Croda International Plc 2013 Preliminary Results 25 February 2014 - PowerPoint PPT Presentation

Croda International Plc 2013 Preliminary Results 25 February 2014

Introduction Steve Foots – Group Chief Executive

Robust results in a tough environment Profit before tax 1 up 5.4% to £251.4m  Earnings per share 1 up 8.3% to 132.2p  Strong sales growth of 10.8% in new and protected products (NPP)  Quality of product mix helped increase ROS to 24.6%  Very strong cash generation, free cash flow of £249m (2012: £181m)   Full year dividend increased by 8.4% to 64.5p Focus on quality of business, returns and cash flow generation is paying dividends 1. Figures quoted before acquisition costs and amortisation of intangible assets arising on acquisition 3

A strong business, getting stronger Research and development expansion in Brazil, China and Singapore  New customer training centres opened in Singapore and Brazil  Acceleration of new technology capture with the acquisition of Arizona  Chemical’s speciality business Increased presence in emerging markets with Sipo joint venture  New dedicated management team created to drive growth in EEMEA*  Making real progress with strategy delivery *Eastern Europe, Middle East and Africa 4

Financial Review Sean Christie – Group Finance Director

Basis of preparation All figures are quoted before  Acquisition costs  Amortisation of intangible assets arising on acquisition  6

2013 Q4 results

Q4 sales by segment £m 2013 2012 Growth Consumer Care 135.0 136.3 -1.0% Performance Technologies 88.9 83.9 +6.0% Industrial Chemicals 22.5 19.9 +13.1% Total turnover 246.4 240.1 +2.6% Consumer Care sales show marginal constant currency growth before 1.2%  adverse currency translation Strong Performance Technologies performance driven by Lubricants and the  acquisition of Sipo plus 0.4% favourable currency translation  Industrial Chemicals also boosted by Sipo 8

Sales trends v 2012 Q1 Q2 Q3 Q4 Year Mix/price -0.9% +0.3% +1.6% -1.1% 0.0% Volume +0.1% -1.8% -0.8% +2.0% -0.2% Underlying -0.8% -1.5% +0.8% +0.9% -0.2% Currency +1.1% +3.4% +1.6% -0.9% +1.4% Acquisition +0.1% +0.4% +2.0% +2.6% +1.2% Continuing +0.4% +2.3% +4.4% +2.6% +2.4% sales  Underlying sales growth returned in H2 Q4 adverse mix due to highest growth coming from lower average price PT & IC segments  Currency translation negative in Q4 with worsening trend - December 2.5% adverse with  only the Euro in positive territory v Sterling 9

Q4 EBIT/ROS by segment £m 2013 2012 Growth Consumer Care 46.5 44.5 +4.5% ROS 34.4% 32.6% Performance Technologies 14.6 13.4 +9.0% ROS 16.4% 16.0% Industrial Chemicals 2.2 4.0 -45.0% ROS 9.8% 20.1% Total EBIT 63.3 61.9 +2.3% ROS 25.7% 25.8% Good profit growth and strong margins in CC & PT. Some one- off’s in IC in Q4 2012 10

2013 preliminary results

Full year update on key trading issues Positives Negatives Good underlying sales growth in Underlying Performance   all Consumer Care businesses in Technologies sales down in Western Europe Western Europe  Underlying sales growth in Asia,  Very weak demand in all segments US, Brazil and Mexico in EEMEA, Argentina & Venezuela  Crop returned to growth H2  Crop sales declines H1 Favourable currency translation in Adverse currency translation in   most territories Q1-Q3 Asia (negative almost everywhere by year end) 12

2013 turnover by destination 36% of sales Good underlying growth in Asia  in emerging markets but adverse currency translation 7% UK represents 5% of European sales flattered by  11% total sales currency translation 38% W. Europe +4% Reasonable sales growth in  North America 18% N. America +3%  LATAM: Strong growth in Brazil Asia +4% & Mexico. Sales well down in 26% LATAM +1% Argentina & Venezuela due to political turmoil Other emerging markets* -8% Very weak sales in EEMEA*  Overall geographical mix of business is broadly unchanged versus 2012 * Eastern Europe, Middle East and Africa 13

Focus on high quality turnover growth We internally analyse the business in three categories New and Protected Products (NPP)  12 Patented products  Plus new products, less than 5 years old  10  Products protected in some other way (e.g. formula registration) 8  Differentiated 6 High barriers to entry  (quality/manufacturing know-how) 4 Novel variants of existing products  2  Tail Commodities and by-products  0 Toll processing arrangements  2013 14

Focus on high quality turnover growth Group revenue* £m +11% 1200 2.4% 1000 11% 800 NPP +1% Differentiated 600 Tail 1% 400 200 -4% -4% 0 2012 2013 * Full year figures 15

New and protected products (NPP) – % of sale Consumer Care Performance Technologies % % 35 35 Growth: 11% 30 30 Growth: 12% 25 25 20 20 Growth 10% Growth 5% 15 15 10 10 5 5 0 0 2011 2012 2013 2011 2012 2013  Double digit NPP growth in both Consumer Care and Performance Technologies in 2013 16

Consumer Care 160 £m 2013 2012 Inc Sales (£m) 120 Turnover 593.2 586.4 +1.2% 80 Operating profit 191.3 185.3 +3.2% 40 0 ROS 32.2% 31.6% Q1 Q2 Q3 Q4 • Good growth in Western Europe 60 EBIT 50 Robust margin performance driven by • (£m) 40 double digit NPP sales growth 30 20 • Sales declined in less differentiated products 10 0 particularly in EEMEA  2012 Q1 Q2 Q3 Q4  2013 Adverse currency translation in Asia • 17

Performance Technologies 120 £m 2013 2012 Inc Sales 100 (£m) Turnover 387.1 382.8 +1.1% 80 60 Operating profit 63.0 59.5 +5.9% 40 20 0 ROS 16.3% 15.5% Q1 Q2 Q3 Q4  Weak demand in key Western European 20 EBIT marketplace until Q4 which saw a return (£m) 15 to growth for Lubricants 10 Strong underlying sales growth in Asia  5 Very weak demand in EEMEA  0  2012 Q1 Q2 Q3 Q4 Double digit NPP sales growth driving   2013 margins 18

Industrial Chemicals 30 £m 2013 2012 Inc Sales 25 (£m) Turnover 96.7 82.7 +16.9% 20 15 Operating profit 10.3 10.3 - 10 5 0 ROS 10.7% 12.5% Q1 Q2 Q3 Q4  Steady sales growth in specialities 5 EBIT boosted by Sipo acquisition in H2 4 (£m) 3 As expected, Sipo only made a marginal  2 contribution to EBIT in H2 1 Q4 2012 profitability boosted by one off  0  2012 items and lower overhead allocations Q1 Q2 Q3 Q4  2013 19

2013 pre-tax profit up 5.4% £m 2013 2012 Growth Total operating profit 264.6 255.1 +3.7% ROS 24.6% 24.3% Financing (13.2) (16.6) Pre-tax profit 251.4 238.5 +5.4% ROS increases to 24.6%   Financing  Reduced opening pension deficit reduces financing costs Pre tax profit £251.4m, up 5.4%  20

2013 Earnings Per Share up 8.3% £m 2013 2012 Growth Pre-tax profit 251.4 238.5 +5.4% Tax rate 28.7% 31.1% Average number of shares 135.2m 134.6m Earnings per share 132.2p 122.1p +8.3% Tax rate reduced to 28.7%   Falling UK tax rates, increased emerging market profit weighting in the mix  Further (modest) reductions expected in the future Pre-tax growth plus falling tax takes EPS growth to 8.3%  21

Total dividend up 8.4% £m 2013 2012 Growth Earnings per share 132.2p 122.1p +8.3% Total dividend 64.5p 59.5p +8.4% Pay-out ratio 49% 49% Cover 2.1x 2.1x Dividend policy:   Total dividend: 40-50% of full year earnings Total dividend 64.5p  Interim dividend 29.0p  Final dividend 35.5p  Dividend growth in line with earnings growth   So payout ratio and cover unchanged from 2012 22

Capital expenditure Previous guidance was to spend around 60 £m twice depreciation over next few years 50 Project phasing plus reduced need for  capacity expansion in 2012 and 2013 40 reduced spend to 1.7 and 1.4 times depreciation 30 All major NPD/geographical  20 expansion capital has been spent as planned 10 Key spends in North America and  0 2012 2013 Singapore Capital investment Depreciation Expect to invest significantly more in 2014 23

Acquisitions Speciality business of Arizona Chemical  Cost £7.8m  Based in Florida, have moved manufacture to Europe post acquisition  Enhances our leadership in speciality ingredients from renewable resources  65% share of Sichuan Sipo Chemical Co Ltd  Cost £41.3m (equity £30.3m plus share of inherited debt)  Strengthens existing operations and overall position in Asia  Both acquisitions expected to generate profits in 2014 24

Significant free cash generation £m 2013 2012 EBITDA 298.2 284.5 (3.0) (51.7) Working Capital movement Cash from operations 295.2 232.8 Capital expenditure (46.2) (52.3) Free cash flow 249.0 180.5 38% increase in free cash flow to £249m  5% growth in EBITDA  Low requirement for extra working capital  Reduced capital spend  25

Net cash flow £m 2013 2012 Free cash flow 249.0 180.5 Excess pension contributions (41.2) (24.7) Share purchases/issues 0.9 1.1 Dividends paid (83.6) (76.8) Interest (8.4) (8.1) Tax (50.1) (60.6) M&A (55.9) 9.1 Other (mainly restructuring) (5.0) (1.5) Net cash flow 5.7 19.0 Exchange differences (0.2) 4.4 Change in net debt 5.5 23.4 26