Croda International Plc · LSE:CRDA
Croda International — FY2010 Earnings Presentation
43 slides from Croda International's earnings presentation, Feb 22, 2011
Slide 1: Results for the 12 months to 31 December 2010
Croda International Plc Results for the 12 months to 31 December 2010 1
Slide 2: Chairman
Chairman CRODA
Slide 3: Financial Review
Financial Review CRODA
Slide 4: Summary
Summary In 2010 Consumer Care and Industrial Specialities achieved strong growth and record results - Continuing turnover up 21% to £1002m - Continuing pre tax profit up 78% to £192m Strong Q4 results despite challenging 2009 comparatives - Continuing turnover up 13% to £237m - Continuing pre ta
Slide 5: Discontinued
Discontinued £m 2010 2009 Turnover 46.6 118.3 Operating loss (1.4) (6.7) Post tax (0.9) (4.6) Gross proceeds 46.5 4.2 Profit/(loss) on sale/closure 2.1 (29.0) 2009: Bromborough closure and legacy site sale 2010: Emmerich sold to KLK. Bromborough site sold. Korean JV share sold January 2011 treat
Slide 6: Strong Q4 trading
Strong Q4 trading £m 2010 2009 Inc Consumer Care 123.8 109.6 +13.0% Industrial Specialities 113.6 100.3 +13.3% Continuing sales 237.4 209.9 +13.1% Consumer Care 32.9 26.2 +25.6% Industrial Specialities 16.5 8.8 +87.5% Continuing operating profit 49.4 35.0 +41.1% Return on sales 20.8% 16.7% Consumer
Slide 7: Sales trends by quarter
Sales trends by quarter Price/volume/currency Q1 Q2 Q3 Q4 Year Price/mix -7.2% +7.8% +4.1% +5.9% +3.0% Volume +29.0% +25.0% +12.4% +5.7% +17.4% Underlying +21.8% +32.8% +16.5% +11.6% +20.4% Currency -4.3% +3.5% +2.0% +1.5% +0.7% Continuing sales +17.5% +36.3% +18.5% +13.1% +21.1% Negative price/mi
Slide 8: Sales volume trends by quarter: year growth
Sales volume trends by quarter: 2 year growth Q1 Q2 Q3 Q4 Year 2010 v 2009 +29% +25% +12% +6% +17% 2009 v 2008 -28% -24% -7% +14% -13% 2 year growth -7% -5% +5% +20% +2% 2 year growth is sequentially improving 8
Slide 9: Sales trends by quarter: Sector split
Sales trends by quarter Sector split Q1 Q2 Q3 Q4 Year Consumer Care +1.6% +28.2% +15.4% +13.0% +14.0% Industrial Specialities +41.8% +45.9% +22.9% +13.3% +29.7% Continuing sales +17.5% +36.3% +18.5% +13.1% +21.1% Consumer Care - record sales for each quarter, building on strong 2009 performance
Slide 10: Continuing turnover by destination
Continuing turnover by destination UK 5% Europe +21% N. America +20% 5% LATAM +15% 17% Asia +27% 43% ROW +23% 10% 25% Strong growth in all regions LATAM/Asia/ROW account for 32% of group sales 10
Slide 11: Continuing Consumer Care
Continuing Consumer Care £m 2010 2009 Inc Turnover 516.4 453.1 +14.0% Operating Profit 136.5 103.6 +31.8% ROS 26.4% 22.9% Double digit sales and profit growth plus improved return on sales All 3 business areas saw double digit sales growth Personal Care: high end/salon products performing part
Slide 12: Consumer Care trends (£m)
Consumer Care trends (£m) Sales Operating Profit 40 140 35 120 30 100 25 80 20 60 15 40 10 20 5 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2009 Consistent sales and profit performance across the quarters Q1 2009 boosted by very strong Crop Care 12
Slide 13: Continuing Industrial Specialities
Continuing Industrial Specialities £m 2010 2009 Inc Turnover 485.5 374.4 +29.7% Operating Profit 62.1 17.9 +246.9% ROS 12.8% 4.8% Good progress towards 15% ROS target All business areas made significant progress in the year Polymer Additives: Doubled sales in China despite capacity constraints
Slide 14: Industrial Speciality trends (£m)
Industrial Speciality trends (£m) Sales Operating Profit 140 20 120 15 100 80 10 60 5 40 0 20 0 -5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2009 H1 2009 depressed by global recession/destocking 2010 much more consistent 14
Slide 15: Continuing operating profit up 64%
Continuing operating profit up 64% £m 2010 2009 Inc Turnover 1001.9 827.5 +21.1% Operating Profit 198.6 121.5 +63.5% ROS 19.8% 14.7% Sales and margin led operating profit increase 15
Slide 16: Continuing pre-tax profit up 78%
Continuing pre-tax profit up 78% £m 2010 2009 Inc Continuing operating profit 198.6 121.5 +63.5% Interest (6.3) (13.5) Continuing pre-tax profit 192.3 108.0 +78.1% Lower debt levels and interest rates plus reduced pension liabilities lead to reduced interest costs, boosting continuing pre-tax prof
Slide 17: Continuing earnings per share up 77%
Continuing earnings per share up 77% £m 2010 2009 Inc Continuing pre-tax profit 192.3 108.0 +78.1% Tax 32.5% 32.7% Continuing post tax profit 129.8 72.7 Number of shares (m) 136.0 135.0 EPS 95.4p 53.8p +77.3% Marginal changes to tax rate and shares in issue result in a 77% increase in earnings per s
Slide 18: Dividend up 63% to 35p
Dividend up 63% to 35p 2010 2009 Inc EPS 95.4p 53.8p +77.3% Dividend 35.0p 21.5p +62.8% Cover 2.7x 2.5x 18
Slide 19: Continuing EPS and dividend
Continuing EPS and dividend 100 80 60 EPS 40 DPS 20 0 2006 2007 2008 2009 2010 Steady progression in earnings, 2009 depressed by recession Dividend increases now more closely aligned to current year earnings growth 19
Slide 20: Free cash flow £168m
Free cash flow £168m £m 2010 2009 EBITDA 231.6 150.5 Working capital movement (22.0) 68.6 Cash from operations 209.6 219.1 Capital expenditure (41.3) (39.8) Free cash flow 168.3 179.3 Another year of strong cash generation Strong EBITDA Working capital increases as activity levels rise – but i
Slide 21: Net cash flow £64m
Net cash flow £64m £m 2010 2009 Free cash flow 168.3 179.3 Excess pension contributions (16.7) (16.6) Share purchases/issue 2.1 1.6 Dividends paid (33.7) (27.1) Interest (9.9) (19.9) Tax (45.9) (21.5) M&A 13.1 2.7 Other (mainly restructuring) (13.2) (10.6) Net cash flow 64.1 87.9 Exchange difference
Slide 22: Net debt reduced by £68m
Net debt reduced by £68m £m 2010 2009 Net debt 220.3 288.5 Committed facilities 473.8 452.0 Committed headroom 253.4 163.8 Net debt/EBITDA <1.0x 1.8x EBITDA interest cover 36.7x 11.3x Committed headroom and covenant ratios improve significantly Net debt at £220.3m $100m committed 10 year, fixe
Slide 23: Bank covenants
Bank covenants times 4 3 2 Debt/Ebitda Covenant < 3x 1 0 '04 '05 '06 '07 '08 '09 '10 Falling net debt and rising underlying EBITDA lead to reduction in key debt metric 23
Slide 24: Net debt: currencies and hedging
Net debt : currencies and hedging Net debt £220.3m Main currency borrowings US$108m (2009: US$145m) $100m 10 year fixed rate bond at 5.94% €120m (2009: €138m) Floating rate 24
Slide 25: Pension Fund (IAS19 basis)
Pension Fund (IAS19 basis) £m 2010 2009 Market value of assets 641.9 577.0 Value of liabilities (789.7) (780.5) Gross deficit (147.8) (203.5) Deferred tax credit 42.9 53.5 Net deficit (104.9) (150.0) Funding level 81.3% 73.9% Deficit reduced significantly Emmerich sale, company contributions, eq
Slide 26: Pensions: state of main funds
Pensions: state of main funds German liabilities acquired by KLK with Emmerich IAS19 basis 26
Slide 27: Share buyback
Share buyback Net debt 1x EBITDA and falling See this as minimum level for debt Progressive underlying dividend policy in place Would rather invest surplus in the Croda story BUT Attractive M&A opportunities are rare Practical limit to annual internal capital spend Share buyback Rela
Slide 28: Financial 5 year KPI trends
Financial 5 year KPI trends eps Return on sales 100 Target 5-10% growth pa minimum 15% 80 60 20% 40 15% 10% 20 5% 0 0% '06 '07 08 09 10 06 07 08 09 10 Debt ratios ROIC Target > WACC (7.5%) x EBITDA interest cover 20% 15% 10 Target > 4x Debt/EBITDA 10% 5% 5 Target < 3x 0% '06 '07 '08 09 10 0 '06 '07
Slide 29: Robust Strategy for Strong Organic Growth
Robust Strategy for Strong Organic Growth 29
Slide 30: Robust strategy for strong organic growth
Robust strategy for strong organic growth Leading position in growth markets - Exposed to high value, high margin speciality product niches Proven track record and reputation for innovation - New product pipeline consistently strong Pricing power - Ensures we can continue to protect profitabil
Slide 31: Current growth trend can continue
Current growth trend can continue Current Growth We grew our sales substantially in 2010 - In all of our chosen end markets - In all regions - In all our focus products Future Growth Targets We expect to grow our underlying sales at 5-10% per annum We expect profit growth to exceed sales growt
Slide 32: How?
How? 1. By continuing to exploit our leading position in our chosen end markets and niche product areas, all of which are growing above GDP 2. Through innovation and ensuring that our pipeline remains consistently strong 3. Through continued investment: - In people - In new technologies - In plants
Slide 33: Innovation growth
Innovation growth Pipeline is stronger than ever Hundreds of new products successfully launched in last 5 years No “Blockbusters” low risk Open innovation trend from customers Unrivalled customer contact gives us truly market focused innovation 33
Slide 34: Lubricant additive innovation
Lubricant additive innovation Polymeric speciality friction modifiers Extremely low levels of friction Quantifiable fuel efficiency benefits Hypermer technology in new applications New development for US based customer with improvements in fuel economy over existing engine oil technology 3
Slide 35: Coatings and Polymers innovation
Coatings and Polymers innovation Toughness and impact resistance for Coatings/ Adhesives/Composites Impact resistance 200 Impact resistance (cm.kg) 175 150 125 100 75 50 25 0 d 02 me r n er ifie gh y lico m mo d tou po l si l asto un B- co e cte d BN CT rea B-toughTM additive: no n superior perfor
Slide 36: Polymer Additives innovation
Polymer Additives innovation Solasorb™ Reduces UV induced colour fade in food and beverages Working with major sports beverage manufacturer Colour fade virtually eliminated Longer shelf life and brand appeal Vitamin loss can also be counteracted with Solasorb technology 36
Slide 37: Geo Tech innovation
Geo Tech innovation Anfomul 40XX – The next generation Patented technology Liquid polymers to enhance the performance of our emulsifiers in emulsion explosives Double wall Stabilise the water phase as well as the oil phase (PIBSA/SMO) Can quadruple the shelf life/ stability 37
Slide 38: Growth through investment
Growth through investment In People - We have built world class technical teams in all regions and across all business sectors - More great chemists join us every year - Crucial to ensure future innovation In Technologies - Enterprise Technology unit continues to expand co-operation with univers
Slide 39: Long term profit record
Long term profit record* PBT £m 250 200 192.3 150 108 96.3 100 60.8 49.4 52.5 50 38.7 43.1 31.7 36.5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Croda Annual Accounts * Profit represents profit before tax for continuing operations based on the last year of full comparative reporting
Slide 40: Long term DPS growth
Long term DPS growth 40 35 35.00 30 Pence per share 25 21.50 19.75 20 15.75 14.30 15 12.50 13.35 11.30 11.50 11.85 10 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 40
Slide 41: Outlook
Outlook Strong start to 2011 - Strong trading performance during the fourth quarter has continued Significant raw material inflation - Further price increases in place to protect profitability Changing competitor landscape - Higher capex to ensure we can capitalise on opportunities New produ
Slide 42: Appendix 1: 2009 by quarter
Appendix 1: 2009 by quarter £m Q1 Q2 Q3 Q4 Full year Consumer Care 126.1 106.3 111.1 109.6 453.1 Industrial Specialities 82.8 89.2 102.1 100.3 374.4 Continuing turnover 208.9 195.5 213.2 209.9 827.5 Consumer Care 28.7 24.1 24.6 26.2 103.6 Industrial Specialities (0.5) 1.2 8.4 8.8 17.9 Continuing ope
Slide 43: Appendix 2: 2010 by quarter
Appendix 2: 2010 by quarter £m Q1 Q2 Q3 Q4 2010 Consumer Care 128.1 136.3 128.2 123.8 516.4 Industrial Specialities 117.4 130.1 124.4 113.6 485.5 Continuing turnover 245.5 266.4 252.6 237.4 1,001.9 Consumer Care 34.7 36.4 32.5 32.9 136.5 Industrial Specialities 11.3 18.1 16.2 16.5 62.1 Continuing op