Croda International Plc · LSE:CRDA

Croda International — FY2016 Earnings Presentation

35 slides from Croda International's earnings presentation, Feb 28, 2017

1. Slide 1: Croda International Plc 2016 Full Year Results

   Croda International Plc 2016 Full Year Results 28 February 2017 Innovation you can build on™

2. 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

3. Slide 3: Our Performance

   Our Performance Steve Foots – Group Chief Executive Innovation you can build on™

4. Slide 4: Relentless innovation driving record profit

   Relentless innovation driving record profit Headline performance (reported currency):  Record profit delivered: adjusted profit before tax up 13.2% at £288.3m  Robust sales growth: up 15.0%, driven by Incotec, innovation and progress in high value markets, together with currency translation  Rele

5. Slide 5: Consistent top and bottom line growth

   Consistent top and bottom line growth Continued sales growth Strong return on sales Robust EPS growth Reported currency Reported currency Reported currency +15.0% 24.0% 155.8p +3.1% -40 bps +15.4% Constant currency YOY change Adjusted basic EPS growth Record NPP sales driving strong bottom line perf

6. Slide 6: Investment in fast growing niches driving profit in Personal Care

   Investment in fast growing niches driving profit in Personal Care Class-leading return on Improving mix driving profit Innovation led growth sales +4%  Outperformance in Actives  Softer conditions in Specialities but improving 34.0%  Increased innovation and IP  NPP at 40% of total sales +100 bp

7. Slide 7: Focused acquisition and clever innovation offsetting API weakness in Life Sciences

   Focused acquisition and clever innovation offsetting API weakness in Life Sciences Mix effect diluting return on Focus on fast growth Strong top line growth sales technologies £m  Good performance given API 51 headwind 43  Majority of business delivering  Return on sales strengthening 28.1% pre-I

8. Slide 8: Improving sales and margin in Performance Technologies

   Improving sales and margin in Performance Technologies Improving product mix Profitable top line growth Increased innovation driving return on sales 12.1%  Improving sales trend  Broad based geographic growth  All businesses contributing 16.4%  Positive momentum in Sipo  Innovation led growth +

9. Slide 9: Financial Performance

   Financial Performance Jez Maiden – Group Finance Director Innovation you can build on™

10. Slide 10: Sales growth and continued strong margin driving profit

    Sales growth and continued strong margin driving profit 2016 Constant £m constant currency 2016 currency 2015 change % Sales 1,243.6 1,115.4 1,081.7 +3.1 Operating profit 298.2 276.4 264.2 +4.6 Net interest (9.9) (9.5) (9.5) - Profit before tax 288.3 266.9 254.7 +4.8 IFRS profit before tax 275.7 252

11. Slide 11: Sales growth driven by acquisitions and currency

    Sales growth driven by acquisitions and currency Group, £m 129 1,244 51 1,115 1,082 (11) (12) 5 2015 reported Industrial APIs Organic growth Acquisitions 2016 constant Currency 2016 reported Chemicals in Core currency translation Business 11 Innovation you can build on™

12. Slide 12: Improving sales trend in Core Business

    Improving sales trend in Core Business Planned actions depressed top line Strong finish to year growth Sales growth  Distributor exit in Asia 0.8%  Lower API sales year on year 0.4% -1.5% -2.5%  Exited low value-add products in Performance Technologies  Improving Q4 trend Q1 Q2 Q3 Q4 Constant cu

13. Slide 13: Continued top line growth in Asia & Europe

    Continued top line growth in Asia & Europe Regional sales in Core Business  Asia growing strongly  Region 22% of Group sales  Driven by proximity to local & regional -7% customers and increased customer sophistication  Europe robust +5% +2%  Core Business growing  North America subdued but imp

14. Slide 14: Record level of innovation

    Record level of innovation NPP sales as % of Group sales  NPP sales 2.6x overall sales growth  Greater proportion of protected 27.3% innovation 26.1%  Improvement in all Core Business 23.4% sectors 21.4%  Incotec aligned, exciting opportunities 20.5% Growth in Skin Actives Fast growth in sun car

15. Slide 15: Innovation, mix and acquisitions driving profit

    Innovation, mix and acquisitions driving profit Profit before tax, £m 21.4 288.3 12.2 266.9 254.7 Return on Return on sales sales 24.0% 24.4% 2015 reported Organic growth and 2016 constant Currency translation 2016 reported acquisitions currency  Profit growth reflects acquisition, innovation and g

16. Slide 16: All Core Business sectors driving profit growth

    All Core Business sectors driving profit growth £m +33.6  Strong profitability in Personal Care  NPP, skin actives & sun care  Good profitability in Life Sciences +18.6  Excipients, seed enhancement +9.4  Performance Technologies +6.9  Increase in innovation -0.9  Exited low value-add busines

17. Slide 17: Impressive cash generation continues, funding expansion in fast growing niches

    Impressive cash generation continues, funding expansion in fast growing niches £m 2016 2015 EBITDA 344.3 302.3 Working capital 7.2 (1.4) Net capital investment (104.5) (91.1) Additional pension contributions (10.9) (18.5) Interest and tax (80.6) (73.8) Free cash flow 155.5 117.5 Dividends (230.2) (9

18. Slide 18: Strategy continuing to deliver

    Strategy continuing to deliver Steve Foots – Group Chief Executive Innovation you can build on™

19. Slide 19: Connecting to faster growth markets

    Connecting to faster growth markets Three legs of growth Personal Care Geographies Technologies Niches Life Sciences Sustainability Performance Technologies 19 Innovation you can build on™

20. Slide 20: Personal Care: Accelerating Innovation in Premium market niches

    Personal Care: Accelerating Innovation in Premium market niches Investing in fast growth technologies Investing in open innovation  Strong collaboration with NPP as % of sales 40%  Skin and hair actives Universities, SMEs and  Plant stem cells industry experts  Sun care actives  10x increase si

21. Slide 21: Life Sciences: investing in high value niches

    Life Sciences: investing in high value niches Investing to scale Life Sciences Investing in fast growth technologies NPP as % of sales  Sales nearly £300m 31%  Expanding high purity Sales growth  Global scale excipients  Strong growth potential  Delivery of complex actives  Rich IP 2012 2016 2

22. Slide 22: Performance Technologies: Innovation driving improved performance

    Performance Technologies: Innovation driving improved performance Improving sales growth Investing in fast growth technologies  Strong finish to NPP as % of sales +3.3% year  Novel slip additives 19%  Investing for future  Friction modifiers -0.3% growth  Flow assurance  Return on sales  Adva

23. Slide 23: Accelerating our customers' transition to sustainable ingredients

    Accelerating our customers’ transition to sustainable ingredients Customers committing to consumers More products claiming sustainability* % of products launched 26.1% 0.5% 2004 2007 2010 2013 2016 Investing in new niches Investing in bio surfactants  Unique positioning  Positive customer interact

24. Slide 24: New niches – our Biosurfactants plant

    New niches – our Biosurfactants plant Enabling customers to build sustainably focused brands Competitive production Existing Ethylene Ethylene plant Oxide Oil / Natural gas New plant Competitive advantage Bio Ethylene Alkoxylates  Ethanol Oxide Corn / Biomass 100%  Croda’s ECO range will be bio-ce

25. Slide 25: Returns will grow post 2018 launch

    Returns will grow post 2018 launch Investment returns  Capex $175m  Commissioning: Q4/2017 Demand Benefit Payback ROIC Existing Increased 7 years ~15% ‘captive’ use margin New ‘white Increased ~6 years ~20% space’ sales Profitability will increase as new ‘white space’ is developed Croda ECO: NYSCC

26. Slide 26: Key takeaways

    Key takeaways 2016 performance Priorities for 2017  Delivered record profit  Focus on premium, fast growth  Growth in premium market niches niches  Relentless innovation driving  Improve performance in less success differentiated markets  Expanding in higher growth markets  Grow margins in Pe

27. Slide 27: Questions

    Questions Innovation you can build on™

28. Slide 28: Full year revenue analysis

    Full year revenue analysis FY 2016 FY 2016 FY 2015 % Constant £m Reported Constant Reported versus 2015 currency Personal Care 420.6 374.2 377.3 (0.8) Life Sciences 292.2 266.5 223.9 19.0 Performance 402.5 359.7 354.8 1.4 Technologies Core Business 1,115.3 1,000.4 956.0 4.6 Industrial Chemicals 128.

29. Slide 29: Underlying sales growth

    Underlying sales growth % H1 2016 H2 2016 FY 2016 Personal Care (0.5)% (1.4)% (0.9)% Life Sciences (1.0)% (6.5)% (3.7)% Performance Technologies (0.3)% 3.3% 1.4% Core Business (0.5)% (0.9)% (0.7)% Industrial Chemicals (12.4)% (3.9)% (8.5)% Group (2.0)% (1.2)% (1.6)% 29 Innovation you can build on™

30. Slide 30: Underlying sales growth

    Underlying sales growth % Q1 2016 Q2 2016 Q3 2016 Q4 2016 Personal Care (1.1)% 0.2% (2.0)% (0.8)% Life Sciences 4.6% (7.1)% (8.2)% (4.9)% Performance Technologies (0.6)% (0.1)% 0.3% 6.5% Core Business 0.4% (1.5)% (2.5)% 0.8% Industrial Chemicals (10.7)% (14.1)% (6.2)% (1.4)% Group (0.9)% (3.0)% (2.9

31. Slide 31: H1/H2 sales analysis

    H1/H2 sales analysis £m H1 2016 H2 2016 FY 2016 Personal Care 207.4 213.2 420.6 Life Sciences 143.6 148.6 292.2 Performance Technologies 195.5 207.0 402.5 Core Business 546.5 568.8 1,115.3 Industrial Chemicals 62.2 66.1 128.3 Group 608.7 634.9 1,243.6 Reported currency 31 Innovation you can build on

32. Slide 32: H1/H2 operating profit analysis

    H1/H2 operating profit analysis H1 2016 H2 2016 FY 2016 FY 2015 Operating profit (£m): Personal Care 73.1 70.0 143.1 124.5 Life Sciences 40.4 41.6 82.0 75.1 Performance Technologies 35.8 30.4 66.2 56.8 Core Business 149.3 142.0 291.3 256.4 Industrial Chemicals 3.3 3.6 6.9 7.8 Group 152.6 145.6 298.2

33. Slide 33: Retirement benefit deficit (IAS19 basis)

    Retirement benefit deficit (IAS19 basis) £m at 31 December 2016 2015 Market value of assets 1,229.4 969.6 Value of liabilities (1,375.9) (1,048.4) Deficit pre tax (146.5) (78.8) Deferred tax 33.8 22.9 Deficit post tax (112.7) (55.9) 33 Innovation you can build on™

34. Slide 34: Capital Policy

    Good capital discipline Reinvest to Regular Disciplined Excess capital Capital Policy grow dividend approach to returned acquisitions 2x typical 40-50% EPS 1-1.5x leverage spend pay-out over cycle Year-end leverage 1.1x Leverage excludes retirement benefit deficit 34 Innovation you can build on™

35. Slide 35: Currency sensitivity

    Currency sensitivity  Currency translation profit impact:  $1 cent = +/- £0.8m (2016 average: $1.35)  €1 cent = +/- £0.5m (2016 average: €1.22) 35 Innovation you can build on™

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