Half year 2023 results

Group performance in line with revised June 2023 expectations; full year 2023 guidance reaffirmed

Pro forma sales down 6% as customers reduce inventory levels in consumer, crop, and industrial markets

• Flat sales in Consumer Care, against a strong prior period
• Sales up 8% in Life Sciences, excluding $62m prior period Covid-19 lipid sales
• Sales fell 20% in Industrial Specialties, after adjusting for the PTIC divestment in the prior period

£128.7m IFRS profit before tax (H122: £636.5m); prior period benefiting from £360.6m divestment profit

Adjusted profit before tax £174.3m (H122 pro forma (pf): £256m)

• 20.0% operating margin (H122 pf: 28%), impacted by lower volumes and phasing of Covid-19 lipid sales
• Temporary cost measures introduced to protect profitability

Improved free cash flow; lower working capital outflow more than offsetting lower profit and higher capex

Interim dividend maintained at 47.0p (H122: 47.0p), reflecting confidence in future performance

Sector performance benefiting from diversification across seven growth businesses

Continued sequential improvement in Consumer Care with sales volumes up 8% vs H222

• Sales of new and protected products (NPP) remain strong at 40% of total sales (H122: 40%)
• Sales up slightly in Beauty Actives with positive mix; volume improvement strongest in Beauty Care
• 20% sales growth in F&F; driving synergies and Croda-enabled growth

Continued progress across Life Sciences 

• Good sales growth in Seed Enhancement and Pharma, excluding prior period Covid-19 lipid sales
• Crop Protection grew sales but experienced rapid destocking in Q2
• Covid-19 lipid shipments still expected in Q4; supporting growing pipeline of other nucleic acid drugs

Lower Industrial Specialities sales and operating margin reflecting destocking and reduced demand

Continued investment and strategic progress

Leveraging strong balance sheet to invest in fast-growing niches

• Investing in innovation in Asia with new R&D labs in Shanghai, China and Hyderabad, India
• Partnering to access critical technology and scaling up Pharma; new capacity on-stream in 2025
• Completed KRW350bn (c£232m) Solus Biotech acquisition on 4 July 2023, adding biotech-derived actives

‘Doing the basics brilliantly’ programme to drive ongoing efficiencies

• Improving employee productivity and responsiveness by simplifying operating processes
• Continuing to enhance customer experience with new online order portal and self-serve data

Steve Foots, Chief Executive Officer, commented:
“The speed and scale of the post-Covid stocking and subsequent destocking has been unprecedented, leading to a decline in first half sales volume and also impacting profit margin. Despite this difficult market backdrop, it is testament to the strength of the Croda business that Consumer Care delivered sequential improvement on the second half of 2022, driven by customer demand for innovation and sustainability. Excluding the impact of Covid-19 lipid sales in the prior period, we also saw growth across all areas of Life Sciences. With continued low visibility, we are taking some actions to protect profitability ahead of conditions returning to normal, while continuing to leverage our strong balance sheet to invest in future growth. The confidence we have in Croda’s strategy is undiminished and the opportunities ahead remain very exciting for our business.”

Outlook
With customer destocking in Consumer Care, Crop Protection and Industrial Specialities continuing into the second half of the year, we continue to expect full year 2023 Group adjusted profit before tax to be between £370m and £400m. We will leverage our strong balance sheet to sustain ongoing investment in our repositioned portfolio, focused on fast-growing niches, to create significant future value.