Croda International Plc · LSE:CRDA
Croda International — H1 2011 Earnings Presentation
38 slides from Croda International's earnings presentation, Jul 28, 2011
Slide 1: Results for the 6 months to 30 June 2011
Croda International Plc Results for the 6 months to 30 June 2011 1
Slide 2: Financial Review
Financial Review CRODA
Slide 3: Summary
Summary Continuing sales up 9.3% Consumer Care sales up 11.0% to £293.6m Industrial Specialities sales up 7.5% to £266.0m Pre tax profit from continuing operations up 30.1% to £124.8m Record profits in both Consumer Care and Industrial Specialities Despite adverse currency translation and strong 201
Slide 4: Sales trends by quarter
Sales trends by quarter Price/volume/currency Q1 Q2 H1 2011 2011 2011 Price and mix +16.1% +13.9% +14.9% Volume -0.5% -5.4% -3.0% Underlying +15.6% +8.5% +11.9% Currency -2.4% -2.8% -2.6% Continuing sales +13.2% +5.7% +9.3% Prices increased 1 January and 1 April 2011 Strong 2010 comparatives Industr
Slide 5: Sales trends by quarter
Sales trends by quarter Sector split Q1 Q2 H1 2011 2011 2011 Consumer Care +14.2% +8.1% +11.0% Industrial Specialities +12.1% +3.3% +7.5% Continuing sales +13.2% +5.7% +9.3% Consumer Care Tough Q2 2010 comparatives in Crop Care Industrial Specialities 2010 Gulf of Mexico clean-up Q2 Geo Technologies
Slide 6: Continuing turnover by destination
Continuing turnover by destination UK 5% Europe +16% N.America no change 5% LATAM +13% 16% 46% Asia +8% 10% ROW no change 23% Europe very strong, particularly Consumer Care US sales flat – Gulf clean-up 2010, currency translation and exit from the last major Uniqema distributor Emerging markets 31%
Slide 7: Continuing Consumer Care
Continuing Consumer Care £m 2011 2010 Inc Turnover 293.6 264.4 +11.0% Operating Profit 88.0 71.1 +23.8% ROS 30.0% 26.9% Strong growth on top of record 2010 All business areas ahead with Crop showing the strongest growth Sales growth despite adverse currency translation Volumes flat - Strong 2010 com
Slide 8: Continuing Industrial Specialities
Continuing Industrial Specialities £m 2011 2010 Inc Turnover 266.0 247.5 +7.5% Operating 37.3 29.4 +26.9% Profit ROS 14.0% 11.9% Sales up 7.5% Lubricant Additives and Coatings and Polymers saw the strongest growth Commodities also strong - reason for adverse mix in IS Geo Technologies (Gulf cleanup)
Slide 9: Continuing operating profit up 25%
Continuing operating profit up 25% £m 2011 2010 Inc Turnover 559.6 511.9 +9.3% Operating Profit 125.3 100.5 +24.7% ROS 22.4% 19.6% 9
Slide 10: Pre-tax profit up 30%
Pre-tax profit up 30% £m 2011 2010 Inc Continuing operating profit 125.3 100.5 +24.7% Interest (0.5) (4.6) Continuing pre-tax profit 124.8 95.9 +30.1% 10
Slide 11: Earnings per share up 31%
Earnings per share up 31% £m 2011 2010 Inc Continuing Pre-tax profit 124.8 95.9 +30.1% Tax rate 32.4% 33.2% Number of shares (m) 136.3 136.0 Continuing EPS 61.9p 47.1p +31.4% Buyback late in the half, so had little effect on the average number of shares. Reduced tax rate adds to EPS uplift 11
Slide 12: New dividend policy
New dividend policy Croda is generating a lot of cash The Board have decided to revise the dividend policy Aim to pay out 40-50% of sustainable earnings each year in dividends Will pay out 40% of first half earnings in the interim dividend Will use the final dividend to top up to the 40-50% full yea
Slide 13: Interim dividend up 154%
Interim dividend up 154% 2011 2010 Inc Continuing EPS 61.9p 47.1p +31.4% Dividend 24.75p 9.75p +153.8% Cover 2.5x 4.8x Pay out ratio 40% 21% Interim dividend 40% of first half earnings Results in a 153.8% increase in 2011 interim dividend to 24.75p 13
Slide 14: Share buyback
Share buyback Number of shares bought 1.3m Total consideration £25.1m Average price per share £18.74 Target buyback: £50m in 2011 Started Q2, halfway there 14
Slide 15: Group free cash flow - £64.1m
Group free cash flow - £64.1m £m 2011 2010 EBITDA 141.3 116.7 Working capital movement (51.9) (32.9) Cash from operations 89.4 83.8 Capital expenditure (25.3) (19.5) Free cash flow 64.1 64.3 Very strong EBITDA generation Inflation and US distributor termination increases working capital Likely to sp
Slide 16: Group net cash flow
Group net cash flow £m 2011 2010 Free cash flow 64.1 64.3 Excess pension contributions (8.1) (8.0) Share purchases/issue (22.6) 0.6 Share based payments 5.5 4.5 Dividends paid (34.5) (20.5) Interest (4.5) (5.0) Tax (29.1) (24.8) M&A 3.1 16.6 Other (mainly restructuring) (4.6) (12.5) Net cash flow (3
Slide 17: Net Debt
Net Debt £m 2011 2010 Covenant Net debt 253.3 269.7 Committed facilities 477.0 496.5 Committed headroom 223.7 226.8 Rolling Net 0.9x 1.3x <3.0x debt/EBITDA* Rolling EBITDA 34.4x 17.1x >4.0x interest cover* * As per loan covenant calculations 17
Slide 18: Net Debt : currencies and hedging
Net Debt : currencies and hedging Net debt £253.3m of which: Currency borrowings US$124m (Dec 2010: US$108m) Includes $100m 10 year bond fixed at 5.94% €113m (Dec 2010: €120m) 18
Slide 19: Pension Fund: IAS19
Pension Fund: IAS19 £m 2011 2010 June 30 December 31 Market value of assets 662.6 641.9 Value of liabilities (798.7) (789.7) Gross deficit (136.1) (147.8) Tax credit 39.0 42.9 Deficit after tax (97.1) (104.9) Gross funding level 83.0% 81.3% 19
Slide 20: Croda: Unique in Speciality Chemicals
Croda Unique in Speciality Chemicals 20
Slide 21: A Truly Unique Speciality Chemical Company
A Truly Unique Speciality Chemical Company Croda is a truly unique speciality chemical company with: A long term strategy A focus on organic growth A focus on margins A focus on cash generation A focus on shareholder returns 21
Slide 22: Strategic Focus
Strategic Focus Long term Focus on growth markets Relentless innovation High barriers to entry Passionate customer service 22
Slide 23: Consistent Organic Growth
Consistent Organic Growth Underlying revenue at between 5 – 10% p.a. for more than 10 years Profit growing faster Identifying niche markets Applying novel technologies 23
Slide 24: Continuous Margin Improvement
Continuous Margin Improvement Through constant innovation Through a laser like focus on future customer needs Through passing on cost increases, fully and swiftly Through direct global customer contact Through continuing control of costs 24
Slide 25: Strong Cash Generation
Strong Cash Generation Continuous increase in EBITDA “Bottom slicing” means only moderate capital demands Super efficient IT and Administration functions 25
Slide 26: Key Strengths
Key Strengths Renewable raw materials Emerging markets with stellar growth “Specialisation” of the industrial portfolio Global marketing/technical network Strong cash flow 26
Slide 27: Our People
Our People A team of world class people at all levels all over the world A young, dynamic and passionate team with shared vision and values Highly experienced senior management team with deep understanding of Croda’s strategy and culture Genuine focus on our impact on society and the environment 27
Slide 28: Innovation
Innovation The key to constant organic growth Apparent in all that we do, not just in science Enterprise Technology investing more and more in nascent companies/technologies 28
Slide 29: New Product - Natragem
New Product - Natragem Green Trend Natural and Organic is the fastest growing market within Personal Care and represents over 2% of the Global market. NatragemTM Range provides effective solutions to emulsification and solubilisation and is ideal for formulations with a green positioning. Green Bene
Slide 30: New Product - Terraquat BD
New Product - Terraquat BD Terraquat BD is a patented, ultimately biodegradable, “green”, hair conditioning agent for use in shampoos and conditioners Environmentally friendly Not harmful to aquatic environments Provides exceptional hair feel Contributes outstanding detangling and conditioning to th
Slide 31: New Product - Resistem
New Product - ResistemTM Plant stem cell-based anti-ageing bodyguard ResistemTM helps the skin to build its own anti-ageing defence system Stem cell culture of extract of Globularia Cordiofolia Helps reduce the level of pro-ageing agents and local micro-inflammation Enhances natural skin glow 31
Slide 32: New Product - Atplus NPF
New Product - Atplus 401 NPF Atplus 401 NPF is a nonylphenol replacement that addresses the need in agricultural products for nonylphenol-free adjuvants Compatible in high salt concentration surfactants Designed for concentrated fertilizer solutions Wetting agent in concentrated ammonium sulfate sol
Slide 33: New Product - Zephrym PD 4974
New Product - Zephrym PD 4974 Zephrym PD 4974 stabilises difficult to disperse iron oxide pigments in colourants and coatings Dramatically improves stability Enhances colour development Reduces need for thickeners 33
Slide 34: New Product - Hypermer 2800
New Product - Hypermer 2800 Allows an extra level of performance for inverse emulsion polymerisation that is difficult to accomplish with conventional emulsifiers Flocculation for water treatment and mineral processing Additive for paper processing Higher molecular weight polymeric emulsifer Can be
Slide 35: A Strong Track Record
A Strong Track Record Business has been reshaped to become a world leading Speciality Chemicals Company - Since 1999 we have disposed of 25 businesses and 38 sites - Total proceeds of nearly £300m Highly successful acquisition of Uniqema in 2006 Consistent track record of year-on-year profit growth
Slide 36: Outlook
Outlook Strong demand in Consumer Care Reshaping the Industrial Specialities business continues to improve margins Raw materials increases slowing Innovation accelerating New plants coming on stream Steve Foots and his team will continue the growth strategy I wish I were 10 years younger! 36
Slide 37: Appendix 1: 2010 by quarter
Appendix 1: 2010 by quarter £m Q1 Q2 Q3 Q4 2010 Consumer Care 128.1 136.3 128.2 123.8 516.4 Industrial Specialities 117.4 130.1 124.4 113.6 485.5 Continuing turnover 245.5 266.4 252.6 237.4 1,001.9 Consumer Care 34.7 36.4 32.5 32.9 136.5 Industrial Specialities 11.3 18.1 16.2 16.5 62.1 Continuing op
Slide 38: Appendix 2: 2011 by quarter
Appendix 2: 2011 by quarter £m Q1 Q2 Half Consumer Care 146.3 147.3 293.6 Industrial Specialities 131.6 134.4 266.0 Continuing turnover 277.9 281.7 559.6 Consumer Care 42.4 45.6 88.0 Industrial Specialities 18.5 18.8 37.3 Continuing operating profit 60.9 64.4 125.3 Interest (0.2) (0.3) (0.5) Continu