ▪ Success in electronic delivers colour adhesives & coatings protection, softness & ▪ Speciality additives in odour
Slide 26: Innovation through Digital
Innovation through Digital Adapting to evolving customer needs Connecting with new customers ▪ New services – eg ▪ Creating new channels CutiTron™ device to market ▪ Precision agriculture ▪ Connecting with collaborations customers – ingredient data on demand ▪ Big data supporting field trials ▪ Sing
Slide 27: Innovation is delivering returns
Innovation is delivering returns Accelerating Innovation 6 >6x 10.4x 2,000 Successive years Increase in number of R&D ROI for every New customers of NPP growth technology partners £1 invested in R&D in last 2 years since 2013 Increasing IP 66% 450% £218m >£100m Increase in number Increase in number
Slide 28: Outlook
Outlook Innovation you can build on™
Slide 29: Confident outlook
Confident outlook Summary Outlook ▪ Delivering strong performance ▪ Continue to invest for the future ▪ Sales and profit growth in all three ▪ Improving free cash flow core sectors ▪ Further progress expected in 2019 ▪ Investing in Stretching the Growth ▪ Excess capital returned NPP is New & Protect
Slide 30: Additional material
Additional material Innovation you can build on™
Slide 31: H1/H2 sales analysis
H1/H2 sales analysis £m H1 2018 H2 2018 FY 2018 Personal Care 247.7 240.1 487.8 Life Sciences 158.6 165.9 324.5 Performance Technologies 235.9 220.5 456.4 Core Business 642.2 626.5 1,268.7 Industrial Chemicals 60.6 57.6 118.2 Group 702.8 684.1 1,386.9 % change H1 2018 H2 2018 FY 2018 Personal Care 3
Slide 32: H1/H2 operating profit analysis
H1/H2 operating profit analysis H1 2018 H2 2018 FY 2018 FY 2017 Operating profit (£m): Personal Care 84.4 75.9 160.3 155.5 Life Sciences 47.4 48.4 95.8 97.0 Performance Technologies 45.6 39.6 85.2 75.4 Core Business 177.4 163.9 341.3 327.9 Industrial Chemicals 1.1 0.1 1.2 4.3 Group 178.5 164.0 342.5
Slide 33: Retirement benefit deficit (IAS19 basis)
Retirement benefit deficit (IAS19 basis) £m 2018 2017 Market value of assets 1,272.7 1,304.8 Value of liabilities (1,291.2) (1,335.3) Deficit pre tax (18.5) (30.5) Deferred tax 6.1 9.4 Deficit post tax (12.4) (21.1) 33 Innovation you can build on™
Slide 34: Capital Policy
Capital allocation model Reinvest to Regular Disciplined Excess capital Capital Policy grow dividend approach to returned acquisitions 1.5x 40-50% EPS 1-1.5x leverage depreciation pay-out over typically cycle Year-end leverage 1.1x Leverage excludes retirement benefit deficit 34 Innovation you can b