Croda International Plc · LSE:CRDA
Croda International — H1 2017 Earnings Presentation
28 slides from Croda International's earnings presentation, Jul 25, 2017
Slide 1: Croda International Plc 2017 Half Year Results
Croda International Plc 2017 Half Year Results 25 July 2017 Innovation you can build on™
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
Slide 3: Our Performance
Our Performance Steve Foots – Group Chief Executive Innovation you can build on™
Slide 4: Strategy continuing to deliver
Strategy continuing to deliver ▪ All Core Business sectors growing sales and profit organically ▪ Group sales up 3.8%, driven by organic growth in Core Business of 4.4% ▪ Adjusted profit before tax up 4.4% ▪ Strong margin performance maintained: return on sales of 24.9% ▪ Demonstrates broad-based gr
Slide 5: Consistent top and bottom line growth
Consistent top and bottom line growth Continued organic sales Robust operating profit Strong EPS growth growth growth Reported currency Reported currency Reported currency +16.2% 24.0% +15.2% 93.4p +3.8% -40 bps +5.4% +18.2% Constant currency Constant currency Basic EPS growth Record NPP sales drivi
Slide 6: Continued sales growth in Personal Care
Continued sales growth in Personal Care Investing in fast growth Improving top line Margin remains strong technologies +2.3% ▪ Record performance in Beauty Actives +1.8% ▪ NPP >40% of total sales 34.7% ▪ Return to growth in North America ▪ Specialities stabilised -50 bps ▪ Investing in fast growth t
Slide 7: Stronger margin in Life Sciences
Stronger margin in Life Sciences Innovation driving margin Investing in fast growth Strong profit growth growth technologies +12.1% ▪ Investing to meet growing demand for high purity excipients ▪ Excellent progress at Incotec 30.4% ▪ Cost synergy ▪ Getting closer to customers +230 bps ▪ New R&D cent
Slide 8: Excellent growth in Performance Technologies
Excellent growth in Performance Technologies Strong organic growth Softer product mix Connecting to faster growth +9.1% Margin +8.1% ▪ Robust demand in most markets: ▪ Strong lubricant sales ▪ Surge in demand in oil & 17.0% gas ▪ Investing in faster growth -120 bps technologies and new capacity ▪ Al
Slide 9: Financial Performance
Financial Performance Jez Maiden – Group Finance Director Innovation you can build on™
Slide 10: Sales growth and continued strong margin driving profit improvement
Sales growth and continued strong margin driving profit improvement H1 2017 Reported Constant £m H1 2017 constant H1 2016 currency currency reported currency reported change change Sales 707.3 631.9 608.7 16.2% 3.8% Operating profit 175.8 160.9 152.6 15.2% 5.4% Net interest (6.1) (5.9) (4.1) (48.8)%
Slide 11: Continued organic growth – constant currency sales up 4.4% in Core Business
Continued organic growth – constant currency sales up 4.4% in Core Business Group, £m 75 707 26 632 609 (1) (2) 2016 reported Industrial APIs Organic growth 2017 constant Currency 2017 reported Chemicals in Core Business currency translation Core Business excludes Industrial Chemicals 11 Innovation
Slide 12: Organic sales growth across Core Business
Organic sales growth across Core Business Continued organic top line growth Three strong legs of growth 5.3% ▪ Broad based return to organic sales growth 4.9% 3.8% 3.4% ▪ Driven by innovation and faster growth niches ▪ Success in premium markets 0.8% (2.5)% ▪ Skin actives ▪ High purity excipients ▪
Slide 13: Growth in Asia & Europe supported by recovery in North America
Growth in Asia & Europe supported by recovery in North America Regional sales in Core Business ▪ Continued robust performance in Asia ▪ Local & regional customer driven ▪ Distributor exit completed +7% ▪ Europe robust – improved market confidence ▪ North America recovery underway ▪ Actions starting
Slide 14: Focus on premium & faster growth niches driving profit
Focus on premium & faster growth niches driving profit Profit before tax, £m 14.7 169.7 6.5 155.0 148.5 Return on Return on sales sales 25.1% 24.9% 2016 reported Organic growth and 2017 constant Currency translation 2017 reported acquisitions currency ▪ Currency translation: ▪ H1/17: $1.26 (H1/16 $1
Slide 15: Continued bottom line growth in Core Business
Continued bottom line growth in Core Business £m ▪ Strong margin maintained in Personal Care ▪ Investing in fast growth niches - Beauty +23.2 Actives ▪ Eliminating decline in Specialities +9.5 +8.9 ▪ Improving profit in Life Sciences +5.0 -0.2 ▪ Growth in Health Care ▪ Cost synergy in Incotec Group
Slide 16: Cash generation continues, funding investment in fast growing niches
Cash generation continues, funding investment in fast growing niches £m H1 2017 H1 2016 EBITDA 200.4 174.1 Working capital (34.5) (33.6) Net capital investment (70.8) (56.8) Non-cash pension expense 1.6 (1.3) Interest and tax (56.2) (32.5) Free cash flow 40.5 49.9 Dividends (54.1) (187.3) M&A - (1.4
Slide 17: Strategy continuing to deliver
Strategy continuing to deliver Steve Foots – Group Chief Executive Innovation you can build on™
Slide 18: Three strong legs of growth
Three strong legs of growth Connecting to faster growth markets Personal Care ‘Smart partnering’ Technologies Niches Life Sciences People Performance Technologies 18 Innovation you can build on™
Slide 19: Personal Care: Investing in faster growth niches
Personal Care: Investing in faster growth niches Investing in people Investing in niches ▪ Next generation ▪ Different market Matrixyl® Actives Formulations dynamics & needs Morphomics™ ▪ 3 teams established ▪ Peptide research & ▪ Target 50% sales claim substantiation Effects from 2 premium ▪ Best i
Slide 20: Life Sciences: investing in faster growth technologies
Life Sciences: investing in faster growth technologies Investing in people Investing in niches ▪ Expansion of R&D facilities ▪ Investing in the core ▪ Market expansion (Asia & North America) Auricular Hormone Gastrointestinal applications treatment diseases Investing in ‘smart partnering’ Investing
Slide 21: Incotec: investing for future growth
Incotec: investing for future growth Investing in core Investing in niches ▪ Innovation in field crop and veg ▪ Focus on key 10 5 geographies ▪ Customer activity increasing ▪ Streamline cost base ▪ Improving R&D Geographies pipeline Investing in technology Investing in R&D ▪ Seed film coatings ▪ New
Slide 22: Performance Technologies: connecting to faster growth
Performance Technologies: connecting to faster growth Investing in people Investing in niches ▪ Connecting to faster growth ▪ Smart Materials ▪ Disruptive non-leaching anti-microbial technology ▪ Energy Technologies ▪ New biocides regulation ▪ From Industrial to Hi-tech ▪ Strong customer interest ▪
Slide 23: Key takeaways
Key takeaways 2017 performance so far Outlook ▪ Broad based sales growth ▪ Confident of delivering continued ▪ 3 strong legs progress in 2017 ▪ Profit growing, margin maintained ▪ No currency translation impact in H2 at current rates ▪ Relentless innovation continues ▪ Fast growth technologies, nich
Slide 24: Questions
Questions Innovation you can build on™
Slide 25: Underlying sales growth
Underlying sales growth % Q3 2016 Q4 2016 Q1 2017 Q2 2017 Personal Care (2.0)% (0.8)% 4.6% 0.2% Life Sciences (8.2)% (4.9)% (1.9)% 4.0% Performance Technologies 0.3% 6.5% 11.7% 6.5% Core Business (2.5)% 0.8% 5.3% 3.4% Industrial Chemicals (6.2)% (1.4)% 1.9% (3.8)% Group (2.9)% 0.6% 4.9% 2.7% Underly
Slide 26: Profit before tax history
Profit before tax history H1 2017 H2 2016 H1 2016 £m Reported Reported Reported Revenue 707.3 634.9 608.7 Operating profit 175.8 145.6 152.6 Net interest (6.1) (5.8) (4.1) Profit before tax 169.7 139.8 148.5 Return on sales 24.9% 22.9% 25.1% 26 Innovation you can build on™
Slide 27: Retirement benefit deficit (IAS19 basis)
Retirement benefit deficit (IAS19 basis) £m 30 June 2017 31 December 2016 Market value of assets 1,264.1 1,229.4 Value of liabilities (1,368.8) (1,375.9) Deficit pre tax (104.7) (146.5) Deferred tax 27.3 33.8 Deficit post tax (77.4) (112.7) 27 Innovation you can build on™
Slide 28: Capital Policy
Good capital discipline Reinvest to Regular Disciplined Excess capital Capital Policy grow dividend approach to returned acquisitions 1.5x 40-50% EPS 1-1.5x leverage depreciation pay-out over typically cycle Leverage at 30 June 2017 - 1.0x Leverage excludes retirement benefit deficit 28 Innovation y