croda international plc
TRANSCRIPT
Investor relations presentationDecember 2020
Croda International Plc
Our response to COVID-19
2
Top 3 priorities Treating all our stakeholders fairly
1. Health and Safety
2. Performance
3. Planning ahead
Objective: Live up to our Purpose – using Smart Science to Improve LivesTM
Employees
No job losses,
furlough or
salary
reductions
Financial
assistance
providedLocal
Communities
Shareholders
Paid final &
interim
dividends
Flexible
payment termsCustomers and
suppliers
3
Smart Science to Improve LivesTM
Growth Innovation Sustainability
Personal Care
Strengthen to grow
Life Sciences
Expand to grow
Performance
Technologies
Refine to grow
Scale drug
delivery
More proactive
M&A“Fast grow” Asia
Scale
biotechnologyAccelerate digital
Our purpose
Strategy
Sector strategies
Priorities
Our strategy
Our Sustainability strategy
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Innovation, technology & customer-driven
By 2030
Climate, Land
& People Positive
Climate
Positive
Enable more
carbon to be saved
than we emit
Land
Positive
Enable more land
to be saved than
we use to grow our
bio-based materials
People
Positive
Apply our innovations
to increase our positive
impact on society
Creating new markets
• Life Sciences: Expand to grow
• Personal Care: Strengthen to grow
• Performance Technologies: Refine to grow
Our priority SDGs
63%
10%Industry average
51
33
20
14 14 13 12 11 11
6 6 5 5 4 4 2
Other European chemical companies
21%
11%11%
6%0.2%0%0%0%
Other chemical companies
Croda – already a leader in Sustainability
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B-B-B
77%
AAA
12th/120
39th/3200
11th
Top 5%
Clearly differentiated
*Source: ECHA, ChemSec SIN list, J.P. Morgan. Number of chemicals on REACH Substances of Very High Concern (SVHC) lists Source: Accenture
Lower hazard chemistry*
Sector leading renewable energy use
Bio-based organic raw materials
Externally recognised by rating agencies
Recognised by Accenture for climate leadership
SCORE CRODA
Other chemical companies
A B C D E F G
Carbon
reductionOut of 4 4 1 2 0 2 3 2 4
Carbon
offsetOut of 2 1 0 0 0 1 0 0 2
Wider
leadershipOut of 4 3 0 3 1 3 1 2 3
No
. o
f h
igh
-ha
zard
ch
em
icals
Embedding Sustainability through acquisition and partnership
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CAGR is compound annual growth rate
2012 Over £500m of investment 2020
Biosector vaccine adjuvants
40% of new Beauty Active
product launches
IRB plant stem cell cultures
High single digit %
growth in field crops
Incotec seed coatings
US$20m pa pipeline
100% bio-based surfactants
25% growth H1 2020
Double digit % future growth
Avanti lipid nanoparticles
Mid-teen CAGR
Biosector
• Leadership
– Executive Committee
champion – sole remit
– Sustainability KPIs for
leadership remuneration
– Engaged employees
• Land Positive
– Accelerating crop innovation
to boost yields and save land
– Developing technologies
to respond to the impact of
climate change on land use
• Climate Positive
– Sustainable products that
save customers carbon
– Decarbonising Croda
– Transition to bio-based
• People Positive
– Saving lives in Health Care
– Improving lives of employees,
partners and communities
– Increasing diversity
and inclusion
Embedding Sustainability through delivering our Commitment
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*Source: United Nations Development Programme
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Delivering customer opportunities from Sustainability
Regulatory changes, customer demand and market disruption will drive significant
opportunities to 2030 and beyond
$12tn The UN SDGs are forecast to generate $12 trillion in global opportunities*
Ingredient
Integrity™
Our consumer markets need innovative sustainable products from bio-based,
traceable ingredients, produced with less emissions and saving consumer carbon
Our Life Sciences sector will drive improved health and well-being, while increasing
crop yields and saving land
Double-digit growth potential in high-value Health Care niches
Moving from consumer health to patient health
Standard
Excipients
Consumer
Health
Enhanced active performance
Speciality
Excipients
Vaccine
Adjuvants
Biologics requiring
injectable delivery
Development of
next generation
therapeutics
Concern around
drug safety
and integrity
Lipid
Nano-
particles
Growth in biotech
providing significant
formulation challenges
Key trends
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Capturing increased value across the Health Care continuum
Building drug delivery platforms for added value
COVID-19 RNA delivery system timeline
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1. Pre COVID-19: Avanti
supplying Lipid
NanoParticles (LNPs) for
clinical trials to mRNA
drug developers
2. COVID-19 outbreak: mRNA
vaccine candidates fast-tracked to
phase II trials – Avanti: key GMP
producer of delivery systems
3. Avanti needed scale-up
partner: Croda engaged for
R&D capability & lipid capacity
4. Croda rapidly re-designed component
production process – GMP scale-up in 4
months to support phase III trials; redeployed
R&D and engineering capability; fast-tracked
plant investment
5. Croda/Avanti secured
contract to supply 4 delivery
system components to Pfizer
for COVID-19 vaccine;
regulatory approval pending
A drug
development
process that
usually takes
between 7 - 10
years reduced to
less than a year
Adapted from PhRMA (Pharmaceutical Research and Manufacturers of America). GMP is Good Manufacturing Practice, the highest quality and regulatory standards for pharmaceutical production.
Acquisition of Iberchem, a global F&F specialist
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Compelling strategic rationale
1. Excellent financial track record
2.Access to high growth adjacency with significant
emerging markets exposure
3. Creates a one stop shop for Consumer Care customers
4. Proven, agile and responsive customer-centric model
5. Dynamic, customer-driven R&D focus
Strong financial rationale
1.EPS accretive from year 1 and strongly
accretive thereafter
2. Significant medium and long-term revenue synergies
3. Capital-light; strong cash conversion
4.Acquisition ROIC to exceed Croda cost of capital
within 5 years
Sales by region(2)
14Manufacturing
facilities
€187mrevenues in 2020F
Source: company information, financials as per management accounts (unaudited)(1) Based on countries where Iberchem’s products are sold(2) FY 2019A; rounded number
(3) As at August 2020; rounded number(4) Active customers (with accounting sales during the year) for 2019A; rounded to the nearest 100
Iberchem: a global fragrance-led company with distinctive positioning
Selling into
Murcia, Spain
+14% growth
(CAGR 2016-20F)
€40mEBITDA in 2020F
21%
EBITDA margin
10 Creative and
R&D centres
850 FTEs(3)
Sales by division(2)
Personal Care Fragrances 40%
Home Care Fragrances
40%
Flavours 20%
36,500 Fragrance
references
18,000 Flavour
references
3,600 customers(4)
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25%of total Iberchem
sales to China
83%of total Iberchem sales
to emerging markets
~120countries(1)
Headquartered in
Asia 36%
Africa 22%
Middle East 17%
Europe 17%
LatAm 8%
Access to 3,000 fragrance customers
particularly in high growth emerging
markets such as Middle East,
North Africa and certain countries
in Asia and Latin America
Access to Croda’s base of 5,900
Personal Care and Home Care customers,
particularly in North America
• New one stop shop in
Consumer Care markets
• Combines Croda’s formulation
capability with Iberchem’s expertise
• Particularly attractive to regional,
“own-brand” and independent customers
1. Creating a new full service
formulation and fragrance offer
2. Significant cross-selling opportunities:
Iberchem to leverage Croda’s global network3. Significant cross-selling opportunities:
Croda to access Iberchem fragrance customers
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Strong financial fundamentals and significant revenue synergies
Targeting €25m annual revenue synergies by year 3 and €48m by year 5
Organic revenue(1)
growth EBITDA(2) margin Cash conversion(3)
Net working capital
as % sales Capex as % sales
2019A 20.0% 19.7% 85.3% 25.5% 2.9%
2020F 7.4% 21.2% 84.5% 28.8% 3.3%
Strong financial fundamentals
Source: company information, financials as per management accounts (unaudited);
customer numbers rounded to the nearest 100
(1) 2019: including net sales contribution of Flavour Inn Corporation
and Duomei from September 2019 and December 2019, respectively
(2) EBITDA including IFRS 16 impact from 2019A onwards, stock margin intercompany
adjustments, and 2019A acquisitions proforma impact
(3) Cash conversion defined as (EBITDA – capex) / EBITDA per Iberchem definition
Core Business
Beauty ActivesBeauty
Effects
Beauty
Formulation
Fragrances
(Iberchem)Home Care
Life
Sciences
Performance
Technologies
Industrial
Chemicals
Consumer
Care
Driving our focus on Consumer Care
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• Group’s Core Business will
comprise 3 sectors:
– Consumer Care
– Life Sciences
– Performance Technologies
• New Consumer Care sector
from 2021
• Comparative 2020 numbers to be
included at Croda’s Full Year 2020
results, February 2021
• +1% Core Business sales
• Personal Care sales -5%; product mix leading to modest
margin dilution, as seen in first half
• Performance Technologies sales -5%; profitability
continuing to be impacted by higher operating leverage
• +18% sales in Life Sciences; Crop Protection phasing &
strong organic growth in Health Care. Continuing margin
development
• North America & Latin America returned to growth; Europe
remained behind prior year; Asia broadly flat, with China
continuing to grow
• Trading in line with expectations - steady month-on-month
recovery in both consumer & industrial markets
• Overall trading outlook for full year unchanged
• Higher forecast full year charge for groupwide share-based
payment schemes due to share price performance
Trading update: 4 months to Oct ‘20
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Full year 2020 outlook
Trading update for the 4 months to 31 October 2020 in constant currency, excluding impact of acquisitions. % change is compared with the same period last year
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