Excellent first half performance driving profit growth

Excellent first half performance

Delivered record sales, margin and profit

• Sales up 21%, driven by pricing and improved mix
• Adjusted profit before tax up 26%, reflecting sales growth and higher return on sales, up 70 bps to 26.6% (2021: 25.9%)  
• IFRS profit before tax of £636.5m (2021: £204.1m), including £360.6m profit on strategic divestment
• Lower free cash flow reflecting investment in working capital to support sales growth

Strong operating model underpinning strategic progress

• Strength and depth of portfolio – growth in adjusted profit delivered across Croda businesses
• Continued recovery of unprecedented raw material and cost inflation

Transition to pure-play Consumer Care and Life Sciences business

• Divestment of majority of Performance Technologies and Industrial Chemicals (“PTIC”; excludes Sipo in China in which Croda has a 65% shareholding)
• Creates stronger margin, higher return, less cyclical and lower carbon intensive business
• Increases proportion of sales from New and Protected Products (“NPP”)
• Redeployment of divestment proceeds underway – enhanced organic investment programme to drive future growth, supported by up to £75m of government co-investment to expand capabilities in pharmaceutical delivery systems

Growth across all sectors and regions

Strong Consumer Care performance, with sales up 24% and adjusted operating profit 34% higher

• Sales growth across all four businesses, led by recovery in Beauty Care over last 18 months
• F&F synergy delivery underway to meet 2025 target, with new geographic presence added
• Margin expansion – return on sales of 26.6% (2021: 24.6%)

Life Sciences building on exceptional prior year, with sales up a further 14% and adjusted operating profit 4% higher

• Strong Crop Protection performance, supported by robust market conditions
• Good growth of speciality excipients and vaccine adjuvants in Health Care
• COVID demand in lipid systems moderating; encouraging pipeline of non-COVID applications
• Continued best in class margin – return on sales of 36.0% (2021: 39.3%)

Good result in Performance Technologies, with price/mix driving sales 23% higher and return on sales of 18.3% (2021: 15.6%)

Steve Foots, Chief Executive Officer, commented:

“This is an excellent first half performance, with record sales, margin and profit driven by the strength of our operating model, which enabled continued recovery of unprecedented cost inflation, and the ongoing successful implementation of our strategy.

“A strong Consumer Care performance saw expanded sales of our sustainable technologies, increased geographic coverage in fragrances and margin expansion. The increasing depth and diversity of our Life Sciences portfolio was evident in a strong result in Crop Protection, whilst Health Care built on an exceptional 2021 performance and is developing an exciting pipeline of non-COVID applications.

“With the successful divestment of the majority of our industrials business, our transition to a pure-play Consumer Care and Life Sciences business continues. Croda is becoming a stronger margin, higher return, less cyclical and lower carbon intensive business. Our focused platform and strategy are enhancing both our full year expectations and our medium-term growth prospects.”

Outlook

Croda has delivered strong growth in the first half year, with profit ahead of expectations. As a result, we expect full year adjusted profit before tax to be modestly ahead of previous expectations. Growth in the second half year is expected to moderate in consumer markets, together with lower sales in lipid systems on reduced COVID vaccine demand, with full year total lipid sales now expected to be US$150m, compared with US$230m in 2021. The improved full year outlook reflects the enhanced strength and breadth of Croda’s portfolio, including a more resilient Consumer Care growth platform, strong ongoing demand in Crop Care, albeit against a tougher second half comparator, and Health Care enjoying good growth overall. Growth beyond 2022 is further supported by a strong innovation pipeline, notably in non-COVID Health Care applications, and our targeted capital investment programme.