Croda International Plc · LSE:CRDA
Croda International — FY2023 Earnings Presentation
42 slides from Croda International's earnings presentation, Feb 27, 2024
Slide 1: Full year 2023 results Analyst presentation
Croda International Plc Full year 2023 results Analyst presentation 27 February 2024 Smart science to improve lives™ 1
Slide 2: Disclaimer
Disclaimer Cautionary statement Alternative Performance Measures (APMs) This review is intended to focus on matters which are relevant to the We use a number of APMs to assist in presenting information in this interests of shareholders in the Company. The purpose of the review statement in an easily
Slide 3: Agenda
Agenda 01. Executive summary 02. Five-year sales performance 03. 2023 performance 04. Financial performance 05. Future performance drivers 06. Outlook and conclusion 07. Questions Smart science to improve lives™ 3
Slide 4: 01 Executive summary
Designer to add Steve image Croda Croda International International Plc Plc 01 Executive summary Steve Foots Chief Executive Officer Smart science to improve lives™ 4
Slide 5: A challenging year; well positioned for macro-recovery
Executive summary A challenging year; well positioned for macro-recovery Significant headwinds in 2023 Highlights • Follows 2 record years post pandemic • F&F, Pharma (ex-CV19) and Seed all growing • Sales down 19%: • Actives and Home Care broadly flat • Unprecedented destocking and demand weakness
Slide 6: 02 Five-year sales performance
Croda Croda International International Plc Plc 02 Five-year sales performance Smart science to improve lives™ 6
Slide 7: Consumer Care 5-year sales performance
5-year sales performance Consumer Care Reported sales (£m) +5% CAGR +4% CAGR +12% CAGR +13% CAGR* 18% (1)% 45% 1% Beauty Actives Beauty Care Home Care F&F Consumer Care 2019 2020 2021 2022 2023 Reported sales. Consumer Care chart to different scale. *F&F CAGR includes full year sales in 2019 and 202
Slide 8: Life Sciences 5-year sales performance
5-year sales performance Life Sciences Reported sales (£m) +16% CAGR +9% CAGR +9% CAGR 37% (5)% 15% 8% CV19 lipid sales Pharma Crop Protection Seed Enhancement Life Sciences (ex. CV19 lipids) (ex. CV19 lipids) 2019 2020 2021 2022 2023 Reported sales. Life Sciences chart to different scale Smart scie
Slide 9: Industrial Specialties 5-year sales performance
5-year sales performance Industrial Specialties Reported sales (£m) Industrial Specialties – playing an important role in our manufacturing model: • Contributing sales volumes to enhance asset utilisation at core multi-purpose sites • Monetising co-streams to 318 191 maximise value of all products •
Slide 10: 03 2023 performance
Croda Croda International International Plc Plc 03 2023 performance Smart science to improve lives™ 10
Slide 11: Consumer Care – ongoing demand for sustainable ingredients
2023 performance Consumer Care – ongoing demand for sustainable ingredients 2023 sales performance Highlights Business unit sales growth in 2023 +4% +17% Beauty Care 20 %+ • New & Protected Product sales up to 42% (2022: 41%) • Continued sustainability-related demand Price/mix (1)% Sales growth (1)%
Slide 12: Life Sciences – resilient performance in challenging markets
2023 performance Life Sciences – resilient performance in challenging markets 2023 sales performance Highlights Business unit sales growth in 2023 (ex. CV19 lipids) +3% +9% +9 % • Life Sciences sales 5% lower excluding CV19 lipid sales • Core Pharma sales up 3% on same basis Sales growth (5)% Crop P
Slide 13: Continued improvement in non-financial performance
2023 performance Continued improvement in non-financial performance Improving on our leading customer NPS Demonstrating our commitment to sustainability +34 • 92% customers rate our product quality highly 22.8m • Big impact from Croda Foundation • Emissions reduction on track 2022: +23 • “You are be
Slide 14: Well positioned for market recovery – near-term priorities
2023 performance Well positioned for market recovery – near-term priorities 1 2 3 4 Beauty Care Crop Protection Pharma Operational improvements Capitalising on recovery in Focusing on innovation in Accelerating conversion of All with strong operational Beauty Care Crop Protection despite Pharma pipe
Slide 15: 04 Financial performance
Click icon to add picture Croda Croda International International Plc Plc 04 Financial performance Louisa Burdett Chief Financial Officer Smart science to improve lives™ 15
Slide 16: Group performance in line with updated expectations
Financial performance Group performance in line with updated expectations Adjusted results Pro forma estimates FY22 % change Adjusted results, £m FY23 FY22 % change (pro forma) (pro forma) Sales 1,694.5 2,089.3 (18.9)% 1,898 (11)% Operating profit 320.0 515.1 (37.9)% 476 (33)% Operating margin 18.9%
Slide 17: Sales reduction due to PTIC disposal and lower volumes
Financial performance Sales reduction due to PTIC disposal and lower volumes Sales, £m Reported change (19)% 5% (16)% 1% (1)% (191) 2,089 Pro forma reported change (11)% 1,898 1,695 FY22 PTIC Divestment FY22 pro forma Price/mix Volume Acquisitions Currency translation FY23 Pro forma FY22 estimated r
Slide 18: Operating margin impacted by volume leverage and price/mix
Financial performance Operating margin impacted by volume leverage and price/mix Adjusted operating profit, £m Adjusted operating margin, % Reported change (38)% (5)% (3)% 2% (31)% 0% (2)% (39) 515 320 24.7% 18.9% 476 Pro forma reported change (33)% FY22 PTIC FY22 pro Underlying Acquisitions Currenc
Slide 19: Cost movements in 2023
Financial performance Cost movements in 2023 Operating cost movements, £m Cost tailwinds Variable remuneration: 1 c.£25m Cost Cost Cost tailwinds neutral headwind Factory and freight: 2 (30) c.£15m 1 3 Other discretionary (e.g. travel): c.£5m 2 5 5 470 3 Cost neutral 440 4 410 Employee costs: 405 4
Slide 20: Building blocks for 2024 profit performance
Financial performance Building blocks for 2024 profit performance Indicative PBT movements, £m Post-pandemic Normalisation Well positioned for market recovery 300 FY24 Guidance range 309 250 440 200 FY23 CV19 CV19 lipids Bounceback Variablecosts Continued Bounceback FY24 PBT lipids (and F&F) (inc. v
Slide 21: Free cash flow – supported by strong working capital management
Financial performance Free cash flow – supported by strong working capital management Cash flow, £m FY23 FY22 EBITDA 409.5 601.5 Working capital 29.1 (133.8) Strong working Interest & tax (93.5) (154.0) capital management Other cash movements (7.6) (5.5) • Inventory reduced by c.£120m Net cash from
Slide 22: Balancing investment and capital discipline
Financial performance Balancing investment and capital discipline Continuing to invest in future growth Capital discipline to maintain balance sheet strength Net capital expenditure* Net debt and leverage^ 180.0 9.0% 900.0 2.0 160.0 1.8x 1.8 8% c.£150m c.£150m 8.0% 800.0 8% 140.0 7% 700.0 1.6 7% 7.0
Slide 23: Committed to regular and progressive shareholder returns
Financial performance Committed to regular and progressive shareholder returns Consistent dividend progression Capital allocation policy Ordinary dividend per share (1991-2023) 1 Reinvest for organic growth 2 Provide regular returns to shareholders 3 Acquire complementary technologies / adjacencies
Slide 24: 2024 technical factors
Financial performance 2024 technical factors Input costs Depreciation Raw materials: Remuneration costs: • Raw material costs expected to fall c.2% in Q124 with cost deflation • Expect reversal of c.£25m benefit from variable remuneration and salary costs to be impacted ~£95-100m moderating in Q2 by
Slide 25: 05 Future performance drivers
Croda Croda International International Plc Plc 05 Future performance drivers Steve Foots Chief Executive Officer Smart science to improve lives™ 25
Slide 26: Well positioned for market recovery
Future performance drivers Well positioned for market recovery Technology Continued investment in downturn Near-term priorities trends intact Driving fast growth in Asia • Solus Biotech acquisition Strengthen • Capitalising on • Shanghai claims lab Consumer recovery in • Guangzhou production Care Be
Slide 27: Capitalising on recovery in Consumer Care
Future performance drivers Capitalising on recovery in Consumer Care Customer inventory levels are falling Sequential improvement in Consumer Care Stock days Consumer Care volumes (6-month moving average) L'Oreal Colgate Henkel Unilever Estee Lauder Beiersdorf J&J 0 50 100 150 200 250 Jan-22 Jul-22
Slide 28: …informed by enhanced insights in Beauty Care …
Future performance drivers …informed by enhanced insights in Beauty Care … Category strength Balanced geography Sustainability leadership Differentiation 30% 25% 31% Hair Asia N America 20% 70% 12% 32% 62% 38% Not 80% Less Skin Latam Europe Bio-based bio-based Differentiated differentiated Broad-bas
Slide 29: …and driven by a refreshed Beauty Care business plan
Future performance drivers …and driven by a refreshed Beauty Care business plan Category strength Balanced geography Sustainability leadership Differentiation Innovate in Skin Fast-grow Asia Enhance leading position Accelerate differentiation • Low-carbon delivery • R&D investment • Lower carbon pro
Slide 30: Focusing on innovation in Crop Protection despite ongoing destocking
Future performance drivers Focusing on innovation in Crop Protection despite ongoing destocking Customer inventory levels remained heightened Innovating for biopesticides and Precision Ag Stock days Crop Protection strategy Sustainability Biopesticides Nutrition Precision Agriculture FMC Corteva Syn
Slide 31: Accelerating conversion of Pharma pipeline – Protein Delivery
Future performance drivers Accelerating conversion of Pharma pipeline – Protein Delivery Proteins/mAbs market Croda commercial pipeline 10% CAGR +64% Ultra-refined solution for cell health £300bn Increase in number Market need – components that support cell growth market of projects Croda solution –
Slide 32: Accelerating conversion of Pharma pipeline – Adjuvant Systems
Future performance drivers Accelerating conversion of Pharma pipeline – Adjuvant Systems Vaccine market Croda commercial pipeline 13% CAGR +24% PHAD Portfolio £30bn Increase in number PHAD market of projects Market need – improve immune response to antigens Croda solution – novel lipid-based adjuvan
Slide 33: Accelerating conversion of Pharma pipeline – Nucleic Acid Delivery
Future performance drivers Accelerating conversion of Pharma pipeline – Nucleic Acid Delivery Nucleic acid market Croda commercial pipeline Leading solution supplier for mRNA vaccine development 20%+ CAGR +28% Big Pharma ‘A’ Big Pharma ‘B’ Big Pharma ‘C’ £30bn Increase in number of market projects F
Slide 34: All with strong operational improvements
Future performance drivers All with strong operational improvements Leveraging AI and data analytics Simplifying our structure 95 % • Ensures successful germination of high-value seeds AI model delivers • Identifies effective formulations 10ppt improvement • Improves speed and accuracy to tomato see
Slide 35: 06 Outlook
Croda Croda International International Plc Plc 06 Outlook Smart science to improve lives™ 35
Slide 36: 2024 Outlook
Outlook 2024 Outlook 2024 sales 2024 Group operating margin • Given uncertainty, recovery trajectory for each business difficult to Expected to be 2-3 ppts lower than 2023 due to: predict; possible outcomes wider than usual • Business mix – no Covid-19 lipid contribution; continued strong • Expect m
Slide 37: Conclusion
Outlook Conclusion Strategic delivery in a challenging environment • 2023 a challenging year • No structural changes with technology trends intact • Strong balance sheet supports continued strategic investment • Focused on a clear set of priorities • Well positioned for market recovery Smart science
Slide 38: 07 Questions
Croda Croda International International Plc Plc 07 Questions Smart science to improve lives™ 38
Slide 39: Additional financial information
Croda Croda International International Plc Plc Additional financial information Smart science to improve lives™ 39
Slide 40: Quarterly sales breakdown
Additional financial information Quarterly sales breakdown 2023 quarterly sales by sector (£m) Sector Q123 Q223 Q323 Q423 Consumer Care 236.8 218.8 218.2 212.2 Life Sciences 170.8 132.4 125.0 174.1 Industrial Specialties 69.1 53.0 43.8 40.3 Group 476.7 404.2 387.0 426.6 Reported sales Smart science
Slide 41: Currency exposure
Additional financial information Currency exposure Currency translation The US Dollar and the Euro together represent approximately 65% of the Group’s currency translation exposure. Sterling was broadly flat against the US Dollar and weakened slightly against the Euro. 2023 average rates: • US$1.243
Slide 42: Smart science to improve lives™
Smart science to improve lives™