Croda International Plc 2012 Preliminary Results 26 February 2013 - PowerPoint PPT Presentation

Croda International Plc 2012 Preliminary Results 26 February 2013

Introduction Steve Foots – Group Chief Executive

Strong performance in tough environment Sales up 2.3% to £1051.9m  Operating profit up 7.4% to £255.4m  Pre-tax profit up 6.6% to £253.2m   Record ROS, up 1.2% points to 24.3% Earnings per share up 8.2% to 130p  Dividend increased by 8.2% to 59.5p (payout ratio of 46%)  Results confirm the resilience of Croda’s business model and strategy 3

A strong business, getting stronger  Core business continues to achieve strong growth: Progress across all three market areas in Consumer Care with record ROS  Continued specialisation in Performance Technologies   Separation of Performance Technologies and Industrial Chemicals delivering benefits New technology capture with acquisition of IRB and Innovachem   Disposal of Cremona Investment has increased presence in the faster growing regions  Relentless innovation and continued investment delivering strong results 4

Financial Review Sean Christie – Group Finance Director

2012 Q4 results

Q4 sales by segment £m 2012 2011 Growth Consumer Care 136.3 134.4 +1.4% Performance Technologies 83.9 81.7 +2.7% Industrial Chemicals 19.9 18.9 +5.3% Total turnover 240.1 235.0 +2.2% Good underlying sales growth in all three segments reduced by currency  translation 7

Sales trends v 2011 Q1 Q2 Q3 Q4 Year Volume -0.7% +2.4% +8.8% +11.7% +5.1% Price/mix +6.3% +1.0% -5.6% -6.0% -0.7% Underlying +5.6% +3.4% +3.2% +5.7% +4.4% Currency -0.2% -2.3% -2.8% -3.7% -2.2% Acquisition - - +0.1% +0.2% +0.1% Continuing +5.4% +1.1% +0.5% +2.2% +2.3% sales  Underlying sales growth steadily improving post Q2 Currency translation headwind increased through 2012  2 nd half growth in Industrial Chemicals flatters volumes and weakens mix  8

Q4 EBIT/ROS by segment £m 2012 2011 Growth Consumer Care 44.5 42.6 +4.5% ROS 32.6% 31.7% Performance Technologies 13.4 12.8 +4.7% ROS 16.0% 15.7% Industrial Chemicals 4.0 3.5 +14.3% ROS 20.1% 18.5% Total EBIT 61.9 58.9 +5.1% ROS 25.8% 25.1% Growth and improved ROS in all segments despite tough markets and adverse currency 9

2012 preliminary results

2012 turnover by destination 36% of sales Good sales growth in Asia  in emerging markets and Latam in high end 8% products, partially obscured UK represents 5% of total sales 10% by our exit from a number of 38% undifferentiated lines W. Europe -1%  Strong trading in North 18% N. America +5% America Asia +3% Underlying European sales  26% LATAM +4% growth in local currency is masked by 7% hit on Euro Other emerging markets* +8% Underlying turnover growth in all regions despite strong 2011 comparatives * Eastern Europe, Middle East and Africa 11

Consumer Care 160 £m 2012 2011 Inc Sales (£m) 120 Turnover 586.4 571.4 +2.6% 80 Operating profit 185.4 171.2 +8.3% 40 0 ROS 31.6% 30.0% Q1 Q2 Q3 Q4  Profit growth in all quarters despite sales 60 EBIT 50 weakness in Q3 (£m) 40 All business areas saw underlying sales and  30 20 profit growth with Crop Care the strongest 10 performer 0  2011 Q1 Q2 Q3 Q4  2012 12

Performance Technologies 120 £m 2012 2011 Inc Sales 100 (£m) Turnover 382.8 373.6 +2.5% 80 60 Operating profit 59.7 55.3 +8.0% 40 20 0 ROS 15.6% 14.8% Q1 Q2 Q3 Q4  Good progress towards 20% medium 20 EBIT term ROS target despite difficult (£m) 15 European marketplace 10 Weak European markets (particularly  5 automotive) reduced profitability in 0  2011 Lubricants and Coatings and Polymers Q1 Q2 Q3 Q4  2012 13

Industrial Chemicals 30 £m 2012 2011 Inc Sales 25 (£m) Turnover 82.7 83.0 -0.4% 20 15 Operating profit 10.3 11.2 -8.0% 10 5 0 12.5% 13.5% Q1 Q2 Q3 Q4 Limited pricing power so sales, margins  5 EBIT 4 (£m) and profit generation can be volatile 3 2 Strong H2 performance after weak first  1 half 0  2011 Q1 Q2 Q3 Q4  2012 14

2012 pre-tax profit up 6.6% £m 2012 2011 Growth Total operating profit 255.4 237.7 +7.4% ROS 24.3% 23.1% Financing (2.2) (0.2) Pre-tax profit 253.2 237.5 +6.6% Financing   Reduced pension funding credit due to assumption changes Another very strong performance in a difficult market 15

2012 Earnings Per Share up 8.2% £m 2012 2011 Growth Pre-tax profit 253.2 237.5 +6.6% Tax rate 30.8% 31.5% Average number of shares 134.6m 135.3m Earnings per share 130.0p 120.1p +8.2% Tax rate reduced to 30.8%   Falling UK tax rates  Average number of shares reduced due to 2011 buyback 16

Total dividend up 8.2% £m 2012 2011 Growth Earnings per share 130.0p 120.1p +8.2% Total dividend 59.5p 55.0p +8.2% Pay-out ratio 46% 46% Cover 2.2x 2.2x Dividend policy:   Total dividend: 40-50% of full year earnings Total dividend 59.5p  Interim dividend 26.75p  Final dividend 32.75p  Dividend growth exactly in line with earnings growth   So payout ratio and cover unchanged from 2011 17

Investing in the business 80 £m 2012 – 2015 70 60 Aiming to spend around twice depreciation over next few years 50 >70% of spend in capacity  40 expansion, new technology and 30 energy reduction projects 20 More than doubling investment in  10 emerging markets (cf 2008 – 0 2011) 2012 2013 2014 2015 Projected capital investment Estimated depreciation 18

Capital expenditure 2012 capital spend £52.3m (2011: £58.3m)  1.6x depreciation versus the medium term target of 2x  Some of shortfall due to project phasing  ROIC improved slightly despite capital spend and M&A  Major spends include  The acrylic polymer plant  Capacity expansion in North America and Singapore  New warehouse and offices in Germany  19

Acquisitions IRB acquired in July 2012  Cost € 7.7m   Based in Italy Integrated within Sederma  Global leader in plant stem cell technology  Innovachem acquired in December 2012  Cost $2.8m  Based in New Jersey, USA  New and patented product lines for Personal Care  Both acquisitions represent exciting niche opportunities in Personal Care 20

Disposal Cremona sold November 2012  Final fatty acid/glycerine site acquired with Uniqema in 2006  Turnover in Industrial Chemicals and lower end of Performance  Technologies Undifferentiated technology, not Croda’s core competence  Treated as discontinued in 2012 accounts   Loss on disposal £11.5m 21

Free cash flow – £181.0m £m 2012 2011 EBITDA 285.0 274.6 (51.7) (23.7) Working Capital movement Cash from operations 233.3 250.9 Capital expenditure (52.3) (58.3) Free cash flow 181.0 192.6 3.8% growth in EBITDA  Working capital   High finished goods stock anticipating strong January trading High raw material stocks ahead of anticipated price increases  High VAT refund due in Germany at year end  22

Net cash flow £m 2012 2011 Free cash flow 181.0 192.6 Excess pension contributions (25.2) (17.4) Share purchases/issues 1.1 (49.4) Dividends paid (76.8) (67.7) Interest (8.1) (10.1) Tax (60.6) (57.7) M&A 9.1 3.2 Other (mainly restructuring) (1.5) (3.2) Net cash flow 19.0 (9.7) Exchange differences 4.4 (1.1) Change in net debt 23.4 (10.8) 23

Net debt reduced to £207.7m £m 2012 2011 Net debt 207.7 231.1 Committed facilities 466.3 477.0 Committed headroom 258.6 245.9 Net debt/EBITDA* 0.7x 0.8x EBITDA interest cover* 36.8x 33.5x Main banking facilities run to May 2015  $100m fixed rate loan (5.94%) runs to January 2020  $45m other dollar denominated (floating)  € 110m (floating)  * As per loan covenant calculations, rolling 12 months 24

Pension deficit decreases by £33.1m pre tax (IAS19 basis) £m 31 December 2012 31 December 2011 Market value of assets 712.3 647.5 Value of liabilities (878.1) (846.4) Deficit pre tax (165.8) (198.9) Deferred tax 44.9 57.3 Deficit post tax (120.9) (141.6) Changes to certain assumptions and underlying market rates by over £33m pre  tax, £20.7m post tax  New deficit reduction schedule for the UK agreed post triennial valuation 2012: £20.4m  2013: £38.4m  £20m (plus inflation) thereafter  We do not plan to adopt the revised IAS19 rules until 2013, see appendix 3 25

Financial KPIs (I) 30%  ROS ROS 25%  Now stands at 24.3% 20% 15%  CC: 31.6% (target: maintain) 10%  PT: 15.6% (target: 20% medium term) 5% 0%  IC: 12.5% (target: maximise profitability) 08 09 10 11 12  ROIC 25% ROIC  Very high after tax returns maintained 20% v WACC 15% ROIC 23.8%  10% Far ahead of cost of capital  5% WACC 6.8%  0% Capital light business model  08 09 10 11 12 26

Financial KPIs (II) 140 EPS growth  Eps 120 (p) 8.2% growth achieved in 2012 100  80  Target 5-10% 60 40 20 - 2008 2009 2010 2011 2012 40 Debt ratios  Debt 35 Ratios 30 Debt/EBITDA 0.7x (target <3x)  25 x 20  EBITDA interest cover 36.8x (target >4x) 15 10 5 0 2008 2009 2010 2011 2012 27