Croda International Plc 2011 Preliminary Results 21 February 2012 - PowerPoint PPT Presentation

Croda International Plc 2011 Preliminary Results 21 February 2012

Overview Martin Flower - Chairman

Introduction Steve Foots - Chief Executive

Introduction Business reporting and management Steve Foots  changes  Financial review Sean Christie Business Review  Steve Foots Priorities  Updated targets  2012 outlook  4

A record year Sales up 6.6% to £1068.4m  Pre-tax profit up 25.9% to £242.2m  Return on sales up 2.9 percentage points to 22.7%  Dividend increased by 57% to 55p  £50m returned to shareholders through buyback programme  Results confirm the resilience of Croda’s business model and strategy  A strong performance in a challenging world 5

New reporting format Previous format New format Consumer Care Consumer Care  Personal Care  Personal Care  Health Care  Health Care  Crop Care  Crop Care Industrial Specialities Performance Technologies  Lubricants  Lubricants  Coatings & Polymers  Coatings & Polymers  Geo Technologies  Geo Technologies  Polymer Additives  Polymer Additives  Home Care  Home Care  Process Additives Industrial Chemicals  Process Additives Process Additives renamed and separately reported 6

Three different business profiles Consumer Care Performance Technologies Industrial Chemicals By-product volumes are a function   Driven by performance and High growth driven by global  of our activity levels. Growth in sustainability population dynamics other markets (textiles, leather etc) Many new products patented   Most new products patented is global GDP related High margin (current ROS ~15%)   Competition fragmented  Lower margins (<10% ROS)  Higher volume than Consumer  High margin (current ROS ~30%)  Higher volume Care  Low volume  Many competitors  Strong pricing power  Strong pricing power  Limited pricing power  % of Group total  % of Group total  % of Group total Volume: 27% - Volume: 42% - Volume: 31% - Sales: 10% - Sales: 36% - Sales: 54% - EBIT: 3% - EBIT: 25% - EBIT: 72% - 7

Organisational changes  New management appointments Chief Technology Officer - President, Consumer Care Europe - President, Performance Technologies & Industrial Chemicals Europe - Dedicated business segment heads for Consumer Care, Performance Technologies and  Industrial Chemicals in each region  Creation of Asia and Latam Boards, reflecting increased focus on fast growing economies Organisational changes will increase alignment between sales, marketing and technical  business teams Experienced and entrepreneurial management team 8

Financial Review Sean Christie – Finance Director

Consumer Care (unchanged) Sales of £574m, operating profit £173m, ROS 30.2%  Consistently strong sales and profit growth driven by population  dynamics, innovation and sustainability  Personal Care, Health Care, Crop Care 10

Performance Technologies Sales of £389m, operating profit £60m, ROS 15.4%  Strong underlying sales and profit growth expected   Lubricants, Coatings & Polymers, Geo Technologies, Polymer Additives and Home Care have all seen significantly improved performance over recent years 11

Industrial Chemicals Sales £105m, operating profit £9m, ROS 8.5%  Fatty acids, glycerine plus other residues and by-products  Sales to markets outside our core business areas (eg Textiles, Leather)  Predominantly a commodity business but there are also some speciality  products Tends to be low margin but profitable   Much of the output of two manufacturing sites, Cremona (Italy) and Cikarang (Indonesia) go into this sector plus by- products from Croda’s other operations 12

Industrial Chemicals is changing Industrial Chemicals £ 104.9 m 1 2011 Total sales £ 1068.4 m Recession exposure much reduced   Utilise feed stocks internally Separation from Performance Technologies will  provide more focus We have shed >75% of volume since 2007 1 but still almost as big as Consumer Care in volume terms 1. Management estimates 13

Croda is not about volume Since the acquisition of Uniqema  We have shed 61% of our volume - Almost trebled average selling - prices  Concentrating on unique patented chemistry Losing the ‘tail’  Re-positioning incorrectly priced  Uniqema products Passing on raw material inflation  More than quadrupled PBT - Croda has reduced volume every year except 2007 (Uniqema acquisition) Volumes and profits as reported each year. 2006 excludes Uniqema (acquired part way through the year) 14

2011 results: Q4

Q4 Results – PBT up 23% to £60m Modest sales increase overall  Good growth in Consumer Care - Slight declines in Performance Technologies and Industrial Chemicals - Volumes down 18%  Strong growth in new and patented products - Declines in ex Uniqema ‘tail’ in all reporting business areas - Extended Christmas holiday shutdown in European customer base - PBT up 22.7% to £60.0m  Record operating margins with group ROS at 24.5%  £6.7m net debt reduction despite paying interim dividend of £34.5m  16

Q4 sales trends Q4 Year Price and mix +20.1% +17.1% Volume -18.3% -9.7% Underlying +1.8% +7.4% -0.8% Currency +0.6% +6.6% Continuing sales +2.4% Volumes down in all business areas in Q4 but mainly in high volume, low  value tail Mix continues to improve as a result  Favourable currency in quarter, negative for the year as a whole  17

Q4 sales by segment £m 2011 2010 Growth Consumer Care 135.1 123.8 +9.1% Performance Technologies 84.5 87.9 -3.9% Industrial Chemicals 23.6 25.7 -8.2% Total turnover 243.2 237.4 +2.4% Extended Christmas shutdown in European customer base  Customers reduced WIP stocks at year end  Good news for Q1 2012 - Strong sales growth in Consumer Care outweighs declines elsewhere 18

Q4 EBIT/ROS by segment £m 2011 2010 Growth Consumer Care 42.9 32.9 +30.4% ROS 31.8% 26.6% Performance Technologies 13.8 13.8 - ROS 16.3% 15.7% Industrial Chemicals 2.8 2.7 +3.7% ROS 11.9% 10.5% Total EBIT 59.5 49.4 +20.4% ROS 24.5% 20.8% Outstanding profit growth continues in Consumer Care. Margins strong in all sectors 19

2011 results: Full year

2011 turnover by destination Strong Asian sales growth  in high end products, UK represents 5% partially masked by our exit of total sales from a number of unprofitable product areas High end sales in Europe  and US often re-exported to Asia/LATAM by our customers Turnover growth in all regions but slower than 2010. Emerging markets are 32% of Group turnover 21

2011 turnover by segment £m 2011 2010 Growth Consumer Care 574.3 516.4 +11.2% Performance Technologies 389.2 379.4 +2.6% Industrial Chemicals 104.9 106.1 -1.1% Total turnover 1068.4 1001.9 +6.6% Growth in Consumer Care and Performance Technologies but slight sales decline in Industrial Chemicals 22

2011 EBIT/ROS by segment £m 2011 2010 Growth Consumer Care 173.4 136.5 +27.0% ROS 30.2% 26.4% Performance Technologies 60.1 51.2 +17.4% ROS 15.4% 13.5% Industrial Chemicals 8.9 10.9 -18.3% ROS 8.5% 10.3% Total EBIT 242.4 198.6 +22.1% ROS 22.7% 19.8% Again, strong profit growth driven by Consumer Care and Performance Technologies 23

Continuing Consumer Care 2011 2010 Inc Turnover 574.3 516.4 +11.2% Operating profit 173.4 136.5 +27.0% ROS 30.2% 26.4%  Consistent sales and profit progress throughout the year Return on sales reaches 30% for the first time   Sales and profit growth in all business areas with strongest performance in Crop Care and Health Care  2010  2011 24

Continuing Performance Technologies £m 2011 2010 Inc Turnover 389.2 379.4 +2.6% Operating profit 60.1 51.2 +17.4% ROS 15.4% 13.5% Volume losses in undifferentiated products in all areas  Strong growth in new patented products drives margin  improvement  Very strong performance seen in Lubricants, Coatings & Polymers and Home Care  2010 Geo Technologies: good underlying performance but no   2011 repeat of 2010 windfall from the Gulf of Mexico clean-up  Profit decline in Polymer Additives 25

Continuing Industrial Chemicals £m 2011 2010 Inc Turnover 104.9 106.1 -1.1% Operating profit 8.9 10.9 -18.3% ROS 8.5% 10.3%  Volumes reasonably stable throughout the year (we always have by-products to sell)  Limited pricing power so sales, margins and profit generation can be volatile Weak textile market  Price versus cost at its worst in Q3 plus under utilisation   2010  2011 of assets 26

2011 pre-tax profit up 26% £m 2011 2010 Growth Total operating profit 242.4 198.6 +22.1% ROS 22.7% 19.8% Financing (0.2) (6.3) Pre-tax profit 242.2 192.3 +25.9% Financing  Slightly lower interest charge at £8.2m (2010: £8.6m)  Significantly increased IAS19 pension funding credit of £8.0m (2010: £2.3m)  Another very strong performance in a difficult market 27