Croda International Plc · LSE:CRDA
Croda International — FY2019 Earnings Presentation
32 slides from Croda International's earnings presentation, Feb 25, 2020
Slide 1: 2019 full year results
25 February 2020 Croda International Plc 2019 full year results
Slide 2: Cautionary statement & definitions
Cautionary statement & 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
Slide 3: Performance
Performance Smart Science to Improve Lives™ 3 CRODA
Slide 4: A resilient performance…
A resilient performance… • Subdued market conditions ➢Trade war ➢Daigou ➢Automotive ➢Destocking • Sales & operating profit slightly behind • Robust profit performance in consumer markets • Weaker in industrial markets • Continued innovation, robust margin and strong cash generation 4
Slide 5: … from a strong business model
… from a strong business model Sales Margin Profit Cash -0.7% Unchanged -0.8% +30.2% £1,377.7m 24.7% £339.7m £201.7m Revenue Return on sales Operating profit Free cash flow 5
Slide 6: 2019: Sector summary
2019: Sector summary • Slower US cosmetics market – now trading in line Personal • North Asia Daigou and China legislation - lapped Care • Improving sales trend & strong profit maintained Life • Speciality excipient opportunity increasing • Well balanced growth in Crop Protection business Sciences •
Slide 7: Financial performance
Financial performance Smart Science to Improve Lives™
Slide 8: 2019: Adjusted results
2019: Adjusted results £m 2019 2018 % change % change constant currency Sales 1,377.7 1,386.9 (0.7) (2.6) Operating profit 339.7 342.5 (0.8) (1.8) Profit before tax 322.1 331.5 (2.8) (3.7) Return on sales 24.7% 24.7% 0.0%pts Basic EPS 185.0 190.2 (2.7) Ordinary dividend declared 90.0p 87.0p +3.4% Fr
Slide 9: 2019: IFRS reported results
2019: IFRS reported results £m 2019 2018 Adjusted PBT 322.1 331.5 Exceptional items (10.7) (4.9) Acquisition costs (0.3) (2.7) Amortisation of intangible assets (8.8) (6.1) Reported PBT 302.3 317.8 Basic EPS 172.8p 181.4p 9
Slide 10: Sales slightly lower but strong price/mix benefit
Sales slightly lower but strong price/mix benefit Sales, £m Constant currency sales -3% +3% -6% -1% +1% -1% +2% 1,386.9 1,377.7 FY18 Price/mix Volume M&A Industrial Currency FY19 reported Chemicals translation reported currency Core business currency Constant currency unless stated 10
Slide 11: 2019: Sector sales and profit
2019: Sector sales and profit Personal Life Performance Group Care Sciences Technologies 6% (3)% (7)% (3)% Change in sales % +11 +2 (16) (3) Change in operating profit £m +50bps +110bps -260bps Unchanged Return on sales 33.4% 30.6% 16.1% 24.7% Sales in constant currency 11
Slide 12: 2019 performance Personal Care
2019 performance Personal Care Croda Personal Care sales recovery in Q4… Personal Care • Weak Q1-3: trade headwinds • Soft consumer demand in US – destocking % 1 • North Asia weak – Daigou & China legislation • Q4 global sales recovery (1) (5) (6) Beauty Actives Q1 Q2 Q3 Q4 + Modest sales growth + R
Slide 13: 2019 performance Life Sciences
2019 performance Life Sciences Performance Life Sciences +11.6% • Record year, softer H2 • Richer sales mix +5.9% +110bps Health Care + Strong growth in speciality excipients + New capacity investment Sales Return on sales Profit + Biosector integration Crop Protection Sales growth + Ahead of market
Slide 14: 2019 performance Performance Technologies
2019 performance Performance Technologies Improving operating profit impacted by Performance Technologies external market • Disappointing after several years of strong profit growth £m 85 • Economic uncertainty & weak demand 75 69 67 Smart Materials 57 - Poor global automotive demand: sales -7% + Ex
Slide 15: Disciplined cost management supporting reinvestment
Disciplined cost management supporting reinvestment Underlying cost base, £m* 2020 Reinvestment Reinvestment 7 Depreciation Depreciation 6 Pensions Pensions 3 Costsavings Cost savings (16) Underlying Underlying change change 0 • Cost base remains lean • Efficiencies delivered in 2019 to offset sales
Slide 16: 2019: Free cash flow improved 30%
2019: Free cash flow improved 30% £m 71 (4) (8) (1) (16) 5 202 155 FY18 EBITDA Working Capital Leases Pensions Interest & FY19 capital investment Tax • Total dividends paid £267m • Net debt £548m (2018: £426m) • Leverage ratio 1.4x (2018: 1.1x) • Debt facilities fully refinanced – ‘green’ bank revol
Slide 17: 2020: Additional financial information
2020: Additional financial information • Currency translation • 2019 average rates: $1.278 • 2019 average rates: €1.141 • Average impact: £0.9m per $cent Represents 65% of typical • Average impact: £0.6m per €cent currency exposure • If 2020 FX rates were unchanged from today ($1.30, €1.20), estimat
Slide 18: Strategy with Purpose: Creating New Markets
Strategy with Purpose: Creating New Markets Insert AR PT image 18
Slide 19: Our ambitious sustainability commitment
Our ambitious sustainability commitment By 2030 Climate Land People Climate, Land positive positive positive & People positive Enable more Enable more land Apply our carbon to be saved to be saved than innovations to than we emit we use to grow increase our our bio-based positive impact materials on
Slide 20: Life Sciences: Speciality excipients in drug development
Life Sciences: Expand to grow Speciality excipients in drug development Trend Growth market 7 new speciality excipients in 2019 9/10 top selling drugs are biologics Move to biologics Technology Speciality excipients 20
Slide 21: Life Sciences: Vaccine development
Life Sciences: Expand to grow Vaccine development Trend Growth market 100 Adjuvants % vaccines launched HIV 80 10% CAGR with adjuvant 60 40 9% 10.3% 20 Tuberculosis Malaria 0 1925 1960 1980 2000 2020 Demand for new vaccines Importance of adjuvants increasing Technology Differentiation Next generatio
Slide 22: Life Sciences: Crop yield improvement
Life Sciences: Expand to grow Crop yield improvement Trend Growth market 100% 80% of rice to 90% be locally produced by 80% 2023 70% 60% Import 2019 2023 Production Feed growing population with less land Supporting farmers to be self-sufficient Technology Differentiation +24% PaddyRise seed treatmen
Slide 23: Personal Care: Bio-based surfactants
Personal Care: Strengthen to grow Bio-based surfactants Trend Growth market Sustainable Launches in Personal Care +56% CAGR 2015 2016 2017 2018 2019 RSPO-1106097 Clean & sustainable Technology Differentiation Bio-based surfactants First mover advantage Growth market source: Mintel GNPD 2020. The USD
Slide 24: Personal Care: Bio-actives in premium skin care
Personal Care: Strengthen to grow Bio-actives in premium skin care Trend Growth market +26% CAGR 2013 2014 2015 2016 2017 2018 2019 Clean beauty IRB sales growth Technology Differentiation T0 T3 weeks Sagging Tightening Plant cell culture Skin lifting with Majestem™ 24
Slide 25: Performance Technologies: Sustainable fashion
Performance Technologies: Refine to grow Sustainable fashion Trend Growth market Sustainable launches in Fabric Care Extending the active life +6% CAGR of 50% of UK clothing by 9 months would save: 8% 10% 4% Carbon Water Waste 2014 2015 2016 2017 2018 2019 Move away from throwaway fashion Increasing
Slide 26: Outlook
Outlook Strategy in place Outlook • Strong business model • Further progress in consumer markets • Sustainable Purpose • Industrial markets weak but stable • Expand to grow Life Sciences • Growth second half weighted • Strengthen to grow Personal Care • Healthy innovation pipeline • Refine to grow P
Slide 27: Additional material
Additional material Smart Science to Improve Lives™
Slide 28: Investing to minimise our negative impact…
Investing to minimise our negative impact… Moving away from less Social solar Reducing water use at our sites sustainable chemistries Roof space donated for community solar Discontinued global sales of APEs 90% groundwater reduction in Japan Decoupling environmental impact Decarbonising our processe
Slide 29: … and maximise our positive impact
… and maximise our positive impact Smart science improving lives in Increasing our innovation in Increasing vaccine efficacy Togo sustainability-led niches Sun care filters and expertise given to Adjuvant capacity expansion in New technical centre in Shanghai National Association of Albinos Denmark
Slide 30: Sales growth
Sales growth H1 2019 H2 2019 FY 2019 Personal Care (3.6)% (2.3)% (3.0)% Life Sciences 13.0% (0.9)% 5.9% Performance Technologies (6.0)% (8.6)% (7.3)% Core Business (0.4)% (4.2)% (2.3)% Industrial Chemicals (7.4)% (5.7)% (6.6)% Group (1.0)% (4.3)% (2.6)% Constant currency 30
Slide 31: Retirement benefit analysis (IAS19 basis)
Retirement benefit analysis (IAS19 basis) £m 31 Dec 2018 31 Dec 2019 Market value of assets 1,272.7 1,390.8 Value of liabilities (1,291.2) (1,465.8) Deficit pre tax (18.5) (75.0) Deferred tax 6.1 14.9 Deficit post tax (12.4) (60.1) 31
Slide 32: Capital Policy
Capital allocation model Capital Policy Reinvest Regular Disciplined Excess to grow dividend acquisition capital approach returned ~1.5x 40-50% 1-1.5x depreciation EPS payout leverage Leverage at 31 Dec 2019: 1.4x Leverage excludes retirement benefit deficit 32