Croda International Plc · LSE:CRDA
Croda International — FY2022 Earnings Presentation
37 slides from Croda International's earnings presentation, Feb 28, 2023
Slide 1: Full year 2022 results
Croda International Plc Full year 2022 results 28 February 2023
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. A record performance 02. Consistent execution 03. Portfolio shift to faster growth niches 04. Questions Smart science to improve lives™ 3
Slide 4: A record performance
01 A record performance Smart science to improve lives™ 4
Slide 5: A record financial performance
Overview A record financial performance Highlights A milestone year • Record sales and profit • Transitioned portfolio • Strong sector performances • Aligned with megatrends • Powerful operating model • Investing in innovation pipeline • Consistent execution Smart science to improve lives™ 5
Slide 6: Powerful operating model and consistent execution
Overview Powerful operating model and consistent execution… Sales Operating profit Profit before tax Full year dividend +11% +10% +11% +8% £2,089m £515m £496m 108p • Price / mix driven • Sales growth driven • Lower finance costs • >30 year progression • Successful inflation recovery • Currency benef
Slide 7: ...and continued sector growth
Overview …and continued sector growth Consumer Care Life Sciences demonstrating increased resilience building on exceptional prior year • Record sales and adjusted operating profit • All businesses grew double digit percentage • Strong solar protection and ECO bio-based excluding lipid system sales
Slide 8: ...with rapid strategic progress
Overview …with rapid strategic progress Fast grow Asia Building knowledge, infrastructure and now Solus Scale biotechnology >100 biotech-derived products Expand Life Sciences Fast growth in Pharma / Crop innovation pipelines Proactive M&A Scouting network / evolving pipeline Strengthen Consumer Care
Slide 9: ...and excellent progress on sustainability targets
Overview …and excellent progress on sustainability targets Climate Positive Land Positive People Positive Fundamentals Engagement Scope 1 & 2 emissions Protecting biodiversity Sun protection Sustainable sourcing Employee survey Net Nature -20% Positive 61million 81% 74% reduction since 2018 baseline
Slide 10: ...and positive impact of giving back to our communities
Overview …and positive impact of giving back to our communities British Asian Trust Gavi vaccine alliance Instituto Amazonas Beyond suncare Vaccinated 14m people across 5 states Helping to vaccinate c100,000 people Improving food security for >7,000 Training 90 health workers on albinism in India ag
Slide 11: Consistent execution
02 Consistent execution Jez Maiden Group Finance Director Smart science to improve lives™ 11
Slide 12: Consistent execution delivers record performance
Financial results Consistent execution delivers record performance % change constant Adjusted results, £m FY/22 reported FY/21 reported % change currency Sales 2,089.3 1,889.6 10.6% 5.2% Operating profit 515.1 468.6 9.9% 5.7% Return on sales 24.7% 24.8% (10)bps - Profit before tax 496.1 445.2 11.4%
Slide 13: Underlying sales growth driven by price / mix
Financial results Underlying sales growth driven by price / mix Sales, £m Reported growth +11% 24% (6)% (13)% 1% 5% 2,089 Organic growth +18% Divestment impact* 2022 Divestment £m 1,890 reported Impact Sales 2,089 (191) Adjusted operating 515 (39) profit FY/21 reported Price / mix Retained volume PT
Slide 14: Record profit delivery
Financial results Record profit delivery Adjusted operating profit, £m Reported growth +£46m +53 (27) +1 +19 515 Divestment impact* 469 £m 2022 Divestment reported Impact Sales 2,089 (191) Adjusted operating 515 (39) profit FY/21 reported currency Organic growth PTIC divestment Acquisitions Currency
Slide 15: Strong performance in Asia, Western Europe & Latin America
Financial results Strong performance in Asia, Western Europe & Latin America Underlying sales growth (%) • Asia achieved record year – +19% including modest growth in China +10% +5% • Robust demand in Western Europe 0% • Growth in Latin America, led (3)% by Crop Asia Western Europe Latin America Eas
Slide 16: Profit growth across all sectors
Financial results Profit growth across all sectors Consumer Care Life Sciences Industrial Specialties Group +18% +19% +11% Growth in sales (%) (8)% +13% +9% +10% +10% Growth in operating profit (%) 22.8% 33.6% 15.9% 24.7% Return on sales (%) -190bps -280bps +300bps -10bps Reported currency and adjus
Slide 17: Consumer Care performance demonstrating increased resilience
Financial results Consumer Care performance demonstrating increased resilience • Input cost inflation recovery Sales, £m • Growth in Beauty Care and Fragrances Reported growth +18% • Reduced volume: ‒ Destocking in H2 22% (12)% 2% 6% ‒ Capacity constraints leading to demarketing 897.8 Customer Capac
Slide 18: Record profit in Consumer Care
Financial results Record profit in Consumer Care Adjusted operating profit, £m • Successful inflation recovery 8.8 0.7 6.7 • Underlying profit growth – Personal Care driven • Margin dilution: ‒ Lower volume ‒ Business mix 204.7 ‒ Divestment dis-synergy 188.5 FY/21 Underlying growth Acquisitions Curr
Slide 19: Life Sciences building on exceptional prior year
Financial results Life Sciences building on exceptional prior year Sales, £m • Double digit percentage growth in Crop Reported growth +19% Protection, Seed Enhancement and non-CV19 Pharma 0% 5% 6% 8% • More than offset anticipated CV19 lipid decline • Return on sales diluted by mix and CV19 normalis
Slide 20: Improving free cash flow
Financial results Improving free cash flow Cash flow, £m FY/22 FY/21 • Strong EBITDA growth EBITDA 601.5 547.6 • Working capital outflow reflecting inflation • Improvement in H2/22 Working capital (133.8) (102.5) • Capex below guidance – Pharma phasing Net capital expenditure (138.5) (158.5) • Net d
Slide 21: Guided by a clear capital allocation policy
Financial results Guided by a clear capital allocation policy 1 2 3 4 Reinvest for organic Provide regular returns Acquire disruptive Maintain an appropriate growth to shareholders technologies balance sheet and return excess capital • Typical capex ~6% of sales • Increased full year dividend by • A
Slide 22: Portfolio shift to faster growth niches
03 Portfolio shift to faster growth niches Smart science to improve lives™ 22
Slide 23: Portfolio realigned with exciting megatrends
Strategic progress Portfolio realigned with exciting megatrends Megatrends Technology trends Portfolio change Biosector Health & wellbeing Expand Life Move to Solus Sciences biologics Biotech Feeding the planet Strengthen Consumer Care Sustainable ingredients Living sustainably Refine Performance Te
Slide 24: Creating bigger niches and higher growth
Strategic progress Creating bigger niches and higher growth 7 dynamic businesses Bigger niches Well balanced portfolio Industry niche CAGR Pharma Pharma Crop Small molecules 5% Seed Crop Protection Proteins 10% 2025 Beauty Actives 2025 Beauty Care Nucleic acid >20% Seed Enhancement F&F Biopesticides
Slide 25: 2023 strategic priorities
Strategic progress 2023 strategic priorities Fast grow Asia Invest in India, Singapore and North Asia Scale biotechnology Commercialise NPP Expand Life Sciences Convert Pharma pipeline Proactive M&A Target assets with rich IP, fast Strengthen Consumer Care growth niches, clever people Launch Scope 3
Slide 26: Strengthening Consumer Care with fast growth in Asia
Consumer Care Strengthening Consumer Care with fast growth in Asia Investing to deliver fast growth in Asia Capital expenditure outside Europe and N America > 50% CAGR Approved capex: £50m Dahej, India Manufacturing Sales £20m Singapore 2020 2021 2022 R&D Consumer Care sales in Asia Fragrances and F
Slide 27: Strengthening Consumer Care with biotech innovation
Consumer Care Strengthening Consumer Care with biotech innovation Beauty Actives Beauty Care Home Care Nautil anti-ageing active Monar to combat dark spots Hair care actives Probiotic cleaning • Blue biotech-derived skin active • Green biotech-derived skin active • Non-animal keratin for hair care •
Slide 28: Strengthening Consumer Care with Solus Biotech acquisition
Consumer Care Strengthening Consumer Care with Solus Biotech acquisition High growth ceramides market led by Asia 3,500 3,000 • Global leader in biotech-derived skin actives 2,500 2,000 • 30 years’ experience in fermentation 1,500 • 95 people; R&D / manufacturing 1,000 • 3 exciting natural technolog
Slide 29: Solus Biotech – a strategic bullseye
Consumer Care Solus Biotech – a strategic bullseye Excellent alignment with strategic priorities ✓ Fast grow Asia • Strengthens Beauty Actives naturals portfolio Expand • Increases exposure to prestige / premium ✓ Scale biotech Life Sciences ✓ ✓ • • GMP-certified production in high growth Asia marke
Slide 30: Expanding Life Sciences with innovation-led growth in Crop
Life Sciences Expanding Life Sciences with innovation-led growth in Crop Conventional pesticides Biopesticides Seed Enhancement $60bn market; 3% CAGR $5bn; 8% CAGR $5bn; 8% CAGR Market need – sustainable delivery Market need – transition to biopesticides Market need – improved seed germination Croda
Slide 31: Generating revenue across the drug lifecycle
Life Sciences Generating revenue across the drug lifecycle Revenue earning Non revenue earning today Commercial Clinical development Drug discovery/research Croda innovation pipeline Sales for pharma / Sales for pharma / Sample quantities Croda future biotech / generic drugs biotech drugs undergoing
Slide 32: Generating revenue across the drug lifecycle – examples
Life Sciences Generating revenue across the drug lifecycle – examples Commercial Clinical development Drug discovery/research Croda innovation pipeline Protein Delivery Nucleic Acid Delivery Protein Delivery Adjuvant Systems Herception for breast cancer mRNA flu vaccines Blood/brain barrier research
Slide 33: Summary
Conclusion Summary Outlook Key takeaways • Group is trading in line with expectations • Pivotal shift in portfolio • Consumer Care – continued sales growth; • Bigger opportunities destocking should end in first half year • Transformative pharma pipeline • Life Sciences – good sales growth in Crop •
Slide 34: Questions
04 Questions Smart science to improve lives™ 34
Slide 35: Additional financial information
05 Additional financial information Smart science to improve lives™ 35
Slide 36: IAS 19 retirement benefits
Additional financial information IAS 19 retirement benefits £m 31 Dec 2022 30 Jun 2022 Market value of assets 969.3 1,107.6 Value of liabilities (869.2) (999.5) Surplus pre tax 100.1 108.1 Deferred tax (24.9) (27.2) Surplus post tax 75.2 80.9 Smart science to improve lives™ 36
Slide 37: Currency exposure
Additional financial information Currency exposure Currency translation • Favourable profit impact in FY/22 as Sterling weakened • FY/22 average rates: - US$1.237 (FY/21: US$1.375) - €1.174 (FY/21: €1.164) • Average annual impact: - £1.4m per $cent pa - £1.2m per €cent pa • US$ and € represent appro