REG - Croda International - Final Results
25/02/2025 07:00
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RNS Number : 2822Y Croda International PLC 25 February 2025
Press Release
25 February 2025
Results for the year ended 31 December 2024
Strengthening Croda in a transitional year; accelerating actions to grow
earnings and improve returns
Croda International Plc ("Croda" or the "Group"), the company that uses smart
science to create high-performance ingredients and solutions that improve
lives, announces its full year results for the year ended 31 December 2024.
Highlights
Statutory results (IFRS) Adjusted results
Full year ended 31 December 2024 2023 change 2024 2023 Constant change
currency change
Sales (£m) 1,628.1 1,694.5 (3.9)% 1,628.1 1,694.5 (0.8)% (3.9)%
Operating profit (£m) 227.5 247.5 (8.1)% 279.7 320.0 (8.2)% (12.6)%
Operating margin (%) 17.2 18.9 - (1.7)ppts
Profit before tax (£m) 207.8 236.3 (12.1)% 260.0 308.8 (11.6)% (15.8)%
Basic earnings per share (p) 113.5 122.5 (7.3)% 142.6 167.6 - (14.9)%
Ordinary dividend per share (p) 110.0 109.0 0.9%
Free cash flow (£m) 181.1 165.5 - 9.4%
Net debt (£m) 532.3 537.6 - (1.0)%
Sales (ex CV19* where indicated) 2024 2023 Constant Change
£m £m Currency Change Constant (ex CV19*)
Change Currency
Change
(ex CV19*)
Consumer Care 920.0 886.1 7% 4% 7% 4%
Life Sciences 504.3 602.3 (14)% (16)% (6)% (8)%
Industrial Specialties 203.8 206.1 2% (1)% 2% (1)%
Group 1,628.1 1,694.5 (1)% (4)% 2% (1)%
*Where indicated, sales exclude £48m of lipid sales for CV19 vaccine
applications in 2023. They are excluded from this growth calculation to give a
more informative year-on-year comparison, as there were no CV19 lipid sales in
2024
Strengthening in a transitional year
· Group sales -1% (+2% ex CV19*) at constant currency comprising:
o Consumer Care sales +7%
§ Growth driven by sales to local & regional (L&R) customers and
Fragrances and Flavours (F&F)
§ Growing in all regions (at constant currency) led by Asia
o Life Sciences sales -14% (-6% ex CV19*); returned to growth in H224 (ex
CV19*)
§ Crop volumes starting to recover
§ Biopharma growing, including lipids for drug research, offset by challenges
in consumer health
o Industrial Specialties sales +2%
o New and Protected Products (NPP) sales +6%
· Adjusted operating margin lower year-on-year; up sequentially in
H224
o 17.2% adjusted operating margin (2023: 18.9%); prior year benefitting from
high margin CV19(*) sales
o Adjusted operating margin improved sequentially from 16.6% in H124 to
17.7% in H224, driven by higher sales volumes, price discipline and proactive
cost control
o IFRS profit before tax of £207.8m (2023: £236.3m)
o £260.0m adjusted profit before tax (2023: £308.8m); £273.1m at constant
currency
· Strong cashflow with working capital discipline and lower capex;
continued balance sheet strength
o Free cash flow up 9% to £181.1m (2023: £165.5m); £20.9m working capital
inflow (2023: £29.1m inflow)
o Net debt was £532.3m (31 Dec 23: £537.6m); resilient balance sheet 1.4x
levered
o Dividend increased 1% to 110.0p per share (2023: 109.0p) despite lower
earnings
Accelerating actions to grow earnings and improve returns
· Driving sales growth by stepping up innovation and maximising value
of all recent investments
o Leveraging proximity to L&R customers as markets continue to fragment
o Increasing innovation; New and Protected Products (NPP) now 35% of total
sales (2023: 33%)
o Focused on driving returns from period of peak investment including the
integration of Solus Biotech
· Driving margin recovery by increasing asset utilisation and
realigning cost base
o Prioritising sales volumes at eleven key shared sites to increase
utilisation and drive operating leverage
o Targeting £25m of permanent cost saving benefits in 2025 to largely
offset inflation and incremental costs of strategic investments coming online,
as part of an initial two-year £40m programme
· Driving improved returns through these actions and prudent
management of invested capital
o Investment intensity reducing and capex expected to moderate as growth
projects are commissioned
Steve Foots, Chief Executive Officer, comments:
"2024 was another transitional year, following two years of unprecedented
demand in 2021 and 2022, with an industry-wide reset from 2023. Consumer Care
saw progress in all areas, with another standout performance from Fragrances
& Flavours and good growth of New & Protected Products. Life Sciences
was impacted by the absence of Covid-19 lipids and weak sales into consumer
health markets, but better demand in Crop Protection drove an improved
performance in the second half year. Whilst sales growth was lower than we
hoped in a subdued demand environment, proactive actions to rebase costs and
drive efficiencies enabled us to deliver profits in line with our guidance.
"Our multi-year programme of actions to make Croda more focused and more
efficient is beginning to bear fruit with our adjusted operating margin
improving half-on-half and strong free cash flow generation. We are
accelerating our efforts with an enhanced focus on costs and efficiency which,
combined with increased innovation and the growth potential of recent
investments, underpin our confidence in delivering earnings growth and
improving returns in the future."
Outlook
With sales volumes higher in 2024 and price/mix headwinds likely to diminish,
we expect both Consumer Care and Life Sciences to grow sales in 2025, and
operational efficiencies to largely offset inflation and the incremental costs
of investments coming online. Overall for 2025, we expect Group adjusted
profit before tax to be between £265m and £295m at constant currency.
Further information:
An investor presentation will be available via webcast at 0900 GMT on 25
February 2025 at www.croda.com (http://www.croda.com) /investors.
For enquiries contact:
Investors: David Bishop, Croda +44 7823 874428
Reece De Gruchy, Croda +44 7826 548908
Media Charlie Armitstead, FTI Consulting +44 7703 330 269
Notes:
Constant currency expectations are based on the Group's average exchange rates
through 2024 which were US$1.28 and €1.18. The US Dollar and the Euro
represent approximately 65% of the Group's currency translation exposure. We
estimate that the average annual currency translation impact on adjusted
operating profit is £1m per Dollar cent movement per annum and £1m per Euro
cent movement per annum.
CV19 lipids (shortened to CV19) comprise lipid sales for Covid-19 vaccine
applications which totalled £48m in the fourth quarter of 2023. They are
excluded from this growth calculation to give a more informative year-on-year
comparison, as there were no CV19 lipid sales in 2024.
Alternative Performance Measures (APMs): We use a number of APMs to assist in
presenting information in this statement. We use such measures consistently at
the half year and full year, and reconcile them as appropriate. Whilst the
Board believes the APMs used provide a meaningful basis upon which to analyse
the Group's financial performance and position, which is helpful to the
reader, it notes that APMs have certain limitations, including the exclusion
of significant recurring items, and may not be directly comparable with
similarly titled measures presented by other companies.
The measures used in this statement include:
· Constant currency results: these reflect current year
performance for existing business translated at the prior year's average
exchange rates. Constant currency results are the primary measure used by
management to monitor the performance of overseas business units, since they
remove the impact of currency translation into Sterling, the Group's reporting
currency, over which those overseas units have no control. Constant currency
results are similarly useful to shareholders in understanding the performance
of the Group excluding the impact of movements in currency translation over
which the Group has no control. Constant currency results are reconciled to
reported results in the review of financial performance below. The APMs are
calculated as follows:
a. For constant currency profit, translation is performed using the
entity reporting currency before the application of IAS 29 hyperinflation and
any associated one-off foreign exchange gains or losses;
b. For constant currency sales, local currency sales are translated into
the most relevant functional currency of the destination country of sale (for
example, sales in Latin America are primarily made in US Dollars, which is
therefore used as the functional currency). Sales in functional currency are
then translated into Sterling using the prior year's average rates for the
corresponding period;
· Underlying results: these reflect constant currency values
adjusted to exclude acquisitions in the first year of impact. They are used by
management to measure the performance of each sector before the benefit of
acquisitions are included, in order to assess the organic performance of the
sector, thereby providing a consistent basis on which to make year-on-year
comparison. They are seen as similarly useful to shareholders in assessing the
performance of the business. Underlying results are reconciled to reported
results in the review of financial performance section below;
· Adjusted results: these are stated before exceptional items (as
disclosed in the review of financial performance below) and amortisation of
intangible assets arising on acquisition, and tax thereon. The Board believes
that the adjusted presentation (and the columnar format adopted for the Group
income statement) assists shareholders by providing a meaningful basis upon
which to analyse business performance and make year-on-year comparisons. The
same measures are used by management for planning, budgeting and reporting
purposes and for the internal assessment of operating performance across the
Group. The adjusted presentation is adopted on a consistent basis for each
half year and full year results;
· Adjusted operating margin or return on sales: this is adjusted
operating profit divided by sales, at reported currency. Management uses the
measure to assess the profitability of each sector and the Group, as part of
its drive to grow profit by more than sales value, in turn by more than sales
volume as set out in the Group performance section below;
· Net debt: comprises cash and cash equivalents (including bank
overdrafts), current and non-current borrowings and lease liabilities.
Management uses this measure to monitor debt funding levels and compliance
with the Group's funding covenants which also use this measure. It believes
that net debt is a helpful additional measure for shareholders in assessing
the risk to equity holders and the capacity to invest more capital in the
business;
· Leverage ratio: this is the ratio of net debt to Earnings Before
Interest, Tax, Depreciation and Amortisation (EBITDA) and adjusted to include
EBITDA from acquisitions or disposals in the last 12 month period. EBITDA is
adjusted operating profit plus depreciation and amortisation. Calculations and
reconciliations are provided in the five year record of the Group's Annual
Report. The Board monitors the leverage ratio against the Group's debt funding
covenants and overall appetite for funding risk, in approving capital
expenditure and acquisitions. It believes that the APM is a helpful additional
measure for shareholders in assessing the risk to equity holders and the
capacity to invest more capital in the business;
· Free cash flow: comprises net cash generated from operating
activities adjusted for the cash effect of exceptional items less net capital
expenditure and payment of lease liabilities, plus interest received. The
definition of free cash flow was revised in the prior year to better align
with the most directly reconcilable line in the Group's IFRS cash flow
statement. The Board uses free cash flow to monitor the Group's overall cash
generation capability, to assess the ability of the Company to pay dividends
and to finance future expansion, and, as such, it believes this is useful to
shareholders in their assessment of the Group's performance;
· Return on invested capital (ROIC): this is adjusted operating
profit after tax divided by the average adjusted invested capital. Adjusted
invested capital represents net assets adjusted for net debt, net retirement
benefit assets/(liabilities), earlier goodwill written off to reserves and
accumulated amortisation of acquired intangible assets (both net of deferred
tax). Calculations and reconciliations are provided in the five-year record of
the Group's Annual Report. The Board believes that ROIC is a key measure of
efficient capital allocation and that it is useful to shareholders in
assessing the returns delivered by the Group and the impact of deploying more
capital to grow future returns faster; and,
· New and Protected Products (NPP): these are products which are
protected by virtue of being either newly launched, protected by intellectual
property or by unique quality characteristics. NPP is used by management to
measure and assess the level of innovation across the Group.
Croda International Plc
Group Performance
We use a number of APMs to assist in presenting information in this statement
which are defined on page 3.
Group performance summary
Group sales were £1,628.1m (2023: £1,694.5m), with sales volumes up 7%,
price/mix down 6%, a 1% contribution from the Solus Biotech acquisition which
completed in July 2023, a 3% adverse impact from the absence of CV19 sales and
a 3% headwind from foreign exchange, leading to reported sales down 4% (or
down 1% excluding the CV19 sales in the prior year). Lower raw material costs
enabled us to selectively reduce prices in support of a recovery in sales
volumes.
Higher sales volumes drove a 7% increase in sales in Consumer Care and a 2%
increase in Industrial Specialities both at constant currency. Full year sales
were 16% lower in Life Sciences including adverse impacts of 8% from the
absence of CV19 lipids and 3% from currency translation, reflecting ongoing
weakness in consumer health and Crop Protection, but a recovery in Crop helped
Life Sciences return to growth in the second half year (ex CV19).
Higher sales in Crop Protection, together with pricing discipline and
proactive cost control, resulted in the Group adjusted operating profit margin
improving from 16.6% in H124 to 17.7% in H224, resulting in a full year
adjusted operating margin of 17.2% (2023: 18.9%), the prior year having
benefitted from high margin CV19 sales. Profit before tax (on an IFRS basis)
was £207.8m (2023: £236.3m) and adjusted profit before tax was £260.0m
(2023: £308.8m) or £273.1m at constant currency, with foreign exchange rates
reducing reported PBT by £13.1m.
Free cash flow improved 9% to £181.1m (2023: £165.5m) including a working
capital inflow of £20.9m (2023: £29.9m inflow). Our balance sheet remains
strong, with a debt leverage ratio of 1.4x (31 Dec 2023: 1.3x), within our
target range of one to two times. The Board is proposing a one pence per share
increase to the full year dividend to 110p (2023: 109p).
Accelerating actions to grow earnings and improve returns
2024 was another transitional year following two years of unprecedented demand
and record profits in 2021 and 2022, then an industry-wide reset from 2023
carrying on into 2024. Whilst sales growth was lower than we hoped, proactive
actions to reduce costs and drive efficiencies enabled us to deliver profits
in line with our guidance. Consumer Care and Industrial Specialities both grew
sales on a constant currency basis, and Life Sciences returned to growth in
the second half year (ex CV19) with a better performance in both Crop
Protection and Seed Enhancement. We delivered a further sequential improvement
in adjusted operating margin in the second half year by proactively driving
sales volumes to improve capacity utilisation, combined with strong pricing
and cost discipline.
Whilst the overall economic backdrop remains subdued, we are benefitting from
more stable customer inventories and demand in most markets and geographies.
In Consumer Care, local and regional (L&R) customers are continuing to
grow, whereas conditions for many multinational customers remain more
challenging. In Pharma, biopharma markets are improving but consumer health
markets remain challenging, particularly in Europe. In Crop Protection, whilst
customer inventory levels are mixed, demand has started to improve in the
context of stabilising crop commodity prices.
Despite unprecedented fluctuations in sales volumes since 2020 and significant
raw material inflation and subsequent deflation, the financial characteristics
of our differentiated business model remain strong. The margins that we make
in our sales prices on raw materials continue to be attractive and stable,
free cash flow generation remains strong, and we have increased the full year
dividend despite lower earnings.
We are accelerating our actions to grow earnings and improve returns, driving
sales growth by leveraging our intimacy with smaller customers, stepping up
innovation, and driving returns from recent investments, whilst at the same
time driving margin expansion through increasing capacity utilisation and
realigning our cost base.
· With innovation centres close to customers in key countries
worldwide and a direct sales force, our business model is optimised to support
customers of all sizes. As markets continue to fragment, we are localising the
delivery of innovation in Consumer Care to enhance our intimacy with L&R
customers which are winning market share, and diversifying our customer base
in Crop Protection
· Following a period of reduced customer appetite for new product
innovation during the pandemic, we are stepping up innovation to meet renewed
customer demand. Our innovation pipelines are expanding, with new and
protected products (NPP) sales growing at 6% in constant currency to 35% of
total sales (2023: 33%) and our priority is to convert these pipelines into
commercial sales
· We are in the latter stages of our recent intensive investment
cycle which has positioned us well for earnings growth with two new greenfield
sites being commissioned in 2025. Our priority is now to deliver returns from
all recent investments
· Croda is a high value-added ingredients business, focused on value
over volume, but with inefficient utilisation remaining a drag on margins, our
priority is to drive sales volumes to increase capacity utilisation at our
larger manufacturing sites
· With cost base inflation ahead of revenue delivery, we are driving
operational efficiencies to underpin margin progression. We are working to
ensure that the actions and benefits achieved through robust control in 2024
are captured permanently and have established a business excellence team to
deliver longer-term structural changes as part of our modernisation agenda.
Through this multi-year programme, we are targeting £40m of incremental
pre-tax benefits over the next two years, including £25m in 2025 which will
largely offset inflation and incremental costs of strategic investments being
commissioned
Through these actions to drive higher profits, as well as a prudent approach
to managing our invested capital, we are committed to improving returns.
Business summary
Consumer Care
· Sales increased to £920.0m (2023: £886.1m), up 4% on a reported
basis or 7% at constant currency
o This comprised an 11% increase in sales volumes, with price/mix 5% lower,
a 1% acquisition contribution from sales of ceramides and a 3% headwind from
foreign currency translation
o Sales to L&R customers increased 11% at constant currency
· IFRS operating profit was £128.4m (2023: £127.8m). Adjusted
operating profit was flat at £160.2m (2023: £160.3m), increasing 4% at
constant currency. The adjusted operating margin was 17.4% (2023: 18.1%)
· In Consumer Care, we aim to be the most sustainable and responsive
supplier of innovative ingredients:
o NPP sales grew 11% at constant currency and improved to 43% of total sales
(2023: 42%)
o We provide carbon footprint data for over 2,000 product codes, a leading
position in this sector
· By business unit (in constant currency):
o Fragrances and Flavours (F&F) led the way, growing 18%, with continued
momentum in the second half year, reflecting its leading position with
higher-growth L&R customers
o Beauty Actives grew 6%, led by Asia (+16%, excluding acquired ceramides)
and sales to L&R customers
o Beauty Care sales were flat with all regions growing other than EMEA, with
a 6% increase in NPP sales as we accelerate innovation, and growth in North
America aided by market share regains
o Home Care grew 13% due to its focus on innovative ingredients
differentiated by sustainability
Life Sciences
· Sales fell to £504.3m (2023: £602.3m), down 16% on a reported
basis, or 14% at constant currency
o This comprised a 3% reduction in sales volumes, with price/mix 4% lower, a
1% acquisition contribution from sales of phospholipids, adverse impacts of 8%
from the absence of CV19 lipids and 2% from foreign currency translation
o Excluding CV19 lipids sales in the prior year, Life Sciences returned to
growth in H224 driven by higher sales volumes in Crop Protection and a
stronger performance in Seed Enhancement
· IFRS operating profit was £85.5m (2023: £131.7m). Adjusted
operating profit was £104.0m (2023: £150.3m). The adjusted operating margin
improved from 18.3% in H124 to 22.9% in H224 due to higher sales volumes in
Crop Protection as well as strong cost control, resulting in a full year
adjusted operating margin of 20.6% (2023: 25.0%), the prior year margin having
benefitted from high margin CV19 lipid sales
· In Life Sciences our strategy is to empower biologics delivery
through the development of innovative solutions:
o NPP sales improved to 31% total sales (2023: 28%) with growth of strategic
focus areas in Pharma
· By business unit (in constant currency):
o Pharma sales fell by 2% (ex CV19) with lower sales into consumer health
and veterinary markets particularly in Europe, partially offset by growth in
delivery systems for protein-based drugs and lipids for drug research
o Crop Protection sales were down 16% but up 6% in the second half year as
demand began to return
o Seed Enhancement sales were up 1% with our microplastic-free seed coatings
continuing to grow
Industrial Specialties
· Sales were £203.8m (2023: £206.1m), down 1% on a reported basis
and up 2% at constant currency, with a modest increase in the second half year
o This comprised an 8% increase in sales volumes, with price/mix 6% lower,
and a 3% headwind from foreign currency translation
· IFRS operating profit was £13.6m (2023: £12.0m loss) and adjusted
operating profit was £15.5m (2023: £9.4m). The resulting adjusted operating
profit margin of 7.6% (2023: 4.6%) benefitted from positive product mix
· Industrial Specialties is contributing to the efficiency of our
shared manufacturing sites by helping to optimise utilisation rates through
sales to industrial customers, both direct and via a supply agreement,
established as part of the sale of the majority of our industrials businesses
in 2022:
o Direct sales grew by 5% in constant currency
o Sales via the supply agreement fell by 5% in constant currency
Regional summary
· By business, Consumer Care grew sales in every region at constant
currency whereas Life Sciences was behind in all regions except Asia.
· By region (at constant currency):
o Asia sales were up 7% with growth across the board other than to
industrial customers in China
o Latam was broadly flat with good growth in Consumer Care offset by lower
sales in Crop and Pharma
o North America was broadly flat aided by resilient biopharma / new drug
development demand
o EMEA sales fell 6% with Life Sciences lower, but were flat excluding prior
year CV19 sales
A high value-added ingredients business
Croda provides mission-critical, novel ingredients that represent a fraction
of customers' costs but are vital to the performance of their products. With a
portfolio aligned with long-term technology trends, our strategy is well
established and has been supported by a period of heightened investment.
Group strategy
We combine market-leading innovation with sustainability leadership to deliver
profit growth, ahead of sales growth and ahead of cost growth.
· Innovation is our key differentiator, creating new market and
technology niches. Our R&D teams now report directly into Consumer Care
and Life Sciences, ensuring that our priorities are customer driven.
Increasing customer demand for our innovation-led approach is evidenced by NPP
growth, more new product development, an increase in application-focused
innovation, and more external R&D partnership in areas such as biotech
· For Croda, sustainability has a direct link to commercial value
with our ability to provide customers with ingredient options, often unique to
Croda, that help them meet their own sustainability commitments. Demand is
increasing for our ingredients that are differentiated by their sustainability
characteristics, with sales of ECO surfactants and mineral sunscreens, for
example, continuing to grow. We are driving commercial value from our position
as a sustainability leader by expanding our portfolio of sustainable
ingredients and providing best-in-class validation data to enable customer
decision-making. Cradle-to-gate carbon footprint data is now available for
over 1,000 product codes in Life Sciences as well as over 2,000 in Consumer
Care, enabling customers to quantify the positive impact on the carbon
footprint of their products
Business strategies
· In Consumer Care, our leadership in innovative and sustainable
ingredients, and the breadth of our ingredient portfolio, customer base and
geographic reach are our key strengths. With the continued fragmentation of
Consumer Care markets, our leading position with L&R customers, which
represent 80% of sales (2023: 77%), is a particularly important source of
competitive advantage as these customers win share. Our strategy is to
localise the delivery of innovation to meet the specific requirements of
consumers in each region, 'widen the gap' in our sustainability leadership,
and prioritise selected countries, notably China and India, where we are
growing strongly
· In Life Sciences, the move to biologics is the principal technology
trend in both pharmaceutical and agriculture markets over the next decade.
Through the execution of our strategy, we have established our Agriculture
businesses as innovation partner for delivery systems to meet the
sustainability challenges of conventional pesticide delivery while creating
new systems for biopesticides. In Pharma, we have developed a portfolio of
delivery systems with a well-diversified risk portfolio combining both near
and medium-term growth opportunities. This includes novel technologies that
generate revenue at every stage of the development cycle of new drugs, from
discovery through to commercial supply
Priorities for 2025
As we accelerate actions to grow earnings and improve returns, our priorities
in 2025 are as follows:
To drive sales growth we are:
1. Leveraging our proximity to L&R customers as our markets continue to
fragment
2. Stepping up innovation to meet renewed demand from customers of all
sizes
3. Driving growth and returns from all recent investments
To underpin margin recovery we are:
4. Prioritising sales volumes to improve the utilisation and efficiency of
our shared manufacturing assets
5. Realigning our cost base with revenues
Investment intensity reducing; positioned for earnings growth
Since 2020, we have completed a number of strategic acquisitions and invested
selectively in projects to realign our portfolio with structural drivers of
growth, taking net capital expenditure above the historic run-rate of 6-8% of
sales. Investment intensity has already begun to moderate and will reduce
further as key assets are commissioned in 2025. Our priority is to deliver
returns from recent investments and we would expect any acquisitions in the
near term to be limited to small next-generation technologies.
Net capital expenditure was £137.9m (2023: £170.1m), below our guidance of
~£150m, as we reviewed all projects and carefully considered phasing. We are
towards the end of the previously announced £175m Pharma investment
programme, so would expect capex to moderate further as we utilise the
capacity we have built and investment in future capacity is highly selective.
Recent investments in our capital base have strengthened our position as a
high value-added ingredients business, positioning us for earnings growth.
In Consumer Care:
· F&F, initially acquired in 2020 as we commenced the transition
of our portfolio, is delivering sales growth ahead of its broader markets
· Our investments in Asia are delivering fast growth with Consumer
Care sales up 12% in China, 17% in India and 26% in South Korea at constant
currency
· Reflecting our continued prioritisation of high-growth markets in
Asia, a new surfactants plant in Dahej, India is due to be commissioned in
2025, and a new facility will come on-stream in Guangzhou in 2026 initially to
support the continued growth of fragrances in China
In Life Sciences:
· Sales of lipid delivery systems for the development of new nucleic
acid-based drugs have continued to grow, up double-digit percentage CAGR since
2020 (ex CV19)
· We are nearing the end of the previously announced £175m Pharma
capacity scale-up programme, initially focused on lipids, with approximately
£130m invested to date. This programme is being supported by an additional
£75m of US and UK Government grants and provides us with the capacity
necessary to deliver commercial scale volumes
Our priority is to drive returns from all investments made as part of our
portfolio transition since 2020. Whilst most are already making a significant
contribution to the performance of the Group, we have more work to do to
ensure that Solus Biotech, acquired in July 2023, delivers the growth rate and
profit conversion it is capable of. We have accelerated the integration of its
capabilities into our South Korean business to leverage our global sales
network and formulation expertise.
We are committed to prudent management of our invested capital base, as well
as driving profit growth, to deliver consistent improvements in returns on
invested capital.
Driving operational efficiencies
A new organisational structure has been in place since the start of 2024 which
makes the Presidents of Consumer Care and Life Sciences fully accountable for
strategy and performance. The new organisation has clarified accountabilities,
is ensuring we deliver more quickly and effectively for our customers and has
simplified our structure for employees.
Enabled by this simpler structure, we have identified significant
opportunities to simplify business processes, modernise systems, standardise
the way we work and reduce costs. We have created a new centre of business
excellence to share best practice and coordinate workstreams that are
targeting operational efficiencies across supply chain, operations,
distribution and back-office support. Cost disciplines that were established
in 2024 are also being embedded to ensure that benefits are captured
permanently.
In 2025, we are targeting £25m of pre-tax benefits from this multi-year
programme, largely offsetting inflation and the incremental costs that we
expect to incur as our recent strategic investments are commissioned. The
benefits will be principally derived from reduced payroll costs and a
reduction in other operating expenses. In 2026, we are targeting a further
£15m of incremental pre-tax savings, as we realise the early benefits of
these efficiency and modernisation workstreams, bringing the total pre-tax
benefits to £40m over two years. In addition to any non-cash charges, we
estimate that the cash cost to realise these benefits will be approximately
£20m, which we expect to be accounted for as exceptional restructuring
charges of ~£15m in 2025 and ~£5m in 2026. We will go further to realign our
cost base with revenue delivery as necessary, with Stephen Oxley bringing
valuable experience in enhancing business performance through transformation
when he joins as Chief Financial Officer (CFO) on 1 April 2025.
Outlook
We are focused on creating significant value for shareholders through sales
growth and adjusted operating margin expansion in Consumer Care and Life
Sciences, combined with prudent management of our invested capital base and
strong cash flow generation.
With sales volumes higher in 2024 and price/mix headwinds likely to diminish,
we expect both Consumer Care and Life Sciences to grow sales in 2025, and
operational efficiencies to largely offset inflation and the incremental costs
of investments coming online. Overall for 2025, we expect Group adjusted
profit before tax to be between £265m and £295 at constant currency.
Croda will report sales performance quarterly during 2025 and we will provide
an update on first quarter trading at the AGM on 23 April 2025.
Technical foreign exchange guidance
Constant currency expectations are based on the Group's average exchange rates
through 2024 which were US$1.28 and €1.18. The US Dollar and the Euro
represent approximately 65% of the Group's currency translation exposure. We
estimate that the average annual currency translation impact on adjusted
operating profit is £1m per Dollar cent movement per annum and £1m per Euro
cent movement per annum.
Business review - Consumer Care
In Consumer Care, our leadership in innovative and sustainable ingredients,
and the breadth of our ingredient portfolio, customer base and geographic
reach are our key strengths. With the continued fragmentation of Consumer Care
markets, our leading position with local and regional (L&R) customers is a
particularly important source of competitive advantage as these customers win
share. Consumer Care comprises four business units (% of total sales rounded
to the nearest 5%):
· Beauty Actives (c20%) is a leader in peptides - the most effective
ingredient for preventing skin ageing, biotech-derived ingredients, botanicals
and ceramides for rapid skin moisturisation
· Beauty Care (c45%) comprises 'effect' ingredients - such as hair
care proteins and mineral sunscreens, and 'formulation' ingredients which make
up the structural chassis of customer formulations, many of which are
differentiated by their sustainability profile
· Fragrances and Flavours (F&F) (c30%) goes to market as Iberchem
with its wide range of fragrances and niche positioning with L&R
customers, Parfex for fine, premium skin care and natural fragrances, and
Scentium for Flavours
· Home Care (c5%) is focused on two technology platforms which
provide improved efficacy and sustainability - fabric care, with proteins that
increase the lifetime of clothes; and household care, with sustainable
surfactants
Performance in 2024
Consumer Care 2024 2023 Change Constant currency change
£m £m
Beauty Actives sales 3% 6%
Beauty Care sales (3)% 0%
F&F sales 15% 18%
Home Care sales 9% 13%
Total Consumer Care sales 920.0 886.1 4% 7%
Adjusted operating profit 160.2 160.3 (0)% 4%
Adjusted operating margin 17.4% 18.1% (0.7)ppts
IFRS operating profit 128.4 127.8 1%
Consumer Care grew sales by 4% on a reported basis or 7% at constant currency.
Sales growth was driven by an 11% increase in sales volumes, reflecting more
stable customer inventory levels and demand. Price/mix was 5% lower as we took
advantage of lower raw material costs to reduce prices in certain business
units, with the margin that we make on raw materials in our sales prices
stable. Acquisitions added 1% from sales of ceramides in H1 following the
Solus Biotech acquisition, whilst foreign currency translation was a 3%
headwind.
Adjusted operating profit increased 4% with the second half adjusted operating
margin down slightly on H1 due to the mix impact of continued strong F&F
sales, but significantly ahead of the same period last year due to higher
sales volumes and robust cost control.
Strategic progress
In Consumer Care, we aim to be the most responsive and sustainable supplier of
innovative ingredients. Our strategy is to localise the delivery of innovation
to meet the specific requirements of consumers in each region, 'widen the gap'
with competitors in our sustainability leadership, and prioritise selected
countries, notably China and India, where we are growing strongly.
Innovation - our key differentiator
Our innovation pipelines are expanding as customer demand increases for our
innovation-led approach:
· NPP sales grew 11% at constant currency and improved to 43% of
total sales (2023: 42%)
· We are developing and launching more new products including:
o Luceane, obtained from the bio-fermentation of a marine micro-organism,
and proven to reduce premature skin ageing by five years in one month, as well
as immediately reducing skin fatigue
o New hair care ingredients derived from ceramides, currently used for skin
care, such as Shingo'HAIR DryPure which promotes scalp health
· A rapid increase in application-focused innovation, driven directly
by customer requests, which often results in the creation of new formulation
ingredients, such as new emulsifiers and surfactants that are PEG-free
Localising innovation delivery
With a direct sales force and innovation centres close to customers in key
countries globally, our business model is optimised to support customers of
all sizes. We are localising the delivery of innovation to meet the specific
requirements of consumers in each region, and to enhance our intimacy with
L&R customers who are continuing to grow strongly. Our prices are normally
higher to smaller customers because we provide them with additional support,
so less concentration in our customer base is providing more opportunities for
us at good margins:
· Sales to L&R customers increased 11% in constant currency
· They now represent 80% of Consumer Care sales (2023: 77%)
Widening the gap in our sustainability leadership
With sustainability continuing to influence customer buying behaviour, we are
seeking to leverage our leadership position through the creation of new
sustainable ingredients and verification data to prove our claims:
· Demand is increasing for our ingredients that are differentiated by
their sustainability characteristics including strong double-digit percentage
increases in sales of ECO surfactants and mineral sunscreen dispersions
· Sector-leading product-level carbon footprint data is now available
for ~1,500 product codes in Beauty Care and ~600 in Home Care, enabling
customers to make informed decisions about the carbon footprint of their
formulations
· We are increasing transparency and traceability of our natural raw
material supply chains, building customer confidence in ingredient integrity
Driving fast growth in Asia
Whilst Consumer Care grew sales in every region, Beauty sales were strongest
in Asia, up 10% (at constant currency and excluding sales of ceramides
acquired in July 2023):
· The key Asian markets of China, India and South Korea grew 11%, 18%
and 26% respectively at constant currency, leveraging our excellent
relationships with L&R customers and investment in R&D and sales in
recent years
· Asia remains the primary focus of Consumer Care investment with
selective expenditure in new manufacturing capacity. A new surfactants plant
in Dahej, India is due to be commissioned in early 2025, and a new facility
will come on-stream in Guangzhou in 2026, initially to support the continued
growth of fragrances in China
Extracting value from recent investments
We are committed to capturing the full potential of recent acquisitions,
including Solus Biotech in South Korea completed in July 2023. Whilst its
biotech-derived active ingredients, such as ceramides, are excellent additions
to our portfolio, growth rates should be higher. We have accelerated
implementation of our integration plan:
· Integrating the business with our South Korean operations and
exiting all distributor agreements
· Accelerating global sales by leveraging Croda's global selling
network, with dedicated business development leads in each region
· Developing ceramides that are easier for customers to formulate
Business unit commentary
Fragrances and Flavours (F&F)
F&F led the way with sales up at 18% in constant currency and the business
delivering higher sales growth than competitors. This excellent performance
reflects its leading position with higher-growth L&R customers. Growth was
well balanced across both Fragrances and Flavours and was driven by a
combination of higher sales with existing customers, market share gains and
new technologies. Focus areas for innovation include micro-encapsulation with
new patents filed in year, and odour-neutralising fragrances that are
biodegradable. Capital continues to be allocated to this business to sustain
growth, with a new R&D centre now open in Dubai, the expansion of fine
fragrances at our dedicated facility in Grasse in France, and ongoing
construction of a new manufacturing facility in China which will be in
partnership with Beauty Actives.
Beauty Actives
Beauty Actives grew 6%, in constant currency, driven by a 16% increase in
sales to Asia (excluding acquired ceramides) including double-digit percentage
growth in China where the business has excellent relationships with L&R
customers which are winning market share. Whilst peptides drove the sales
growth, new product development is also focused on biotech-based ingredients
and ceramides, leveraging the combined expertise of teams in France and South
Korea.
Beauty Care
Beauty Care sales were flat with a 9% increase in sales volumes offset by
lower price/mix, and the margins that we make on raw materials in our sales
prices were higher than the prior year. Beauty Care grew in all regions at
constant currency other than Europe, with sales in North America benefiting
from regained business that we lost in 2022 due to our inability to meet all
of the demand for certain ingredients at the peak of restocking. Performance
also benefitted from our focus on contract manufacturers as an additional
route to independent brands, who we can support through our expertise in
trends and formulation. We are accelerating innovation to enhance portfolio
differentiation, with NPP sales growing 6% at constant currency and a
significant increase in projects undertaken in close collaboration with
customers to meet their precise performance requirements and specific growth
opportunities. To underpin consistent plant utilisation, we are also managing
sales volumes at the lower end of the Beauty Care portfolio where there is
less differentiation, for example through greater flexibility in pricing for
certain product / customer combinations.
Home Care
Home Care grew 13% at constant currency with strong volumes and good growth in
all regions driven by demand for its innovative ingredients differentiated by
sustainability and strong performance claims.
Business review - Life Sciences
Life Sciences focuses on providing delivery systems for active pharmaceutical
and agricultural products. Our technologies deliver the active ingredient,
improve its efficacy, and solve challenges of stability and sustainability in
customer formulations. It comprises three business units (% of total sales
rounded to the nearest 5%):
· Pharma (c.55% of sector sales) targets leadership in biologics drug
delivery, providing excipients and adjuvants for drugs through synthesis,
purification, formulation and application technology know-how
· Crop Protection (c.30% of sector sales) has leading relationships
with the major crop science companies, offering ingredients that improve
performance and delivery of crop protection formulations
· Seed Enhancement (c.15% of sector sales) leverages our leadership
in seed coating systems and enhancement technologies to improve germination,
stimulate development of seeds and increase crop yields
Performance in 2024
Life Sciences 2024 2023 Change Constant currency change 2023 £m Change Constant currency change
£m £m (ex CV19*) (ex CV19*) (ex CV19*)
Pharma sales (18)% (16)% (5)% (2)%
Crop Protection sales (19)% (16)%
Seed Enhancement sales (2)% 1%
Total Life Sciences sales 504.3 602.3 (16)% (14)% 554.3 (8)% (6)%
Adjusted operating profit 104.0 150.3 (31)% (27)%
Adjusted operating margin 20.6% 25.0% (4.4)ppts
IFRS operating profit 85.5 131.7 (35)%
*Where indicated, sales exclude £48m of lipid sales for CV19 vaccine
applications in 2023. They are excluded from this growth calculation to give a
more informative year-on-year comparison, as there were no CV19 lipid sales in
2024.
Life Sciences sales fell 16%, comprising a 3% reduction in sales volumes, with
price/mix 4% lower, a 1% acquisition contribution from sales of phospholipids,
and adverse impacts of 8% from the absence of CV19 lipids and 2% from foreign
currency translation. Life Sciences returned to growth in the second half
year, with sales up 6% (ex CV19, at constant currency) driven by an improved
performance in our Agriculture businesses - both Crop Protection and Seed
Enhancement.
The adjusted operating margin improved from 18.3% in H124 to 22.9% in H224 due
to higher sales volumes in Crop Protection as well as strong cost control,
resulting in a full year adjusted operating margin of 20.6% (2023: 25.0%), the
prior year margin having benefitted from high margin CV19 lipid sales.
Strategic progress
Over the next decade, the move to biologics is the principal technology trend
in both pharmaceutical and agricultural markets. In Life Sciences, we aim to
empower biologics delivery through the development of innovative solutions.
Through execution of our strategy, we have established our Agriculture
businesses as innovation partner for delivery systems, creating new systems
specifically for the delivery of biopesticides and meeting the sustainability
challenges of conventional pesticide delivery and seed solutions.
In Pharma, we have developed a portfolio of delivery systems that generate
revenue at every stage of the development cycle of new drugs, from discovery
through to commercial supply. Our portfolio includes an increasing number of
novel technologies focused on segments with the highest innovation needs, and
has a well-diversified risk profile combining both near and medium-term growth
opportunities. Growth of our existing business will be supplemented by
opportunities for breakout growth as new drugs that we are supporting are
commercialised and we bring our own new drug delivery technologies to
market.
Innovation - our key differentiator
NPP improved to 31% of total sales (2023: 28%) as our strategic growth areas
in Pharma grew more quickly than sales for consumer health applications.
In Pharma, innovation pipelines are expanding rapidly:
· Customer new drug pipelines are growing and maturing as new drugs
progress through clinical trials:
o Globally, there are 1,700 RNA therapeutics under development across
mRNA and gene editing, with the number increasing rapidly. Moderna's mRNA
vaccine for RSV was approved in 2024 and GSK, Pfizer and Moderna are
developing vaccines for flu that are expected to commercialise in 2025 or
2026. New Nucleic Acid therapeutics require bespoke delivery systems, playing
to our strengths
o As adjuvant systems are semi-active substances critical to the
efficacy of new vaccines, we have good visibility of the clinical trials in
the market and the future systems required. There are now ~1,500 therapeutic
vaccines undergoing clinical trials with an additional 280 now marketed, up
from 140 in 2022
· We are executing against our plan for launching new technologies:
o Our novel, lipid-based synthetic alternative to an adjuvant already
used in shingles, malaria and RSV vaccines, has been included in 80 active
customer projects spanning research and clinical phases
o Virodex, our sustainable alternative to a bioprocessing aid now banned
in Europe, delivered early sales in 2024 across 10 projects with over 150
other opportunities being pursued
o We have just launched Super-Refined Poloxamer 188, leveraging our
refining and purification expertise. It is an aid to cell growth that is
used during upstream bioprocessing, delivering excellent cell culture
performance and batch-to-batch consistency, and therefore lowering
biomanufacturing risk
· We are driving partnership opportunities to enhance our in-house
capabilities
o With vaccine adjuvants a particular focus of our sustainability
strategy for Pharma, our fermentation-derived squalene adjuvant, developed via
an exclusive licensing agreement with Amyris, provides a sustainable
replacement for shark-derived material, and is currently under advanced
evaluation by global pharma companies
In Agriculture, we develop sustainable solutions to improve yields, accelerate
the transition to biopesticides and contribute to food security. All
technologies launched in 2024 are contributing sales including:
· Our first dedicated delivery system for biopesticides
· A delivery system optimised for application by drone, now available
across Asia after good uptake in China
· Additions to our range of seed coatings that are free from
micro-plastics, which grew well reflecting our market-leading position ahead
of the ban on microplastics in seeds in Europe by 2028. These coatings are
being sold across Europe, North America and Latin America, and are in final
test stages with major seed companies
Looking ahead, our internal innovation pipelines and Agriculture product
launches for 2025 are focused on:
· Biodegradability - aligned with customer demand
· Biopesticides - with the US Environmental Protection Agency
estimating that biopesticides now represent 75% of applications for new
pesticides and R&D programmes in place at all major customers
· Biologicals more broadly - including technologies for delivering
sensitive microbes on seeds
Extracting value from investments
Whilst our Crop Protection business will benefit from the commissioning of our
new surfactants plant in India in 2025, Pharma has been the principal
beneficiary of capital allocated to Life Sciences since 2020 due to its
potential for significant incremental growth at superior returns. We are
capturing the full potential of acquisitions and organic investments by:
· Driving the sales of phospholipids, acquired with Solus Biotech,
through our global selling network
· Leveraging the Alabaster site in Alabama, USA as our centre of
excellence for lipid development providing R&D, process development,
analysis, small-scale manufacturing and regulatory support. We are also
expanding our lipid portfolio and leveraging the Avanti brand to access
research customers
· Transferring larger-scale manufacturing and enabling future growth
at a new multi-purpose facility in Lamar, Pennsylvania, due to commence
production in H2 and built with US Government support
· Expanding our cGMP lipid manufacturing capabilities in Leek,
Staffordshire with UK Government support, to provide a second lipid production
facility in Europe
We are nearing the end of the previously announced £175m Pharma investment
programme and expect capex to moderate in 2025 as new assets are commissioned.
Leadership
Thomas Riermeier joins Croda as President of Life Sciences in April 2025. He
has excellent knowledge of both the chemical and pharmaceutical industries
having previously led the Health Care business at Evonik Industries AG. In
this role he was responsible for drug substances, drug delivery and products,
and health solutions, including lipid delivery systems for nucleic acid-based
vaccines and drugs.
Business unit commentary
Pharma
Pharma sales fell by 2% excluding the impact of currency translation and £48m
of CV19 lipid sales in the prior year. Following the acquisition of Solus
Biotech in July 2023, there was a 1% inorganic contribution from phospholipid
sales for both intravenous nutrition and as delivery systems for pharma
actives. With biopharma demand improving through the year, sales of lipids for
drug research and delivery systems for protein-based drugs, both strategic
growth areas for Croda, continued to grow. By contrast, sales into consumer
health and veterinary markets fell particularly in Europe, and Adjuvant
Systems was impacted by the normalisation of CV19 demand. As a result, sales
were higher in Asia and North America, important regions for drug development,
but fell in EMEA and Latam, where consumer health represents a larger
proportion of sales. In response to challenging conditions in consumer health
markets, we are refocusing resources to drive an improvement in sales,
supported by ongoing flexibility in price.
Crop Protection
Crop Protection sales fell 16% at constant currency, comprising a 31% decline
in H124 against a very strong comparator period and a 6% increase in H224 when
volumes started to recover. While customer inventory levels remain mixed,
demand has begun to improve in the context of stabilising crop commodity
prices. Our continued development of business with fast-growing local and
regional crop protection companies delivered positive sales and volume impact
despite the challenging market environment.
Seed Enhancement
Seed Enhancement sales grew 1% at constant currency with the second half
weighting more pronounced than usual. Adverse weather conditions and falling
commodity prices earlier in the year adversely impacted field crop sales but
the vegetable services business performed well, particularly in EMEA,
positively impacting business mix.
Business review - Industrial Specialties
Croda's Industrial Specialties business is not a priority for capital
allocation, but it plays an important role in our integrated Group
manufacturing model. The business contributes to the efficiency of our shared
manufacturing site model by helping to optimise utilisation rates, maximising
sales into value-added industrial applications using Croda's core chemistries,
and operating a supply contract established as part of the divestment of the
industrial businesses in June 2022.
2024 performance
Industrial Specialities 2024 2023 Change Constant currency change
£m £m
Direct sales 2% 5%
Sales via supply agreement (8)% (5)%
Total Industrial Specialities sales 203.8 206.1 (1)% 2%
Adjusted operating profit 15.5 9.4 65% 73%
Adjusted operating margin 7.6% 4.6% 3.0ppts
IFRS operating profit 13.6 (12.0) -
Industrial Specialties sales were £203.8m (2023: £206.1m), down 1% on a
reported basis and up 2% at constant currency, with industrial demand more
stable following a progressive decline in 2023, and a modest increase in H2.
Sales comprised a 9% increase in volumes, with price/mix 7% lower, and an 3%
headwind from foreign currency translation. The margin that we make on raw
materials in our sales prices was robust and stable. At constant currency,
direct sales by Croda to industrial customers grew by 5% and sales via the
supply agreement fell by 5%.
Adjusted operating profit was £15.5m (2023: £9.4m) with the associated
adjusted operating margin of 7.6% (2023: 4.6%) benefitting from favourable
product mix particularly in the first half year.
Non-financial performance
Higher sales of New and Protected Products reflecting strong customer demand for innovation
Our principal measure of innovation is sales of New and Protected Products
(NPP) which are defined as sales protected by virtue of being newly launched,
protected by intellectual property or by unique quality characteristics. We
measure both NPP sales as a proportion of total sales and NPP sales growth:
· NPP increased to 35% of total sales (2023: 33%), driven by
continued increases in the proportion of NPP sales, with the proportion
increasing in all three businesses
o In Consumer Care, NPP improved to 43% of total sales (2023: 42%)
o In Life Sciences, NPP improved to 31% of total sales (2023: 28%) as our
strategic growth areas in Pharma grew more quickly than sales for consumer
health applications
· Group NPP sales grew 6% at constant currency driven by an 11%
increase in Consumer Care
Continued progress delivering our sustainability commitment
We continue to be recognised for our sustainability leadership in the most
robust global rankings including MSCI (which rated us 'triple A'), CDP, and
FTSE4Good.
We are committed to being the most sustainable supplier of innovative
ingredients by having positive impacts on climate, nature, and society
globally.
To be Climate Positive, we will reduce operational greenhouse gas emissions by
46.2% between 2018 and 2030, in line with our verified science-based target
(SBT), making a contribution to limiting global temperature rise to no more
than 1.5°C above pre-industrial level:
· Our scope 1 and 2 emissions were 111,832 tCO2e (2023: 104,462 tCO2e
restated)
· We have met our 2024 interim target of a greater than 25% reduction
from our 2018 baseline and are on-track to meet our 2030 SBT
Our Land Positive objective helps drive our positive impacts on nature:
· We have saved a cumulative total of 289,000 hectares of land
between 2020 and 2024 through the use of our crop and seed technologies to
improve yields. This benefits nature in alleviating the pressure to convert
more land to agricultural uses
Our People Positive objective covers both our employees and wider society:
· Croda Foundation has supported 45 projects to sustainably improve
22.8m lives globally having committed ~£5m in project funding since it was
founded in 2021
· Our Total Recordable Injury Rate ("TRIR") fell to 0.47 (2023: 0.72)
as we continued to set the example of living safety as a value through our
leadership behaviours
Financial performance
Performance enhanced by cost and capital discipline
Group sales grew 2% at constant currency (ex CV19) as we proactively drove
sales volumes and as a consequence improved our capacity utilisation. Our
financial performance benefitted from proactive cost discipline and strict
control of discretionary expenditure alongside strong pricing and capital
discipline. Cost control actions included freezing recruitment, minimising
travel, optimising production and accelerating the integration of
acquisitions. Many of the self-help measures that we introduced in 2024 are
the right thing to do for the business over the longer term as well as having
a positive impact on Group adjusted operating margin in the year. For 2025,
our objective is that continued proactive cost control and the early benefits
of further operational efficiencies and modernisation initiatives will
significantly offset the impacts of inflation and the incremental costs
associated with recent strategic investments being commissioned. These
investments have realigned our portfolio with structural drivers of growth in
our markets, positioning us for future earnings growth and improving returns.
Currency translation
Sterling strengthened against both the US Dollar, at US$1.28 (2023: US$1.24)
and against the Euro, at €1.18 (2023: €1.15). Currency translation reduced
sales by £52.1m and adjusted operating profit by £13.9m. This was driven by
both the strength of Sterling against the US Dollar and the Euro (which
together represent approximately 65% of the Group's currency translation
exposure) and by the impact of changes in exchange rates for other smaller
currencies including the effect of the application of IAS 29 ('Financial
Reporting in Hyperinflationary Economies') to reporting in Argentina and
Turkey. We estimate that the average annual currency translation impact on
adjusted operating profit is £1m per Dollar cent movement per annum and £1m
per Euro cent movement per annum.
Sales
Group sales were £1,628.1m (2023: £1,694.5m), impacted by higher sales
volumes, lower price/mix, the absence of lipid sales for CV19 vaccine
applications that totalled £48m in the prior year, a 3% headwind from foreign
exchange and a 1% inorganic contribution from the Solus Biotech acquisition
which completed in July 2023. Our approach is to disclose the impact of
acquisitions separately in their first year of ownership, so the acquisition
benefit from Solus Biotech comprises its sales and profit contribution in the
first half year. We have also disclosed below quarterly sales performance as
we will continue to report sales performance quarterly during 2025.
Sales (ex CV19* where indicated) 2024 2023 Constant 2024 2023 Constant Change
£m £m Currency Change £m (ex CV19*) Currency (ex CV19*)
Change £m Change
(ex CV19*)
Consumer Care 920.0 886.1 7% 4% 920.0 886.1 7% 4%
Life Sciences 504.3 602.3 (14)% (16)% 504.3 554.3 (6)% (8)%
Industrial Specialties 203.8 206.1 2% (1)% 203.8 206.1 2% (1)%
Group 1,628.1 1,694.5 (1)% (4)% 1,628.1 1,646.5 2% (1)%
Sales 2024 Price/mix Volume Acquisition CV19 Currency 2023 Change
£m lipids* £m
Consumer Care 920.0 (4.8)% 11.4% 0.6% - (3.4)% 886.1 3.8%
Life Sciences 504.3 (2.9)% 0.8% (8.0)% (2.5)% 602.3 (16.3)%
(3.7)%
Industrial Specialties 203.8 (6.4)% 8.5% - - (3.3)% 206.1 (1.2)%
Group 1,628.1 (5.5)% 6.9% 0.6% (2.8)% (3.1)% 1,694.5 (3.9)%
Quarterly sales £m Consumer Life Industrial Group Life Sciences Group Year-on-year change
Care Sciences Specialties (ex-CV19)* (ex-CV19)*
Q1 2023 236.8 170.8 69.1 476.7 170.8 476.7 -
Q2 2023 218.8 132.4 53.0 404.2 132.4 404.2 -
Q3 2023 218.2 125.0 43.7 386.9 125.0 386.9 -
Q4 2023 212.3 174.1 40.3 426.7 126.1 378.7 -
Q1 2024 236.8 121.8 49.9 408.5 121.8 408.5 (14)%
Q2 2024 231.6 124.4 51.4 407.4 124.4 407.4 1%
Q3 2024 228.1 128.8 49.7 406.6 128.8 406.6 5%
Q4 2024 223.5 129.3 52.8 405.6 129.3 405.6 7%
Half yearly sales £m Consumer Life Industrial Group Life Sciences Group Year-on-year
Care Sciences Specialties (ex-CV19)* (ex-CV19)* change
H1 2023 455.6 303.2 122.1 880.9 303.2 880.9 -
H2 2023 430.5 299.1 84.0 813.6 251.1 765.6 -
H1 2024 468.4 246.2 101.3 815.9 246.2 815.9 (7)%
H2 2024 451.6 258.1 102.5 812.2 258.1 812.2 6%
*Where indicated Life Sciences and Group sales exclude £48m of lipid sales
for CV19 vaccine applications in 2023. They are excluded from this growth
calculation to give a more informative year-on-year comparator, as there were
no CV19 lipid sales in 2024.
Profit and margin
2024 2023
IFRS Adjustments Adjusted IFRS Adjustments Adjusted
£m £m £m £m £m £m
Sales 1,628.1 - 1,628.1 1,694.5 - 1,694.5
Cost of sales (894.2) - (894.2) (964.5) - (964.5)
Gross profit 733.9 - 733.9 730.0 - 730.0
Operating costs (506.4) (52.2) (454.2) (482.5) (72.5) (410.0)
Operating profit 227.5 (52.2) 279.7 247.5 (72.5) 320.0
Net interest charge (19.7) - (19.7) (11.2) - (11.2)
Profit before tax 207.8 (52.2) 260.0 236.3 (72.5) 308.8
Tax (48.2) 11.6 (59.8) (64.2) 9.5 (73.7)
Profit after tax 159.6 (40.6) 200.2 172.1 (63.0) 235.1
2024 2023
Operating profit IFRS Adjustments Adjusted IFRS Adjustments Adjusted
£m £m £m £m £m £m
Consumer Care 128.4 (31.8) 160.2 127.8 (32.5) 160.3
Life Sciences 85.5 (18.5) 104.0 131.7 (18.6) 150.3
Industrial Specialties 13.6 (1.9) 15.5 (12.0) (21.4) 9.4
Group 227.5 (52.2) 279.7 247.5 (72.5) 320.0
Adjustments 2024 2023
£m
£m
Business acquisition costs - (9.6)
Restructuring costs (3.0) (5.4)
Business transformation costs (3.5) -
Environmental provision (8.5) -
Impairment - (20.8)
Amortisation of intangible assets arising on acquisition (37.2) (36.7)
Total adjustments (52.2) (72.5)
2024 Underlying growth Acquisition impact Constant currency change Currency
£m £m £m impact 2023
£m £m Change
Adjusted operating profit
Consumer Care 160.2 7.2 (0.1) 4.4% (7.2) 160.3 (0.1)%
Life Sciences 104.0 (39.7) (0.6) (26.8)% (6.0) 150.3 (30.8)%
Industrial Specialties 15.5 6.8 - 72.6% (0.7) 9.4 64.9%
Operating profit 279.7 (25.7) (0.7) (8.2)% (13.9) 320.0 (12.6)%
Net interest (19.7) (11.2)
Profit before tax 260.0 308.8 (15.8)%
Cost of sales benefitted from a reduction in raw material costs, which fell
~4% following a ~12% reduction in 2023. Lower raw material costs enabled us to
selectively reduce prices in certain business units with the margin that we
make in our sales prices on these raw materials robust and broadly in line
with the pre-pandemic period. Aided by lower prices, we delivered a 9%
increase in sales volumes in both Beauty Care and Industrial Specialties,
which account for almost 70% of volumes at our 11 shared manufacturing sites,
thereby improving asset utilisation and benefiting adjusted operating margins.
We expect a small increase in the average cost of raw materials in the first
quarter of 2025 driven by the rising cost of bio-based raw materials, notably
palm oil derivatives. With raw material costs expected to rise modestly in
2025, the headwinds that we have seen from price/mix are expected to diminish.
People and freight costs were higher as anticipated, with energy costs lower.
IFRS operating profit was £227.5m (2023: £247.5m). IFRS operating profit
included a charge for adjusting items of £52.2m (2023: £72.5m), comprising a
£37.2m (2023: £36.7m) charge for amortisation of acquired intangibles, an
increase in environmental provisions of £8.5m (2023: nil increase),
restructuring costs associated with changes to the Group's operating model of
£3.0m (2023: £5.4m), and business transformation costs of £3.5m (2023: nil)
principally relating to our Enterprise Resource Planning (ERP) system.
Group adjusted operating profit was £279.7m (2023: £320.0m). The full year
adjusted operating profit margin of 17.2% (2023: 18.9%) was adversely impacted
by investment costs, inflation, the absence of CV19 lipid sales and the
partial unwind of the benefit we saw in 2023 from a negligible variable
remuneration charge. The adjusted operating margin improved from 16.6% in H124
to 17.7% in H224 driven by robust cost discipline and better capacity
utilisation as sales volumes began to recover in Crop Protection which also
uses our shared sites for its manufacturing.
Net finance costs were £19.7m (2023: £11.2m), in line with our guidance; we
expect a further small increase in net finance costs in 2025. Profit before
tax (on an IFRS basis) was £207.8m (2023: £236.3m) and adjusted profit
before tax was £260.0m (2023: £308.8m) or £273.1m at constant currency.
The effective tax rate on adjusted profit was 23.0% (2023: 23.9%) and the
effective tax rate on IFRS profit was 23.2% (2023: 27.2%). IFRS basic earnings
per share (EPS) were 113.5p (2023: 122.5p) and adjusted basic EPS were 142.6p
(2023: 167.6p).
Cash flow Full year ended 31 December
Cash flow 2024 2023
£m
£m
Adjusted operating profit 279.7 320.0
Depreciation and amortisation 98.6 89.5
Adjusted EBITDA 378.3 409.5
Working capital 20.9 29.1
Interest & tax paid (84.4) (93.5)
Non-cash pension expense 2.9 (4.4)
Share-based payments 5.0 (4.2)
Other cash movements (3.3) 1.0
Net cash generated from operating activities 319.4 337.5
Net capital expenditure (137.9) (170.1)
Interest received 6.9 8.3
Payment of lease liabilities (17.5) (17.0)
Exceptional items cash outflow add back 10.2 6.8
Free cash flow 181.1 165.5
Dividends (152.2) (150.7)
Acquisitions - (241.8)
Business disposal (6.8) (4.6)
Exceptional items cash outflow (10.2) (7.9)
Other cash movements (5.2) (10.3)
Net cash flow 6.7 (249.8)
Net movement in borrowings (9.0) 125.1
Net movement in cash and cash equivalents (2.3) (124.7)
Proactive cash flow management yielded good results with improved free cash
flow of £181.1m (2023: £165.5m). This included a working capital inflow of
£20.9m (2023: £29.1m inflow) which benefitted from payment of a CV19 lipid
receivable from 2023 as well as careful management of net working capital
days.
Continued balance sheet strength
Enhanced by improved free cash flow, our balance sheet remains strong.
Net capital expenditure fell to £137.9m (2023: £170.1m) as we reviewed
capital commitments and phasing. We are towards the end of the previously
announced Pharma investment programme so would expect capex to moderate
further as we utilise the capacity we have built and investment in future
capacity is highly selective. We expect depreciation to increase by
approximately £10m in 2025, partially driven by the impact of new facilities
commencing operations (notably in Lamar, USA and Dahej, India).
Building on our record of consistent distribution to shareholders, the Board
is proposing to increase the full year dividend to 110p (2023: 109p), despite
temporarily taking us above our stated percentage of adjusted profit after
tax, reflecting its confidence in delivery of future earnings growth.
Closing net debt was £532.3m (31 Dec 23: £537.6m), with a leverage ratio of
1.4x adjusted EBITDA (31 Dec 23: 1.3x), within our 1-2x target range.
In October 2024, we successfully refinanced our bank Revolving Credit Facility
with a new five-year £630m multi-currency facility. As at 31 December 2024,
the Group had committed funding in place of £1,075.8m, with undrawn long-term
committed facilities of £418.0m and £166.8m in cash.
Capital allocation policy
We allocate capital in line with the following priorities:
1. Reinvest for growth - investment in organic capital expenditure to
drive shareholder value creation through new capacity, product innovation and
expansion in attractive geographic markets to drive sales and profit growth
2. Provide regular returns to shareholders - pay a regular dividend to
shareholders, representing 40 to 50% of adjusted profit after tax over the
business cycle
3. Acquire disruptive technologies - target technology acquisitions in
existing and adjacent markets
4. Maintain an appropriate balance sheet and return excess capital -
maintain an appropriate balance sheet to meet future investment and trading
requirements, targeting a leverage ratio of 1 to 2x over the medium-term
cycle. We consider returning excess capital to shareholders when leverage
falls below our target range and sufficient capital is available to meet our
investment opportunities
Retirement benefits
The post-tax asset on retirement benefit plans at 31 December 2024, measured
on an accounting valuation basis under IAS-19, improved to £77.7m (31 Dec
2023: £64.9m). Cash funding of the various plans is driven by the schemes'
ongoing actuarial valuations. The triennial actuarial valuation of the largest
pension plan, the UK Croda Pension Scheme, was performed as at 30 September
2023 and indicated that the funding position of the scheme had significantly
improved. The scheme was 120.6% funded on a technical provisions basis.
Consequently, the cash cost of providing benefits has fallen and no deficit
recovery plan is required.
Other matters
Principal risks
Our risk management processes, policies and the principal risks and
uncertainties facing the Group are set out in the Group's Annual Report and
Accounts for the year ended 31 December 2024. Our risk management processes
and policies remain largely consistent with prior year, with minor adjustments
being made in conjunction with the deployment of a new integrated risk
management system. The Group's principal risks, as reported in the financial
statements for the year ended 31 December 2024, are revenue generation;
product and technology innovation and protection; digital technology
innovation; delivering sustainable solutions - Climate, Land, and People
Positive; management of business change; our people - culture, wellbeing,
talent development and retention; product quality; loss of a significant
manufacturing site; ethics and compliance; and security of business
information and networks.
During our periodic risk reviews, we confirmed that all principal risks
reported in 2023 remain relevant and no new principal risks were identified.
The risks and opportunities associated with digital technology innovation
increased in 2024 due to the rapid advancement of Artificial Intelligence.
Management of business change risk also intensified in 2024. Effective change
management becomes increasingly critical as new facilities are commissioned
(following a recent period of intensive investment) and with the initiation of
new efficiency and modernisation workstreams.
Croda International Plc
Summary Financial Statements for the Year Ended 31 December 2024
Group Income Statement
for the year ended 31 December 2024
Note 2024 2024 2024 2023 2023 2023
Reported
Reported
Adjusted
Adjustments
Total
Adjusted
Adjustments
Total
£m
£m
£m
£m
£m
£m
Revenue 2 1,628.1 - 1,628.1 1,694.5 - 1,694.5
Cost of sales (894.2) - (894.2) (964.5) - (964.5)
Gross profit 733.9 - 733.9 730.0 - 730.0
Operating costs (454.2) (52.2) (506.4) (410.0) (72.5) (482.5)
Operating profit 2 279.7 (52.2) 227.5 320.0 (72.5) 247.5
Financial costs 3 (31.0) - (31.0) (26.0) - (26.0)
Financial income 3 11.3 - 11.3 14.8 - 14.8
Profit before tax 260.0 (52.2) 207.8 308.8 (72.5) 236.3
Tax 4 (59.8) 11.6 (48.2) (73.7) 9.5 (64.2)
Profit after tax for the year 200.2 (40.6) 159.6 235.1 (63.0) 172.1
Attributable to:
Non-controlling interests 1.1 - 1.1 1.1 - 1.1
Owners of the parent 199.1 (40.6) 158.5 234.0 (63.0) 171.0
200.2 (40.6) 159.6 235.1 (63.0) 172.1
Adjustments relate to exceptional items, amortisation of intangible assets
arising on acquisition and the tax thereon. Details are disclosed in note 2.
Pence Pence Pence Pence
Reported
Reported
Adjusted
Total
Adjusted
Total
Earnings per 10.61p ordinary share
Basic 5 142.6 113.5 167.6 122.5
Diluted 142.5 113.5 167.4 122.3
Ordinary dividends paid in the year
Interim 6 47.0 47.0
Final 6 62.0 61.0
Group Statement of Comprehensive Income
for the year ended 31 December 2024
2024 2023
£m
£m
Profit after tax for the year 159.6 172.1
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of post-retirement benefit obligations 15.5 (23.3)
Tax on items that will not be reclassified (3.9) 5.5
11.6 (17.8)
Items that have been or may be reclassified subsequently to profit or loss:
Currency translation (90.3) (58.4)
Cash flow hedging - (19.3)
(90.3) (77.7)
Other comprehensive expense for the year (78.7) (95.5)
Total comprehensive income for the year 80.9 76.6
Attributable to:
Non-controlling interests 0.9 0.1
Owners of the parent 80.0 76.5
80.9 76.6
Arising from:
Continuing operations 80.9 76.6
Group Balance Sheet
at 31 December 2024
Note 2024 2023
£m
£m
Assets
Non-current assets
Intangible assets 7 1,310.6 1,408.5
Property, plant and equipment 8 1,082.9 1,044.0
Right of use assets 85.0 87.5
Investments 1.9 1.9
Deferred tax assets 14.7 14.4
Retirement benefit assets 9 130.0 113.5
2,625.1 2,669.8
Current assets
Inventories 367.9 341.2
Trade and other receivables 349.5 395.7
Cash and cash equivalents 166.8 172.5
884.2 909.4
Liabilities
Current liabilities
Trade and other payables (274.0) (252.0)
Borrowings and other financial liabilities (35.0) (36.7)
Lease liabilities (13.2) (13.7)
Provisions 9 (6.5) (8.6)
Current tax liabilities (7.8) (9.2)
(336.5) (320.2)
Net current assets 547.7 589.2
Non-current liabilities
Borrowings and other financial liabilities (580.2) (588.4)
Lease liabilities (70.7) (71.3)
Other payables (1.1) (1.1)
Retirement benefit liabilities 9 (25.7) (26.8)
Provisions 9 (17.3) (10.5)
Deferred tax liabilities (180.9) (192.8)
(875.9) (890.9)
Net assets 2,296.9 2,368.1
Equity
Ordinary share capital 15.1 15.1
Share premium account 707.7 707.7
Reserves 1,559.7 1,629.7
Equity attributable to owners of the parent 2,282.5 2,352.5
Non-controlling interests in equity 14.4 15.6
Total equity 2,296.9 2,368.1
Group Statement of Changes in Equity
for the year ended 31 December 2024
Note Share Share Other Retained Non Total
capital
premium
reserves
earnings
controlling
equity
£m
account
£m
£m
interests
£m
£m
£m
At 1 January 2023 15.1 707.7 47.1 1,645.7 15.5 2,431.1
Profit after tax for the year - - - 171.0 1.1 172.1
Other comprehensive expense - - (76.7) (17.8) (1.0) (95.5)
Total comprehensive (expense)/income for the year - - (76.7) 153.2 0.1 76.6
Hedging losses transferred to goodwill - - 19.3 - - 19.3
Transactions with owners:
Dividends on equity shares 6 - - - (150.7) - (150.7)
Share-based payments - - - 1.6 - 1.6
Transactions in own shares - - - (9.8) - (9.8)
Total transactions with owners - - - (158.9) - (158.9)
Total equity at 31 December 2023 15.1 707.7 (10.3) 1,640.0 15.6 2,368.1
At 1 January 2024 15.1 707.7 (10.3) 1,640.0 15.6 2,368.1
Profit after tax for the year - - - 158.5 1.1 159.6
Other comprehensive (expense)/income for the year - - (90.1) 11.6 (0.2) (78.7)
Total comprehensive (expense)/income for the year - - (90.1) 170.1 0.9 80.9
Transactions with owners:
Dividends on equity shares 6 - - - (152.2) - (152.2)
Share-based payments - - - 4.0 - 4.0
Transactions in own shares - - - (1.8) - (1.8)
Total transactions with owners - - - (150.0) - (150.0)
Changes in ownership interests:
Dividends paid to non-controlling interest - - - - (2.1) (2.1)
Total changes in ownership interests - - - - (2.1) (2.1)
Total equity at 31 December 2024 15.1 707.7 (100.4) 1,660.1 14.4 2,296.9
Other reserves include the Capital Redemption Reserve of £0.9m (2023: £0.9m)
and the Translation Reserve of £(101.3)m (2023: £(11.2)m).
Group Statement of Cash Flows
for the year ended 31 December 2024
Note 2024 2023
£m
£m
Cash generated by operations
Adjusted operating profit 279.7 320.0
Exceptional items 2 (15.0) (35.8)
Amortisation of intangible assets arising on acquisition (37.2) (36.7)
Operating profit 227.5 247.5
Adjustments for:
Depreciation and amortisation 135.8 126.2
Impairments on intangible assets and property, plant and equipment - 22.0
Impairment of investment - 1.5
Loss on derivatives - 4.6
Loss on disposal and write-offs of intangible assets and property, plant and 0.6 0.2
equipment
Net provisions charged 13.4 5.6
Share-based payments 5.0 (4.2)
Non-cash pension expense 2.9 (4.4)
Net-monetary adjustment 5.0 6.3
Cash paid against operating provisions (7.3) (3.4)
Movement in inventories (39.3) 117.8
Movement in receivables 21.3 (19.0)
Movement in payables 38.9 (69.7)
Cash generated by operations 403.8 431.0
Interest paid (28.5) (24.2)
Tax paid (55.9) (69.3)
Net cash generated from operating activities 319.4 337.5
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired - (204.3)
Payment of contingent consideration - (9.6)
Purchase of property, plant and equipment (178.4) (180.4)
Receipt of government grants 43.0 10.9
Purchase of other intangible assets (3.4) (8.6)
Proceeds from sale of property, plant and equipment 0.9 4.0
Tax paid on business disposals (6.8) (4.6)
Settlement of acquisition-related FX derivatives - (23.9)
Cash paid against non-operating provisions (1.3) (1.6)
Interest received 6.9 8.3
Net cash used in investing activities (139.1) (409.8)
Cash flows from financing activities
New borrowings 440.4 336.0
Repayment of borrowings (449.4) (210.9)
Payment of lease liabilities (17.5) (17.0)
Net transactions in own shares (1.8) (9.8)
Dividends paid to equity shareholders 6 (152.2) (150.7)
Dividends paid to non-controlling interests (2.1) -
Net cash used in financing activities (182.6) (52.4)
Net movement in cash and cash equivalents (2.3) (124.7)
Cash and cash equivalents brought forward 150.2 281.6
Exchange differences (6.2) (6.7)
Cash and cash equivalents carried forward 141.7 150.2
Cash and cash equivalents carried forward comprise:
Cash at bank and in hand 166.8 172.5
Bank overdrafts (25.1) (22.3)
141.7 150.2
Group Statement of Cash Flows continued
Reconciliation to net debt
Note 2024 2023
£m
£m
Net movement in cash and cash equivalents (2.3) (124.7)
Net movement in borrowings and other financial liabilities 26.5 (108.1)
Change in net debt from cash flows 24.2 (232.8)
Loans in acquired businesses - (6.1)
Non-cash movement in lease liabilities (18.2) (12.9)
Exchange differences (0.7) 9.4
5.3 (242.4)
Net debt brought forward (537.6) (295.2)
Net debt carried forward (532.3) (537.6)
Notes to the Summary Financial Statements
1. Basis of preparation
The Company is a public limited company (Plc) incorporated and domiciled in
the UK. The address of its registered office is Cowick Hall, Snaith, Goole,
East Yorkshire DN14 9AA. The Company is listed on the London Stock Exchange.
The financial information set out above does not constitute the Group's
statutory financial statements for the years ended 31 December 2024 or 2023
but is derived from those financial statements. Statutory financial statements
for 2023 have been delivered to the Registrar of Companies and those for 2024
will be delivered following the Company's Annual General Meeting. The auditor
has reported on those financial statements; their reports were unqualified,
did not draw attention to any matters by way of emphasis without qualifying
their report and did not contain statements under s498(2) or (3) of the
Companies Act 2006.
Going concern basis
The consolidated financial statements for the year ended 31 December 2024 have
been prepared on a going concern basis which the Directors believe to be
appropriate for the following reasons:
At 31 December 2024 the Group had £1,075.8m of committed debt facilities
available from its banking group, USPP bondholders and lease providers, with
principal maturities between 2026 and 2030, of which £418.0m (2023: £381.2m)
was undrawn, together with cash balances of £166.8m (2023: £172.5m). The
Group's debt facilities have funding covenant requirements, principally the
leverage covenant with a maximum level of 3.5x net debt to covenant EBITDA,
and interest cover.
The Directors have reviewed the liquidity and covenant forecasts for the
Group's going concern assessment period covering at least 12 months from the
date of approval of the financial statements. Given the time horizon of these
forecasts, the risk of climate change is not expected to have a material
impact on these forecasts. Based on these forecasts, the Group continues to
have significant liquidity headroom and strong financial covenant headroom
under its debt facilities.
A reverse stress testing scenario has been performed which assesses that
adjusted operating profit would need to fall by almost 75% to trigger an event
of default prior to 30 June 2026. This scenario includes some mitigating
actions to conserve cash, including reducing dividends and capital
expenditure. Throughout this scenario, the Group continues to have significant
liquidity headroom. The Directors do not consider this a plausible scenario.
This is consistent with the bottom-up risk scenario modelling for the
long-term viability statement which considered severe but plausible,
individual, and combined scenarios, none of which trigger an event of default.
Accordingly, the consolidated financial statements have been prepared on a
going concern basis.
Climate change
The Group has long recognised the scale of the climate emergency and considers
this to offer both opportunities and risks in the future. The Group's current
climate change strategy focuses on reducing its carbon footprint and
increasing its use of bio-based raw materials, whilst the benefits in using
its ingredients will enable more carbon to be saved than is emitted through
operations and supply chain.
The impact of climate change has been considered in the preparation of these
financial statements, including the risks identified as part of the Task Force
on Climate-related Financial Disclosures (TCFD). None of these risks had a
material effect on the consolidated financial statements of the Group. In
particular, the Directors have considered the impact of climate change in
respect of the following areas:
· Going concern and viability of the Group over the next three years;
· Post-retirement benefit obligations;
· Carrying value and useful economic lives of property, plant and
equipment; and
· The discounted cashflows included in the value in use calculation
used in the annual goodwill impairment testing.
Whilst there is currently no material impact expected from climate change, the
Group is aware of the ever-changing risks related to climate change and will
continue to develop its assessment of the impact on the financial statements.
1. Basis of preparation continued
Changes in accounting policy
In preparing this financial information, management has used the principal
accounting policies that will be detailed in the Group's Annual Report for
2024 and which are unchanged from the prior year.
(a) New and amended standards adopted by the Group
A number of new amendments to standards and interpretations are effective for
annual periods beginning on or after
1 January 2024 and have been applied in preparing these consolidated financial
statements. None of these had a significant effect on the consolidated
financial statements of the Group.
(b) New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are
effective for annual periods beginning on or after 1 January 2025 and have not
been applied in preparing the consolidated financial statements. The Group is
assessing the impact of these new standards and the Group's financial
reporting will be presented in accordance with these standards from 1 January
2025, 1 January 2026 or 1 January 2027 as applicable.
2. Segmental information
The Group's sales, marketing and research activities are organised into three
global market sectors, being Consumer Care, Life Sciences and Industrial
Specialties. These are the segments for which summary management information
is presented to the Group's Executive Committee, which is deemed to be the
Group's Chief Operating Decision Maker.
There is no material trade between segments. Segmental results include items
directly attributable to a specific segment as well as those that can be
allocated on a reasonable basis.
2024 2023
£m
£m
Income statement
Revenue
Consumer Care 920.0 886.1
Life Sciences 504.3 602.3
Industrial Specialties 203.8 206.1
Total Group revenue 1,628.1 1,694.5
Adjusted operating profit
Consumer Care 160.2 160.3
Life Sciences 104.0 150.3
Industrial Specialties 15.5 9.4
Total Group operating profit (before exceptional items and amortisation of 279.7 320.0
intangible assets arising on acquisition)
Exceptional items and amortisation of intangible assets arising on acquisition (52.2) (72.5)
Total Group operating profit 227.5 247.5
In the following table, revenue has been disaggregated by sector and
destination. This is the primary management information that is presented to
the Group's Executive Committee.
Europe, Middle East & Africa North Latin Asia Reported
£m
Total
America America £m
£m
£m £m
Revenue 2024
Consumer Care 383.2 188.7 100.7 247.4 920.0
Life Sciences 173.5 156.1 72.5 102.2 504.3
Industrial Specialties 75.5 37.5 7.3 83.5 203.8
Total Group revenue 632.2 382.3 180.5 433.1 1,628.1
Revenue 2023
Consumer Care 375.1 189.7 89.4 231.9 886.1
Life Sciences 245.9 167.6 87.7 101.1 602.3
Industrial Specialties 69.2 39.3 8.3 89.3 206.1
Total Group revenue 690.2 396.6 185.4 422.3 1,694.5
2. Segmental information continued
Adjustments
2024 2023
£m
£m
Exceptional items - operating profit
Business acquisition costs (note 12) - (9.6)
Restructuring costs (3.0) (5.4)
Business transformation costs (3.5) -
Environmental provision (8.5) -
Goodwill impairment (note 7) - (20.8)
Exceptional items (15.0) (35.8)
Amortisation of intangible assets arising on acquisition (37.2) (36.7)
Total adjustments (52.2) (72.5)
The exceptional items in the current year relate to:
· the ongoing costs of changes to the Group's operating model,
announced in December 2023, which have been classified as exceptional due to
their size and one-off nature;
· business transformation costs where the Group has commenced the
planning and scoping of a significant Group wide business transformation
project during the year, including the planned upgrade of the Group's current
Enterprise Resource Planning (ERP) system. These costs have been presented as
exceptional items due to their size and one-off nature, with the benefit to
underlying performance from these costs to be realised in future years rather
than the current year; and
· an increase to environmental provisions related to one operational
and one non-operational site in the Americas. These costs have been presented
as exceptional items due to their size and one-off nature, with the cost
arising from historic contamination at those sites, rather than relating to
the ongoing activities of the Group.
The exceptional items in the prior year related to a goodwill impairment to
the carrying value of the Chinese SIPO Cash Generating Unit (CGU) in
Industrial Specialties, acquisition costs and restructuring costs associated
with changes to the Group's operating model.
3. Net financial costs
2024 2023
£m
£m
Financial costs
Interest payable on borrowings 25.8 20.2
Interest on lease liabilities 2.8 2.6
Other bank loans and overdrafts 2.3 3.1
Preference share dividend 0.1 0.1
31.0 26.0
Financial income
Bank interest receivable and similar income (6.9) (9.4)
Net interest on post-retirement benefits (4.4) (5.4)
(11.3) (14.8)
Net financial costs 19.7 11.2
4. Tax
2024 2023
£m
£m
Analysis of tax charge for the year
United Kingdom current tax (0.8) (1.5)
Overseas current tax 60.8 62.1
Global minimum top-up tax 1.2 -
Deferred tax (13.0) 3.6
48.2 64.2
The effective adjusted corporate tax rate before exceptional items of 23.0%
(2023: 23.9%) is lower than the UK's standard tax rate of 25.0%. The reported
corporate tax rate after exceptional items is 23.2% (2023: 27.2%).
The reported corporate tax rate after exceptional items was higher in the
prior year due to expenditure which was deemed capital in nature for tax
purposes being incurred in 2023.
Croda operates in many tax jurisdictions other than the UK, both as a
manufacturer and distributor and it is the exposure to these different tax
rates that makes it difficult to forecast the Group's future tax rate with any
certainty given the unpredictable nature of exchange rates, individual
economies and tax legislators. Following the increase in the UK statutory rate
of tax to 25.0%, the Group's non-UK profits are taxed at an average rate that
is lower than the UK rate.
Croda's effective corporate tax rate has decreased as a result of tax
incentive claims and prior year adjustments which includes the release of tax
provisions. The movement in temporary differences includes the movement in tax
losses, whilst in the prior year unutilised tax losses not recognised through
deferred tax were disclosed separately. The presentation has been aggregated
to provide simplicity in reporting of temporary differences. Otherwise, there
are no significant adjustments between the Group's expected and reported tax
charge based on its reported accounting profit. Given the global nature of the
Group, and the number of associated cross-border transactions between
connected parties, we are exposed to potential adjustments to the price
charged for those transactions by tax authorities. However, the Group carries
appropriate provisions relating to the level of risk.
5. Earnings per share
2024 2023
pence
pence
Adjusted earnings per share 142.6 167.6
Impact of exceptional items, amortisation of intangible assets arising on (29.1) (45.1)
acquisition and the tax thereon
Basic earnings per share 113.5 122.5
6. Dividends paid
Pence per 2024 Pence per 2023
share
£m
share
£m
Ordinary
Interim
2023 interim, paid October 2023 - - 47.0 65.6
2024 interim, paid October 2024 47.0 65.6 - -
Final
2022 final, paid May 2023 - - 61.0 85.1
2023 final, paid May 2024 62.0 86.6 - -
109.0 152.2 108.0 150.7
The Directors are recommending a final dividend of 63p per share amounting to
a total of £87.9m in respect of the financial year ended 31 December 2024.
Subject to shareholder approval, the dividend will be paid on 28 May 2025 to
shareholders registered on 11 April 2025. The total proposed dividend for the
year ended 31 December 2024 will be 110p per share amounting to £153.5m.
7. Intangible assets
2024 2023
£m
£m
Opening net book amount 1,408.5 1,253.2
Exchange differences (61.3) (24.7)
Additions 3.4 8.8
Acquisitions - 233.8
Disposals and write offs (0.1) (1.0)
Reclassifications from property, plant and equipment 2.4 0.2
Amortisation charge for the year (42.3) (41.0)
Impairments - (20.8)
Closing net book amount 1,310.6 1,408.5
Intangible asset amortisation is recorded in operating costs.
During the prior year an impairment of £20.8m was recorded in relation to
goodwill arising on the acquisition of SIPO. This impairment principally
reflected the decline in the profitability of the business in the period
driven by adverse external market conditions, impacting both demand and
pricing, which are expected to continue over the medium term. This impairment
is recorded in the income statement as an exceptional item within operating
costs and is within the Industrial Specialties operating business segment.
A change to the Group's Cash Generating Unit (CGU) structure utilised for
goodwill impairment purposes has been completed during the year, further
detail is provided in note 9.
8. Property, plant and equipment
2024 2023
£m
£m
Opening net book amount 1,044.0 964.5
Exchange differences (12.1) (37.4)
Additions 132.1 181.1
Acquisitions - 9.2
Disposals and write offs (1.3) (2.3)
Reclassifications to intangible assets and right of use assets (2.5) (0.2)
Depreciation charge for the year (77.3) (69.7)
Impairments - (1.2)
Closing net book amount 1,082.9 1,044.0
During the year the Group recognised government grant funding of £36.8m
(2023: £18.3m) relating to the US cGMP scale up project and UK Pharma
production capacity expansion project. Grant income is deducted from the cost
of the associated asset within the additions line above. During the prior
year, plant and equipment was impaired by £1.2m. This impairment was recorded
in the income statement as an exceptional item within operating costs.
9. Significant accounting judgements and estimates
The Group's significant accounting policies under UK-adopted international
accounting standards have been set by management with the approval of the
Audit Committee. The application of these policies requires estimates and
assumptions to be made concerning the future and judgements to be made on the
applicability of policies to particular situations. Estimates and judgements
are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be
reasonable under the circumstances. Under UK-adopted international accounting
standards an estimate or judgement may be considered significant if it has a
significant effect on the amounts recognised in the financial statements or if
the estimates have a risk of material adjustment to assets and liabilities
within the next financial year.
The significant accounting judgement required when preparing the Group's
accounts is as follows:
Goodwill impairment
The Group has revised its Cash Generating Unit (CGU) structure during the year
as there has been a change in the way it monitors strategy and financial
performance. A revised operating model was implemented at the start of 2024
which has resulted in a simplified and more cost-effective organisational
structure to provide clear accountabilities and enhanced customer focus.
Accounting standards require that CGU structure is reassessed when there have
been significant changes to the way the Group monitors performance or there
are other relevant factors which would indicate the current CGU structure is
no longer appropriate. The Group has concluded that the revised operating
model change required the Group to perform a reassessment of the CGU structure
used for goodwill impairment.
9. Significant accounting judgements and estimates continued
The determination of the Group's CGU structure requires significant judgement
to assess and conclude on what the most appropriate CGU structure is. The
assessment performed considered the CGUs previously identified and the extent
to which their separate identification remained appropriate. The Group
considered the way in which strategy and financial performance is assessed,
alongside the level of integration of the CGU with the wider Group and the
extent to which the Group has the ability to identify independent separate
cash inflows for the acquired businesses from those of the remaining Group.
The Group specifically considered whether, if the update to CGU structure was
not completed, there would have been indicators of impairment to the previous
standalone CGUs. This review considered factors known to the Directors and
considered financial performance and information up to the time of the Group's
interim results in June 2024. No impairment indicators were identified in this
review.
As a result of this review, the CGU structure of the Group was revised and
resulted in a reduction in the number of standalone CGUs from ten to four
(including the three operating business segment CGUs). The remaining
Standalone CGU is Fragrances & Flavours (F&F), a combination of the
previous separate Fragrances and Flavours CGUs. There is more limited
structural integration of F&F within the wider Group when compared to
other recent acquisitions, and it remains a separate Business unit within the
Consumer Care sector. The Group does not separately monitor performance of the
individual Fragrances and Flavours businesses, and instead considers them as
one Business unit. As a separate Business unit within Consumer Care, financial
performance including cash flows of the acquired F&F business is more
closely monitored than for other recently acquired businesses at a Group
level. The Group have therefore concluded that F&F should be one
Standalone CGU for goodwill impairment testing purposes.
For the remaining standalone CGUs identified in the prior year (Incotec,
Biosector, Avanti, Alban Muller and Croda Korea (formerly Solus Biotech)) the
Group has concluded that they should no longer be recognised as separate CGUs.
This is on the basis that the financial performance of these acquired
businesses is not separately monitored by the Group following a high level of
integration of assets and cash inflows with that of the wider Group. Strategy
and financial performance for these acquisitions is considered as part of the
operating segment reporting.
The significant accounting estimates required when preparing the Group's
accounts are as follows:
Post-retirement benefits
The Group's principal retirement benefit schemes are of the defined benefit
type. Year-end recognition of the liabilities under these schemes and the
valuation of assets held to fund these liabilities require a number of
significant assumptions to be made, relating to key financial market
indicators such as inflation and expectations on future salary growth and
asset returns. These assumptions are made by the Group in conjunction with the
schemes' actuaries and the Directors are of the view that any estimation
should be appropriate and in line with consensus opinion. The critical
accounting estimate specifically relates to the Group's UK scheme, given the
size of the liabilities and their sensitivity to underlying assumptions. Small
changes in these assumptions could result in a material adjustment to carrying
values in the next financial year.
2024 2023
£m
£m
Opening net retirement benefit surplus 86.7 100.1
Current service cost (10.1) (10.0)
Net interest income 4.4 5.4
Employer contributions 7.1 14.2
Benefits paid 0.2 0.2
Remeasurements 15.5 (23.3)
Acquisitions - (0.4)
Business disposal - 0.5
Exchange differences on overseas schemes 0.5 -
Closing net retirement benefit surplus 104.3 86.7
Total market value of assets 897.6 967.1
Present value of scheme liabilities (781.4) (867.3)
Net pension plan asset 116.2 99.8
Post-employment medical benefits (11.9) (13.1)
Net retirement benefit surplus 104.3 86.7
Analysed in the balance sheet as:
Retirement benefit assets 130.0 113.5
Retirement benefit liabilities (25.7) (26.8)
Net retirement benefit surplus 104.3 86.7
9. Significant accounting judgements and estimates continued
The sensitivity of the defined benefit obligation to changes in the
significant assumptions is as follows:
Impact on retirement benefit obligation
Sensitivity Of increase Of decrease
Discount rate 0.5% 5.8% 6.4%
Inflation rate 0.5% 3.9% 3.9%
Mortality (assumes a one-year change in life expectancy) 1 year 3.8% 3.8%
The above sensitivity analyses are based on a change in an assumption while
holding all other assumptions constant. In practice, this is unlikely to
occur, and changes in some of the assumptions may be correlated. When
calculating the sensitivity of the defined benefit obligation to significant
actuarial assumptions, the same method (present value of the defined benefit
obligation calculated with the projected unit credit method at the end of the
reporting year) has been applied as when calculating the retirement benefit
obligation recognised in the Group balance sheet.
10. Financial instruments
Financial risk factors
The Group's activities expose it to a variety of financial risks; currency
risk, interest rate risk, liquidity risk, and credit risk. The Group's overall
risk management strategy is approved by the Board and implemented and reviewed
by the Risk Management Committee. Detailed financial risk management is then
delegated to the Group Finance department which has a specific policy manual
that sets out guidelines to manage financial risk. Regular reports are
received from all sectors and regional operating units to enable prompt
identification of financial risks so that appropriate action may be taken. In
the management definition of capital the Group includes ordinary and
preference share capital and net debt.
These summary financial statements do not include all financial risk
management information; full disclosures will be available in the Group's
annual financial statements for the year ended 31 December 2024.
Financial instruments measured at fair value use the following hierarchy;
· Quoted prices (unadjusted) in active markets for identical assets
or liabilities (level 1),
· Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices) (level 2),
· Inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs)
(level 3).
All of the Group's financial instruments are classed as level 2 with the
exception of other investments, which are classed as level 3.
Fair values
For financial instruments with a remaining life of greater than one-year, fair
values are based on cash flows discounted at prevailing interest rates.
Accordingly, the fair value of cash deposits and short-term borrowings
approximates to the book value due to the short maturity of these instruments.
The same applies to trade and other receivables and payables (excluding
continent consideration which is discounted using a risk-adjusted discount
rate).
Where there are no readily available market values to determine fair values,
cash flows relating to the various instruments have been discounted at
prevailing interest and exchange rates to give an estimate of fair value.
In January 2020 the existing US$100m fixed rate 10 year note matured and was
repaid, this was replaced with a new US$100m fixed rate 10 year note (27
January 2020). On 27 June 2016, the Group issued £100m (£70m and £30m) and
€100m (€70m and €30m) of fixed rate notes. On 6 June 2019, the Group
issued a further £65m, €50m and US$60m of fixed rate notes. In June 2023,
the existing £30m and €30m fixed rate 7 year notes matured and were repaid.
10. Financial instruments continued
The table below details a comparison of the Group's financial assets and
liabilities where book values and fair values differ.
Book Fair Book Fair
value
value
value
value
2024
2024
2023
2023
£m
£m
£m
£m
US$100m 3.75% fixed rate 10 year note (79.9) (71.2) (78.5) (71.5)
€70m 1.43% fixed rate 10 year note (57.9) (56.6) (60.8) (58.2)
£70m 2.80% fixed rate 10 year note (70.0) (67.2) (70.0) (66.1)
€50m 1.18% fixed rate 8 year note (41.3) (39.6) (43.5) (40.9)
£65m 2.46% fixed rate 8 year note (65.0) (60.3) (65.0) (59.8)
US$60m 3.70% fixed rate 10 year note (47.9) (44.3) (47.1) (43.7)
11. Related party transactions
The Group has no related party transactions, with the exception of
remuneration paid to key management and Directors.
12. Business combinations
On 4 July 2023 the Group successfully completed the acquisition of 100% share
capital of Solus Biotech Co Ltd ('Solus'), a global leader in premium,
biotechnology-derived active ingredients for beauty care (Consumer Care
sector) and pharmaceuticals (Life Sciences sector) employing 95 people in
South Korea. The business was acquired for a total cash consideration of
£227.4m with total identifiable net assets of £97.9m, generating goodwill of
£129.5m. The acquisition provided access to Solus' existing biotech-derived
ceramide and phospholipid technologies, and its emerging capabilities in
natural retinol. This acquisition significantly strengthens Croda's Beauty
Actives portfolio and increases its exposure to targeted prestige segments.
Located in South Korea, Solus expands Croda's Asian manufacturing capability
and creates a new biotechnology R&D hub in the region. Post-acquisition
the entity has changed its name to Croda Korea Ltd.
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