Croda International Plc · LSE:CRDA
Croda International — H1 2019 Earnings Presentation
30 slides from Croda International's earnings presentation, Jul 24, 2019
Slide 1: 2019 Half Year Results
24 July 2019 Croda International Plc 2019 Half Year Results 1
Slide 2: Disclaimer & definitions
Disclaimer & definitions 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 poten
Slide 3: Our performance
Our performance Steve Foots – Group Chief Executive 3
Slide 4: Resilient performance despite subdued market conditions
Resilient performance despite subdued market conditions ▪ Core Business sales in line with prior year, despite subdued market conditions & strong comparator ▪ Operating profit unchanged, with stronger gross margin ▪ Profit before tax slightly lower, due to higher interest charge ▪ Improving cash gen
Slide 5: Core Business sales & operating profit unchanged
Core Business sales & operating profit unchanged Sales in line Operating profit Robust margins unchanged Reported currency Reported currency Group return on sales +2.4% +1.1% 25.1% -0.4% +0.0% -30 bps Constant currency Constant currency Year on year change Continued progress in most consumer markets
Slide 6: External factors impacting first half performance
External factors impacting first half performance External factors Strong price/mix effect US / China trade dispute 10% % growth 5% 0% -5% China Daigou legislation -10% Personal Life Sciences Perf. Tech. Care Automotive slowdown Price/mix Volume M&A Innovation stronger than ever Increasing customer
Slide 7: Financial performance
Financial performance Jez Maiden – Group Finance Director 7
Slide 8: Sales and operating profit in line with prior year
Sales and operating profit in line with prior year £m 2019 Reported Constant reported currency currency change change Sales 714.7 1.7% (1.0)% Adjusted operating profit 179.4 0.5% (0.6)% Net interest (8.8) (151.4)% (142.9)% Adjusted profit before tax 170.6 (2.5)% (3.5)% IFRS profit before tax 166.2 (
Slide 9: Constant currency sales unchanged in Core Business
Constant currency sales unchanged in Core Business Sales, £m Constant currency sales unchanged +2% +4% -5% +1% +2% -2.1% 657.9 642.2 HY '18 reported Price/mix Volume M&A Currency HY '19 reported Percentage changes rounded to no decimal places 9
Slide 10: Continued strong margins underpin Group operating profit
Continued strong margins underpin Group operating profit Adjusted operating profit, £m +1.1% +0.5% -0.3% -0.3% 2.0 178.5 179.4 HY '18 reported Underlying growth M&A Currency translation HY '19 reported 10
Slide 11: Profit progress in Life Sciences. Leading margins in Personal Care & Performance Technologies
Profit progress in Life Sciences. Leading margins in Personal Care & Performance Technologies Adjusted operating profit, £m ROS 25.4% 33.3% 30.6% 18.0% - 25.1% (5.1) (1.1) +2.0 +9.0 (3.9) 179.4 178.5 HY '18 reported Personal Care Life Sciences Performance Industrial Currency HY '19 reported Technolo
Slide 12: Personal Care: Two different market environments
Personal Care Two different market environments Markedly different Class-leading margin Strong fundamentals sales growth retained 2% Return on sales ▪ US/North Asia trade headwinds ▪ Western Europe, (3.6)% 33.3% 24.2% LatAm & South Asia in growth -80 bps +20 bps ▪ Strong structural (10)% growth driv
Slide 13: Personal Care: US & North Asia trade headwinds
Personal Care US & North Asia trade headwinds Key factors US Beauty sales % • US/China trade dispute 2.1 • Reduced consumer confidence in US/North Asia • US exports to China hit by higher tariffs 0.3 0 • Unpredictable customer destocking -0.7 Q3/18 Q4/18 Q1/19 Q2/19 • Chinese Daigou legislation • Im
Slide 14: Personal Care: Europe, South Asia & LatAm in growth
Personal Care Europe, South Asia & LatAm in growth H1 growth H1 growth Beauty Actives 4% • Robust prestige cosmetic market • Leveraging recent expansion of R&D 2% & manufacturing capacity 1% • Strong innovation pipeline – claims data driven W Europe LatAm S Asia Beauty Effects Beauty Formulation • G
Slide 15: Life Sciences: Excellent performance growing sales & margin
Life Sciences Excellent performance growing sales & margin Double digit sales NPP driving Technology-rich growth improved margin attractive platforms 25% M&A Return on sales ▪ 19% profit growth 20% Organic ▪ NPP at 29% 9% ▪ Health standout 15% 30.6% 24.2% performer 4% 10% ▪ Integrating +70 bps Biose
Slide 16: Performance Technologies: Soft markets in developed regions
Performance Technologies Soft markets in developed regions Recent market Margin decline on Mixed performance weakness lower volume 0% Return on sales ▪ Smart Materials - weak automotive & lower stocks ▪ Energy Tech. - 18.0% 24.2% markets resilient (6)% (7)% ▪ Moving to high- -130 bps +20 bps tech: N
Slide 17: Improving cash generation, lower capex
Improving cash generation, lower capex £m H1 2019 H1 2018 EBITDA 209.9 203.0 Working capital (27.9) (57.9) Net capital expenditure (41.5) (54.8) Lease payments (4.3) (0.5) Non-cash pension expense 1.5 3.4 Interest and tax (43.2) (31.0) Free cash flow 94.5 62.2 Dividends (216.1) (60.5) Acquisitions 0
Slide 18: Strategy with 'Purpose'
Strategy with ‘Purpose’ Steve Foots – Group Chief Executive 18
Slide 19: A Purpose led organisation
A Purpose led organisation A Purpose led organisation Our priority UN SDGs Smart Science to Improve LivesTM Recognised Sustainability leader Making choices Expanding Life Sciences Strengthening Personal Care Refining Performance Technologies 19
Slide 20: Expanding Life Sciences
Expanding Life Sciences Geographic expansion Capital investment ▪ Drug delivery ▪ China ▪ Doubling ▪ R&D capacity ▪ People ▪ New technologies Innovation Acquisitions / investments ▪ Aligned to UN Sustainability Biosector Goals ▪ Banzai – cocoa yield enhancement 20
Slide 21: Strengthening Personal Care
Strengthening Personal Care Increasing presence in Asia Connecting with Digital ▪ Investment ▪ China ▪ R&D Enhancing Formulation expertise Smart customer partnerships ▪ Scaling Beauty Actives/Effects ▪ New textures lab in Paris ▪ One-stop shop in formulation 21
Slide 22: Refining Performance Technologies
Refining Performance Technologies Geographic expansion Moving to High Tech ▪ Home Care ▪ Flowsolve™ ▪ Sustainable ▪ Maximising ingredients energy efficiency ▪ US ▪ 10 fold sales increase Accelerating innovation Technology acquisitions NPP sales % ▪ Rewitec 19% ▪ Renewable energy 14% applications 201
Slide 23: Investing to maximise our positive impact…
Investing to maximise our positive impact… Increasing efficiency of Extending wind turbine life Adjuvants for vaccines drug delivery High purity excipients capacity Acquisition of Biosector Acquisition of Rewitec expansion Avoiding land use through Improving farmer livelihoods Focusing on diversity
Slide 24: …and minimise environmental impact
…and minimise environmental impact Increasing renewable heat Reducing petrochemical Increasing solar power capacity feedstocks capacity CHP to burn landfill gas in US 100% bio-based surfactants New arrays in Germany & US Revolutionising processes to Protecting biodiversity on Reducing water use incr
Slide 25: Short-term market challenges, well positioned for growth
Short-term market challenges Well positioned for growth Clear strategy in place Outlook for H2 ▪ Aligned with megatrends ▪ Strong pipeline & robust business model ▪ Sustainability leader ▪ US remaining subdued/ ▪ Clear growth strategy: progressive Asia recovery ▪ Expanding Life Sciences ▪ Based on c
Slide 26: Additional material
Additional material Smart Science to Improve Lives™
Slide 27: Sales growth
Sales growth H1 2018 H2 2018 H1 2019 Personal Care 9.3% 4.1% (3.6)% Life Sciences 2.3% 3.3% 13.0% Performance Technologies 1.7% 1.1% (6.0)% Core Business 4.7% 2.8% (0.4)% Industrial Chemicals (7.0)% (3.6)% (7.4)% Group 3.6% 2.2% (1.0)% 27
Slide 28: Income statement
Income statement £m H1 2018 H2 2018 H1 2019 Reported Reported Reported Revenue 702.8 684.1 714.7 Adjusted operating profit 178.5 164.0 179.4 Net interest (3.5) (7.5) (8.8) Adjusted profit before tax 175.0 156.5 170.6 Exceptionals, acquisition (4.2) (9.5) (4.4) costs & intangibles IFRS profit before
Slide 29: Retirement benefit analysis (IAS19 basis)
Retirement benefit analysis (IAS19 basis) £m 31 December 2018 30 June 2019 Market value of assets 1,272.7 1,376.4 Value of liabilities (1,291.2) (1,432.1) Deficit pre tax (18.5) (55.7) Deferred tax 6.1 12.4 Deficit post tax (12.4) (43.3) Positive percentage indicates favourable variance 29
Slide 30: Capital Policy
Capital allocation model Capital Policy Reinvest Regular Disciplined Excess to grow dividend approach capital to returned 1.5x 40-50% acquisition depreciation EPS payout 1-1.5x leverage Leverage at 30 June 2019: 1.5x Leverage excludes retirement benefit deficit 30