Croda International Plc · LSE:CRDA
Croda International — FY2014 Earnings Presentation
35 slides from Croda International's earnings presentation, Feb 24, 2015
Slide 1: Croda International Plc 2014 Full Year Results
Croda International Plc 2014 Full Year Results 24 February 2015 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 Innovation you can build on™
Slide 4: 2014 headlines – improving sales growth
2014 headlines – improving sales growth ▪ Challenging market conditions, especially Western Europe ▪ Top line growth - sales up 2.9%* ▪ All core sectors returned to growth in second half* ▪ Consistently outperforming our markets during second half ▪ Operating profit lower by £16.2m to £235.4m ▪ Curr
Slide 5: Strategy delivering progress in a tough environment
Strategy delivering progress in a tough environment Return to improved Delivering in fast growth Accelerating innovation sales growth markets 23% +2.9% +6% +13% Sales growth YOY NPP sales % Group Growth rate YOY NPP sales growth YOY Constant currency NPP = New & Protected Products Fast growth market
Slide 6: Return to improved sales growth
Return to improved sales growth New market led structure starting to deliver Steady improvement in Strong performance in Robust growth in Personal Care Life Sciences Performance Technologies Q1 Q2 Q3 Q4 2.6% 7.9% 5.7% 1.2% -2.0% 2014 2014 -2.3% Constant currency Life Sciences = Health Care and Crop
Slide 7: Accelerating innovation
Accelerating innovation Personal Care Life Sciences Performance Technologies Sebuless™ Acne Treatment Heart Health Superior gellants ▪ Cell cultures ▪ PureMax™ technology – ▪ Novel oil and fragrance ▪ Guaranteed purity FDA approved gellants ▪ Sustainable ▪ Purity and potency ▪ High loading with stea
Slide 8: Delivering in fast growth markets
Delivering in fast growth markets 63% of sales to markets outside Western Europe +1% +1% -2% +11% Regional performance: ▪ Asia up 11% +5% ▪ Improvement in North America and Latin America in H2 ▪ Western Europe remained subdued Western Europe North America Asia Pacific Latam Largest customer >2% of t
Slide 9: Financial performance
Financial performance Innovation you can build on™
Slide 10: Revenue up 2.9%*
Revenue up 2.9%* 10.1 1,108.0 (61.4) 20.9 1,077.0 1,046.6 £m 2013 reported Underlying growth Acquisitions 2014 Constant Currency 2014 reported Currency translation ▪ Revenue growth through NPP innovation, fast growth markets, Life Sciences and Performance Technologies * At constant currency 10
Slide 11: Operating profit slightly lower*
Operating profit slightly lower* 2014 Constant 2014 2013 £m Constant currency Reported Reported currency change % Revenue 1,046.6 1,108.0 1,077.0 2.9 Operating profit 248.4 260.1 264.6 (1.7) Net interest (13.0) (13.4) (13.2) Pre-tax profit 235.4 246.7 251.4 (1.9) Tax rate 28.0% 28.0% 28.7% EPS 125.2
Slide 12: Overall operating profit increased in core sectors*
Overall operating profit increased in core sectors* 2014 Constant 2014 2013 £m Constant currency Reported Restated currency change % Personal Care 117.3 124.0 132.7 (6.6) Life Sciences 64.7 67.4 58.6 15.0 Performance Technologies 63.8 65.5 62.7 4.5 Core sectors 245.8 256.9 254.0 1.1 Industrial Chemi
Slide 13: Good progress in Life Sciences and Performance Technologies
Good progress in Life Sciences and Performance Technologies Performance Group Personal Care Life Sciences Technologies Revenue +2.9% -0.3% +7.9% +5.7% Return on sales -0.9% pts -2.0% pts +2.4% pts +0.3% pts Constant currency revenue 13
Slide 14: Good progress in Life Sciences and Performance Technologies
Good progress in Life Sciences and Performance Technologies 2014 2014 2013 £m Constant Reported Restated currency Revenue 369.1 391.6 392.7 ▪ Personal Tough H1 sales, improving H2 Care Operating profit 117.3 124.0 132.7 ▪ Margin impacted by mix ▪ Asia developing well Return on sales 31.8% 33.8% Reve
Slide 15: World class innovation being delivered
World class innovation being delivered ▪ Strong NPP – better value add, 11% 13% Fast grow broad based growth ▪ Net growth in differentiated – e.g. 1% 1% significant growth in sustainable palm Grow derived products -4% -7% ▪ Declining tail; lower commodity Manage prices, tolling and exits 2012 2013 2
Slide 16: Strong cash generation
Strong cash generation £m 2014 2013 EBITDA 279.4 297.2 Working capital (12.3) (3.0) Operating cash 267.1 294.2 Capital investment (65.0) (46.6) Additional pension contributions (30.2) (41.2) Interest and tax (57.9) (58.5) Free cash flow 114.0 147.9 Dividends (88.1) (83.6) M&A (1.9) (54.9) Other (3.6
Slide 17: We continue to invest for growth and innovation
We continue to invest for growth and innovation Capex £m ▪ Increase in 2014 investment to 1.8x depreciation ▪ Expect capex 2015-17 to be ~2x recent average – investment in bio-surfactants and developing markets ▪ Return to ‘normal’ spend level beyond 2017 2012 2013 2014 2015 2016 2017 17
Slide 18: A strong record of returns to shareholders
A strong record of returns to shareholders ROIC % Dividend (pence per share) 25 70 60 20 50 15 40 30 10 WACC 20 5 10 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2006 2007 2008 2009 2010 2011 2012 2013 2014 WACC is weighted average cost of capital (estimated) 18
Slide 19: We have a clear capital allocation policy
We have a clear capital allocation policy Continued strong return on capital Reinvest to Regular Disciplined Excess capital grow dividend approach to return within acquisitions gearing target 2x recent c40-50% EPS spend 1-1.5x gearing* *excluding retirement benefit deficit 19
Slide 20: Closing financial thoughts
Closing financial thoughts ▪ Tax rate – stable ▪ Pensions – no deficit contributions currently planned after January 2015 ▪ Refinancing – completed to 2019 ▪ FX translation impact ▪ $0.01 change: £0.5m profit impact ▪ €0.01 change: £0.4m profit impact ▪ Trading updates ▪ Ongoing 4 market sectors ▪ Q
Slide 21: Delivering our Strategy – Being different
Delivering our Strategy – Being different Innovation you can build on™
Slide 22: Our priorities
Our priorities Delivering Increasing Investing in a consistent top sales of New sustainable and bottom and Protected future line growth Products 22
Slide 23: Personal Care – Looking ahead
Personal Care – Looking ahead ▪ Improved trend in H2 2014 Consistent profitable ▪ Growing with regional dynamos growth ▪ Competition in mass market – offset by growth in prestige and masstige ▪ R&D expansion in USA, Singapore, NPP sales Increasing India and France Growing trend – Pure and natural ▪
Slide 24: Life Sciences – Looking ahead
Life Sciences – Looking ahead ▪ Positive trend in Health Care Consistent profitable ▪ Crop Care sales in line with market growth ▪ Opportunities to grow in nascent markets ▪ Leverage formulation expertise NPP sales Increasing ▪ Growing niches in high purity Omega- Drug delivery 3, pharma excipients,
Slide 25: Performance Technologies – Looking ahead
Performance Technologies – Looking ahead ▪ Growth across all regions Consistent profitable ▪ Opportunities to grow outside Europe growth ▪ Continued focus on niche markets ▪ Greater specialisation NPP sales Increasing ▪ Extensive customer project pipeline JD Horizons – FlowSolve™ acquisition ▪ More
Slide 26: Addressing polarised regional growth
Addressing polarised regional growth Western Europe North America Developing markets Consolidate Expand Specialise and expand 37% of Group sales 26% of Group sales 37% of Group sales ▪ Simplify and streamline ▪ Fast grow Life Sciences and ▪ Partnering with regional ▪ Cost rationalisation Performance
Slide 27: Capital investment targeting fast growth markets
Capital investment targeting fast growth markets Singapore surfactants China expansion India excipients Europe specialities for export USA high purity pharma Indonesia growth 27
Slide 28: Unique investment in bio-surfactants
Unique investment in bio-surfactants ▪ £120m capital investment through to 2017 12 What ▪ 100% renewable bio-surfactants from sustainable bio- ethanol 10 ▪ Upgrade from traditional hydrocarbon routes Sustainability 8 ▪ One of Croda’s core facilities: Atlas Point, US Where ▪ Target on-stream 2017 6 ▪
Slide 29: Summary and outlook
Summary and outlook Key messages ▪ Global market sectors in place and delivering ▪ Return to improved sales growth in H2 ▪ Innovation at record levels ▪ Investment in fast growth markets starting to deliver Outlook ▪ Europe remains subdued ▪ Targeting profitable sales growth ▪ Innovation key to driv
Slide 30: Appendix
Appendix
Slide 31: Full year revenue analysis
Full year revenue analysis FY 2014 FY 2014 FY 2013 % Constant £m Reported Constant Restated versus 2013 currency Personal Care 369.1 391.6 392.7 (0.3%) Life Sciences 204.5 216.4 200.5 7.9% Performance 355.2 375.3 355.2 5.7% Technologies Core sectors 928.8 983.3 948.4 3.7% Industrial Chemicals 117.8
Slide 32: H1/H2 sales analysis
H1/H2 sales analysis H1 2014 H2 2014 2014 £m Restated Reported Reported Personal Care 188.7 180.4 369.1 Life Sciences 103.1 101.4 204.5 Performance Technologies 182.3 172.9 355.2 Core sectors 474.1 454.7 928.8 Industrial Chemicals 63.3 54.5 117.8 Group 537.4 509.2 1,046.6 At reported currency 32
Slide 33: H1/H2 operating profit analysis
H1/H2 operating profit analysis H1 2014 H2 2014 2014 Restated Reported Reported Operating profit (£m): Personal Care 62.6 54.7 117.3 Life Sciences 32.6 32.1 64.7 Performance Technologies 34.4 29.4 63.8 Core sectors 129.6 116.2 245.8 Industrial Chemicals 2.7 (0.1) 2.6 Group 132.3 116.1 248.4 Return o
Slide 34: Q4 summary on previous reporting basis
Q4 summary on previous reporting basis Sales Operating profit % % % % £m 2014 2013 change change 2014 2013 change change reported constant reported constant Consumer Care 141.1 135.0 4.5% 5.6% 44.6 46.4 (3.9%) (2.8%) Performance 82.8 80.4 3.0% 5.3% 14.0 14.5 (3.4%) (4.1%) Technologies Core sectors 2
Slide 35: Retirement benefit deficit
Retirement benefit deficit £m at 31 December 2014 2013 Market value of assets 946.5 808.3 Value of liabilities (1,073.2) (944.1) Deficit pre tax (126.7) (135.8) Deferred tax 31.3 31.9 Deficit post tax (95.4) (103.9) 35