Croda International Plc · LSE:CRDA
Croda International — H1 2016 Earnings Presentation
28 slides from Croda International's earnings presentation, Jul 26, 2016
Slide 1: Croda International Plc 2016 Half Year Results
Croda International Plc 2016 Half Year Results 26 July 2016 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
Slide 4: Strategy continuing to deliver
Strategy continuing to deliver Headline performance: More protected innovation: NPP sales up to 27.5% of total sales† (2015: 26.1%) Key technology platforms growing: Constant currency sales up 2.1% including Incotec acquisition Improved operating margin: up 0.8 percentage points to 25.7% (2015
Slide 5: Driving profitable growth
Driving profitable growth Sales expanding Robust & improving margin Profit before tax increasing 25.7% +2.1% +6.3% +80bps Key technologies growing Increased innovation Value over volume Incotec acquisition Clever product mix Bottom line growth Record NPP sales driving strong bottom line
Slide 6: Innovation driving margin in Personal Care
Innovation driving margin in Personal Care Profitable top line growth Record margin level Delivering profitable growth 8.9% Increased innovation & IP Record sales in skin actives 35.7% New capacity in sun care Investing in technologies +300 bps Focus on fast growth regions -0.5% Asia > 1
Slide 7: Growth in Life Sciences boosted by Crop Care and Incotec acquisition
Growth in Life Sciences boosted by Crop Care and Incotec acquisition Incotec acquisition diluting Strong top line growth Focus on technology margin £m 23 22 Growing high value-add technologies 29.3% High purity Health excipients 4 Crop Care outperforming (5) Progress in innovation & -560 bps
Slide 8: Improving mix in Performance Technologies
Improving mix in Performance Technologies Profitable top line growth Good margin improvement Enhancing the product mix 11.4% Exited low value-add products NPP growth increased 19.0% Growing in Asia - strong SIPO performance +200 bps Geo Technologies stabilising -0.3% Sales Profit Return on s
Slide 9: Financial Performance
Financial Performance Jez Maiden – Group Finance Director
Slide 10: Strong margin driving profit growth
Strong margin driving profit growth H1 2016 Reported Constant £m H1 2016 constant H1 2015 currency currency reported currency reported change % change % Sales 608.7 576.5 564.6 7.8% 2.1% Operating profit 152.6 148.2 140.8 8.4% 5.3% Net interest (4.1) (4.0) (5.1) 19.6% 21.6% Profit before tax 148.5 1
Slide 11: Sales growth driven by acquisition and currency
Sales growth driven by acquisition and currency First half £m 32 609 23 577 565 (5) (8) 2 554 2015 reported APIs Industrial Other growth 2016 Acquisitions 2016 constant Currency 2016 reported Chemicals underlying currency translation Reduced sales of low value-add co-products & tolling Lower API
Slide 12: Continued top line growth in Asia & Europe
Continued top line growth in Asia & Europe Regional underlying sales† Asia growth Driven by proximity to local & regional customers China & India excellent -11% Europe robust +3% Personal Care strong +7% North America Business migrating to other regions Lower API sales -6% Latin Am
Slide 13: Protected innovation driving profit growth
Protected innovation driving profit growth NPP sales as % of Group sales Bigger and better innovation Record NPP sales in Personal Care Progress in Crop adjuvants and Health 27.5% excipients 26.1% Performance Technologies progress in Polymer Additives and clever Coatings Driving margin inc
Slide 14: Innovation, mix and acquisition driving profit
Innovation, mix and acquisition driving profit First half £m 25.7% 24.9% 4.3 148.5 1.1 144.2 7.4 135.7 2015 reported PBT Underlying mix and Interest 2016 constant Currency translation 2016 reported PBT acquisition currency PBT Profit growth driven by innovation, product mix improvement and acquisi
Slide 15: Robust Personal Care and Performance Technologies performance
Robust Personal Care and Performance Technologies performance £m Operating profit +8.5 Profit growth in Personal Care Richer product mix +5.7 Unchanged profit in Life Sciences +3.6 Growth from acquisition and strong technologies 0 (1.9) Offsetting decline in APIs Good progress in Perform
Slide 16: Robust cash generation, funding capital investment programme
Robust cash generation, funding capital investment programme £m H1 2016 H1 2015 EBITDA 174.1 159.7 Working capital (33.6) (23.2) Net capital investment (56.8) (38.2) Additional pension contributions (1.3) (19.4) Interest and tax (32.5) (32.2) Free cash flow 49.9 46.7 Dividends (187.3) (48.9) M&A (1.
Slide 17: Impact of the EU Referendum
Impact of the EU Referendum Exit terms as yet unclear Limited initial impact: >95% of sales ex-UK 80% of production ex-UK Currency translation profit impact: $1 cent = +/- £0.5m (2015: $1.52; H1 2016: $1.43) €1 cent = +/- £0.3m (2015: €1.37; H1 2016: €1.28) 17
Slide 18: Strategy in action
Strategy in action Steve Foots – Group Chief Executive
Slide 19: Delivery driven by increasing Intellectual Property
Delivery driven by increasing Intellectual Property Three legs of growth Fast growth Personal Care technologies New technology capture Life Sciences High value niches Performance Technologies 19
Slide 20: Personal Care: investing in fast growing, premium segments
Personal Care: investing in fast growing, premium segments Profitable growth continuing Investing in fast growth technologies +9% NPP as % of sales Improved mix Skin and hair actives +6% NPP increasing Plant stem cells Capturing new Sun care actives technologies Novel polymers FY '15 H
Slide 21: Life Sciences: investing in high value niches
Life Sciences: investing in high value niches Investing in innovation Investing in fast growth technologies NPP as a % of sales High purity excipients 21% Advanced rheology modifiers Pipeline value as % of Oral care actives Crop customer collaboration 2012 H1 2016 current revenue Investing in
Slide 22: Performance Technologies: investing to improve margin and specialise
Performance Technologies: investing to improve margin and specialise Investing in new geographies Investing in fast growth technologies NPP as % of sales Friction modifiers Double digit sales and Water based coating profit growth in last 3 systems years Site expansion underway High perform
Slide 23: Key take aways
Key take aways 2016 so far Subdued markets Richer product mix Increased innovation – more IP Proactive exit of low value-add sales Impressive margin development All sectors contributing Strong cash generation Outlook Continued economic uncertainty Innovation pipeline strong Confi
Slide 24: Questions
Questions
Slide 25: Underlying sales growth
Underlying sales growth Q2 2016 Q1 2016 Q4 2015 Q3 2015 Personal Care 0.2% (1.1)% (0.4)% 2.0% Life Sciences (7.1)% 4.6% 5.5% 7.3% Performance (0.1)% (0.6)% 0.7% (1.1)% Technologies Core sectors (1.5)% 0.4% 1.5% 1.9% Industrial Chemicals (14.1)% (10.7)% 3.5% 5.3% Group (3.0)% (0.9)% 1.7% 2.3% 25
Slide 26: Profit before tax history
Profit before tax history H1 2016 H2 2015 H1 2015 £m Reported Reported Reported Revenue 608.7 517.1 564.6 Operating profit 152.6 123.4 140.8 Net interest (4.1) (4.4) (5.1) Profit before tax 148.5 119.0 135.7 Return on sales 25.1% 23.9% 24.9% Reported results 26
Slide 27: IAS19 pension deficit
IAS19 pension deficit £m 30 June 2016 31 December 2015 Market value of assets 1,115.5 969.6 Value of liabilities (1,264.7) (1,048.4) Deficit pre-tax (149.2) (78.8) Deferred tax 38.3 22.9 Deficit post-tax (110.9) (55.9) Pre-tax deficit increased by £70.4m – low discount rates Post-tax deficit now
Slide 28: Capital Policy
Capital allocation policy Reinvest to Regular Disciplined Excess capital Capital Policy grow dividend approach to returned acquisitions Currently 40-50% EPS 1-1.5x leverage above pay-out over target* average cycle Half year leverage of 1.3x Return of capital to mid-point of range - £136m returned by