Croda International Plc · LSE:CRDA
Croda International — H1 2020 Earnings Presentation
30 slides from Croda International's earnings presentation, Jul 23, 2020
Slide 1: Half year 2020 results
Croda International Plc Half year 2020 results 23 July 2020
Slide 2: Cautionary statement & definitions
Cautionary statement & definitions Cautionary statement Constant currency results This review is intended to focus on matters which are relevant to the interests of shareholders in All data is at reported currency rates unless otherwise stated. Reported currency results reflect the Company. The purp
Slide 3: First half performance
First half performance Our sustainability commitment includes an ambition to significantly reduce our water use 3
Slide 4: Strong business model delivers resilient performance
Strong business model delivers resilient performance • Limited operational impact from COVID-19 pandemic • Modest reduction in sales • Resilient margin • Healthy cash generation supporting continued investment • Technology-rich Health Care acquisition • 2020 interim dividend maintained at 39.5p 4
Slide 5: Our response to COVID-19
Our response to COVID-19 Top 3 priorities Treating all our stakeholders fairly 1. Health and Safety No job losses, furlough or Flexible salary payment terms Employees Customers and reductions suppliers 2. Performance Financial Paid final assistance dividend 3. Planning ahead Local provided Sharehold
Slide 6: First half 2020 – a resilient performance
First half 2020 – a resilient performance Sales Margin Profit Cash Modest reduction in sales Resilient margin Lower volume & weaker mix Healthy cash generation -6.0% -1.1ppts -9.4% -15.1% £625.9m 24.0% £161.6m £80.2m Core Business revenue Return on sales Operating profit Free cash flow Change in sal
Slide 7: Sector performance led by Life Sciences
Sector performance led by Life Sciences • Solid Q1 – continuing positive trends from Q4 2019 Personal • Significant impact on consumer demand from COVID-19 during Q2 Care • Accelerating customer engagement; encouraging recovery in China • Limited impact from COVID-19 Life • Continued growth in highe
Slide 8: Financial performance
Financial performance Sea algae: we use this sustainably harvested algae in our ingredients to naturally improve skin hydration 8
Slide 9: Resilient performance despite crisis impact
Resilient performance despite crisis impact % change constant Adjusted results, £m 2020 reported 2019 reported % change currency Sales 672.9 714.7 (5.8)% (6.9)% Operating profit 161.6 179.4 (9.9)% (9.4)% Net interest (9.1) (8.8) (3.4)% (4.5)% Profit before tax 152.5 170.6 (10.6)% (10.1)% Return on s
Slide 10: IFRS result includes delivery of 2019 cost saving actions
IFRS result includes delivery of 2019 cost saving actions £m 2020 reported 2019 reported Adjusted PBT 152.5 170.6 Exceptional items (1.7) 0.0 Acquisition costs (1.0) (0.1) Amortisation of intangible assets (4.9) (4.3) Reported PBT 144.9 166.2 Basic EPS 84.1p 95.6p 10
Slide 11: Weaker product mix and limited volume reduction
Weaker product mix and limited volume reduction Sales, £m Core Business sales -6% -4% -2% 0% -1% 1% +X% 669.4 714.7 672.9 HY19 reported Price mix Volume M&A Industrial Currency HY20 reported currency Chemicals translation currency Core business Change in sales in constant currency 11
Slide 12: Sector performance led by profit growth in Life Sciences
Sector performance led by profit growth in Life Sciences Personal Life Performance Group Care Sciences Technologies (9.5)% (1.7)% (5.6)% (6.9)% Change in sales % 7.4% (16.6)% (19.6)% (9.4)% Change in operating profit % -290bps +190bps -290bps -110bps Return on sales 30.4% 32.5% 15.1% 24.0% Change in
Slide 13: Personal Care impacted by consumer lockdown
Personal Care impacted by consumer lockdown Personal Care and Beauty consumer sales data+ US Europe +6% • Consumer markets significantly impacted by COVID-19; 0% 6% volume decline -1% • Europe and Latin America worst affected -14% Q2 Q1 Q2 •+North Asia recovery – China Q1 + • Consumer channel disrup
Slide 14: Continued margin expansion in Life Sciences
Continued margin expansion in Life Sciences Strengthening return on sales, % Life Sciences +440bps 32.5 • Limited COVID-19 impact; volume up 2% 30.1 29.5 30.6 28.1 • Strong demand for speciality excipients and vaccine +adjuvants – high value niches + 16 17 18 19 20 • Tough comparator in Crop – weath
Slide 15: Limited sales impact in Performance Technologies
Limited sales impact in Performance Technologies Weaker industrial demand contrasts with consumer strength Performance Technologies 20 Smart Energy Home & Materials Technologies 85 Fabric • Progressive weakening in industrial demand 75 10 67 69 57 -2 -18 • Strong sales in hygiene and packaging 0 +11
Slide 16: Healthy cash generation supporting continued investment
Healthy cash generation supporting continued investment £m (17) 14 (9) 3 (5) (1) 80 95 HY19 EBITDA Working capital Capital Lease payments Pensions Interest & Tax HY20 investment 16
Slide 17: Strong balance sheet and liquidity maintained
Strong balance sheet and liquidity maintained Significant committed headroom+, £m …. Net debt 577 • Strong business model demonstrated Cash 61 • Leverage 1.5x EBITDA Undrawn committed 448 • Significant committed headroom and long maturities Total committed funding 1,090 • $200m acquisition facility
Slide 18: Strategic update
Strategic update Sunflower stem. Our ingredients help to sustainably grow more crops and improve health 18
Slide 19: Our strategic priorities
Our strategic priorities Smart Science to Improve LivesTM Our purpose Health and Feeding global Beauty and ageing Sustainability Megatrends wellbeing population Performance Personal Care Life Sciences Technologies Sector strategies Strengthen to grow Expand to grow Refine to grow Scale drug More pro
Slide 20: Accelerating digital to increase customer intimacy
Accelerating digital to increase customer intimacy Group digital activity China case study % change H1 2020 / H1 2019 • Digital users in China spend average of six hours online per day Webinars hosted +196% • Launched Croda WeChat account with LiveChat capability • Up to 65,000 participants in each
Slide 21: Scale drug delivery
Scale drug delivery Key trends Capturing increased value across the Health Care continuum Growth in biotech providing significant formulation challenges Moving from consumer health to patient health Biologics requiring injectable delivery Consumer Standard Speciality Vaccine Lipid Health Excipients
Slide 22: New drug delivery – creating increased opportunities
New drug delivery – creating increased opportunities Injectable delivery Gene therapy New niches Speciality excipients for sensitive, challenging biologics Polar lipids for vaccine and oncology applications Bioprocessing aids for biologic actives manufacture Respiratory diseases Increasing geographi
Slide 23: More proactive M&A – Avanti
More proactive M&A – Avanti Avanti Polar Lipids, Inc. • Pharmaceutical expertise • 150 employees; 100+ scientists • 3,000 customers • World-leading research products portfolio • GMP* clinical development services Strategic rationale Double digit % sales growth • Doubles R&D capability 2020E • Rich i
Slide 24: Summary Outlook
Summary Outlook • Resilient half year performance, proving Croda’s business • Following a challenging Q2, trading has stabilised; timing of model recovery remains unclear • Reflects portfolio breadth, global footprint and flexible • Life Sciences will benefit from phasing of Crop Care sales manufact
Slide 25: Supporting data
Supporting data Smart Science to Improve lives™
Slide 26: Strong business model; strategy remains unchanged
Strong business model; strategy remains unchanged Our Purpose Smart Science to Improve LivesTM Our strategy Consistent top and bottom line Growth growth, with profit growing ahead of sales, ahead of volume A high-quality business The lifeblood of our business, with earnings growth and we seek to inc
Slide 27: Capital allocation model
Capital allocation model Capital Policy 1 2 3 4 Reinvest Regular Disciplined Excess to grow dividend acquisition capital returned ~1.5x depreciation 40-50% EPS payout approach 1-1.5x leverage Leverage at 30 June 2020: 1.5x Leverage excludes retirement benefit deficit 27
Slide 28: Foreign exchange translation
Foreign exchange translation • First half currency translation impact limited – small benefit to sales, marginally adverse on profit • H1 2020 average rates: – US$1.261 (H1 2019: US$1.294) – €1.145 (H1 2019: €1.145) • Average annual impact: – £0.7m per $cent pa – £0.6m per €cent pa • US$ and € repre
Slide 29: Retirement benefit analysis (IAS19 basis)
Retirement benefit analysis (IAS19 basis) £m 31 Dec 2019 30 Jun 2020 Market value of assets 1,390.8 1,509.5 Value of liabilities (1,465.8) (1,532.1) Deficit pre tax (75.0) (22.6) Deferred tax 14.9 6.2 Deficit post tax (60.1) (16.4) 29
Slide 30: CRODA
CRODA