Croda International Plc · LSE:CRDA
Croda International — FY2017 Earnings Presentation
32 slides from Croda International's earnings presentation, February 2018
Slide 1: Croda International Plc 2017 Full Year Results
Croda International Plc 2017 Full Year Results February 2018 Innovation you can build on™
Slide 2: Cautionary statement
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 and the potential for those strategies
Slide 3: Our Performance
Our Performance Steve Foots – Group Chief Executive Innovation you can build on™
Slide 4: Record profit and strong sales growth
Record profit and strong sales growth ▪ Record profit: continued progress across all core sectors. PBT +11.1% at £320.3m ▪ Strong sales growth: +10.4% - strongest underlying growth since 2012 ▪ Relentless innovation: 5th successive year of NPP growth ▪ Robust margin & return: ROS 24.2%, ROIC 19.2% ▪
Slide 5: Consistent top and bottom line growth
Consistent top and bottom line growth Strong sales growth Robust return on sales Excellent EPS growth Reported currency Group +10.4% 24.2% 179.0p +5.6% +20 bps +14.9% Constant currency Year on year change Basic EPS growth Core Business Record NPP sales driving A strong strong business bottom getting
Slide 6: Broad-based sales growth across all core sectors
Broad-based sales growth across…. All core sectors All customer classes All major regions 6.6% Top 10 11-20 Rest 8.0% 5.3% 4.6% +4.7% 6.2% 5.3% +4.3% Personal Care Life Sciences Technologies Asia Europe North America Performance +4.6% 2016 2017 Constant currency 6 Innovation you can build on™
Slide 7: Personal Care: strong sales improvement with stable margin
Personal Care: strong sales improvement with stable margin Return to sales growth Stable margin Innovation-led growth +5.3% ▪ NPP +6% to >40% sales ▪ Strong growth in Beauty Actives ▪ Return to healthy growth in +3.3% 33.3% Beauty Formulations ▪ Growing opportunity in Beauty Effects -70 bps ▪ MNC re
Slide 8: Life Sciences: innovation and Incotec integration delivering faster profit growth
Life Sciences: innovation and Incotec integration delivering faster profit growth Incotec driving improvement Focus on fast growth Faster profit growth in return on sales technologies +14.0% ▪ NPP +10%; 32% of sales ▪ Outperformance in Crop Protection 30.1% ▪ R&D investment delivering in Incotec ▪ I
Slide 9: Performance Technologies: transitioning to more focused innovation
Performance Technologies: transitioning to more focused innovation Second year of Focus on Broad based growth double digit % profit growth ‘value over volume’ +10.7% Full year return on sales ▪ Re-focusing on faster growth technologies ▪ Premium Smart Materials & +6.6% 16.5% Energy Technology market
Slide 10: Financial Performance
Financial Performance Jez Maiden – Group Finance Director Innovation you can build on™
Slide 11: Consistent top and bottom line growth
Consistent top and bottom line growth Reported Constant £m 2017 currency currency reported change change Sales 1,373.1 10.4% 4.6% Operating profit 332.2 11.4% 6.9% Net interest (11.9) (20.2)% (19.2)% Profit before tax 320.3 11.1% 6.5% IFRS profit before tax 314.1 13.9% Adjusted EPS 179.0p 14.9% 10.5
Slide 12: Sales momentum in Core Business
Sales momentum in Core Business Constant currency sales growth Three strong legs of growth (Core Business) 7.9% ▪ Return to steady organic growth in H1 ▪ Growth accelerated in H2 5.7% 5.3% ▪ Progressive improvement in consumer business at strong margins 3.4% ▪ Rebalanced Performance Technologies gro
Slide 13: Constant currency sales in Core Business +5.6%
Constant currency sales in Core Business +5.6% Sales £m +5.8% +10.4% Constant currency sales +4.6% +5.6% +0% -1.0% 1,373 1,244 2016 reported Industrial Chemicals Core Business M&A Currency translation 2017 reported 13 Innovation you can build on™
Slide 14: Robust volume growth in consumer businesses
Robust volume growth in consumer businesses Volume Price/mix ▪ Personal Care: return to volume growth +6.6% +4.6% +5.3% ▪ Life Sciences: volume growth, particularly Crop +4.6% ▪ Performance Technologies: sharper focus on premium/technology benefiting mix; raw material price increases recovered Perso
Slide 15: Continued profit progress across Core Business
Continued profit progress across Core Business Growth in operating profit +£34m +£15m +£12m +£9m +3.3% +14.0% +10.7% +6.9% Personal Care Life Sciences Performance Group Technologies Percentage growth in constant currency, absolute growth in reported currency Group includes Industrial Chemicals secto
Slide 16: Excellent EPS growth driven by underlying performance, currency & tax
Excellent EPS growth driven by underlying performance, currency & tax Basic EPS, p +3.8% +14.9% Constant currency PBT +6.5% +4.6% +2.3% -0.4% +4.6% 179.0 155.8 2016 EPS Sales growth Operating margin Interest FX Tax rate 2017 reported Continued impact in 2018 16 Innovation you can build on™
Slide 17: Robust financial platform for future growth & returns
Robust financial platform for future growth & returns Net capital investment Free cash flow £157m £105m Bio £92m £40m £156m £99m £65m Other £65m 2016 2017 2016 2017 Net debt/leverage Pension deficit 1.1x 1.0x 2016 2017 £21m £364m £382m £113m 2016 2017 Leverage: Net debt / EBITDA. Net debt, EBITDA an
Slide 18: Strategy continuing to deliver
Strategy continuing to deliver Innovation you can build on™
Slide 19: With stronger, faster & smarter investments
With stronger, faster & smarter investments Premium Niches R&D Smart Partnering Technology acquisitions Sustainability Digitalisation Stretching our growth plans across our 3 core sectors 19 Innovation you can build on™
Slide 20: Targeting stronger growth in Premium Niches
Targeting stronger growth in Premium Niches ‘Flight to Performance’ in Life Sciences & ‘Flight to Premium’ in Personal Care Performance Technologies Anti-wrinkle Sun protection Drift reduction Yield increase Matrixyl™ Solaveil™ Atplus™ Disco™ Curl retention Hair straightening Injectables Sterile coa
Slide 21: Supported by stronger investment in R&D
Supported by stronger investment in R&D Five successive years of NPP growth Getting closer to our customers in Asia 27.6% 20.5% £216m £379m 2013 2017 2012 2017 Recent R&D laboratories Expanded new R&D capabilities Understanding local needs in South Africa Brazil Incotec Sederma Korea 2016 2017 NPP v
Slide 22: With faster investment through Smart Partnering
With faster investment through Smart Partnering Colour Cosmetics Accelerating open innovation 500 Partners 15 Cum. funding (£m) ▪ New exclusive partnership Partners/Projects Projects 400 10 300 ▪ Fast paced niche sector 200 5 ▪ Innovative special effect 100 pigments 0 0 2010-2013 2014 2015 2016 2017
Slide 23: And faster investment in Disruptive Technology acquisitions
And faster investment in Disruptive Technology acquisitions Strong sales growth in new technologies Enza ▪ IRB ▪ Novel surfactants ▪ Biotechnology ▪ Sugar based chemistry ▪ Incotec ▪ Patent-rich ▪ Inventiva ▪ J D Horizons 2013 2017 IonPhasE Accelerating technology M&A ▪ Market leader ▪ Identified mo
Slide 24: With a smarter sustainability story
With a smarter sustainability story Award winning ECO product range Creating many new niches ▪ 100% bio-based ▪ 100% renewable ▪ Lower carbon footprint ▪ USDA BioPreferred programme Extensive marketing campaign Customers’ interest growing ▪ Global brands ▪ 7,000 customer / product combinations ▪ c40
Slide 25: And smarter new digital investments
And smarter new digital investments New digital ecosystems Rapid formulation screening Cutitronics Materials Innovation Factory ▪ 25% investment ▪ State of the art facility ▪ High-tech digital technology ▪ Robotics ▪ Optimum delivery of skin care ▪ Fast screening ▪ Agile R&D Digitally enabled for ne
Slide 26: Strong platform to deliver growth
Strong platform to deliver growth Investing Outlook ▪ In fast growth disruptive technologies ▪ Good momentum ▪ In R&D ▪ Consistent top and bottom line growth ▪ In digital and manufacturing ▪ Deliver continued progress capability ▪ In our people 26 Innovation you can build on™
Slide 27: Additional material
Additional material Innovation you can build on™
Slide 28: H1/H2 sales analysis
H1/H2 sales analysis £m H1 2017 H2 2017 FY 2017 Personal Care 238.3 228.3 466.6 Life Sciences 162.4 160.2 322.6 Performance Technologies 239.9 217.0 456.9 Core Business 640.6 605.5 1,246.1 Industrial Chemicals 66.7 60.3 127.0 Group 707.3 665.8 1,373.1 28 Innovation you can build on™
Slide 29: H1/H2 operating profit analysis
H1/H2 operating profit analysis H1 2017 H2 2017 FY 2017 FY 2016 Operating profit (£m): Personal Care 82.6 72.9 155.5 143.1 Life Sciences 49.3 47.7 97.0 82.0 Performance Technologies 40.9 34.5 75.4 66.6 Core Business 172.8 155.1 327.9 291.7 Industrial Chemicals 3.0 1.3 4.3 6.5 Group 175.8 156.4 332.2
Slide 30: Retirement benefit deficit (IAS19 basis)
Retirement benefit deficit (IAS19 basis) £m 2017 2016 Market value of assets 1,304.8 1,229.4 Value of liabilities (1,335.3) (1,375.9) Deficit pre tax (30.5) (146.5) Deferred tax 9.4 33.8 Deficit post tax (21.1) (112.7) 30 Innovation you can build on™
Slide 31: 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 1.0x Leverage excludes retirement benefit deficit 31 Innovation you can b
Slide 32: Currency sensitivity
Currency sensitivity ▪ Currency translation profit impact: ▪ $1 cent = +/- £0.9m (2017 average: $1.29) ▪ €1 cent = +/- £0.6m (2017 average: €1.14) 32 Innovation you can build on™