Group Performance Overview

Croda International Plc ("Croda" or the "Group") has announced its financial results for the first half of 2024, covering the six months ending June 30, 2024. The company reported that its performance aligns with expectations, benefiting from stable market conditions and ongoing operational improvements. The Group experienced a sequential improvement in sales compared to the second half of 2023, driven primarily by growth in Consumer Care and Industrial Specialties segments.

Segment Performance

In the Consumer Care segment, Croda recorded growth across all regions on a constant currency basis. The Industrial Specialties segment also contributed positively, with increased sales reflecting greater efficiency in the company's manufacturing model. The company highlighted a rise in New and Protected Product (NPP) sales, which increased to 36% of total sales, up from 34% in the first half of 2023, indicating a strong demand for innovation.

However, the Life Sciences segment underperformed, largely due to lower demand in Crop Protection. Despite this, Pharma sales saw a 3% increase compared to the second half of 2023, excluding the impact of COVID-19 lipids. The segment faced challenges with ongoing destocking in consumer health products.

Financial Highlights

Croda's adjusted operating margin stood at 16.6%, down from 20.0% in the first half of 2023, but marking a 1.6 percentage point improvement from the second half of 2023 when excluding the effects of COVID-19 lipids. The Group reported an IFRS profit before tax of ￡106.1 million, down from ￡128.7 million in H1 2023. Adjusted profit before tax was ￡127.3 million, compared to ￡174.3 million in the prior year, or ￡133.8 million at constant currency.

The company reported strong cash flow, with free cash flow increasing by 69% to ￡122.7 million, up from a restated ￡72.8 million in H1 2023. This improvement was driven by a ￡43.5 million working capital inflow and reduced capital expenditure. Net debt decreased to ￡507.9 million, down from ￡537.6 million at the end of 2023, reflecting a resilient balance sheet with a leverage ratio of 1.4x.

Strategic Developments

Croda continues to focus on delivering returns from recent investments and has maintained its interim dividend at 47.0p, the same as in H1 2023. The company is positioning its portfolio for earnings growth, particularly in the Consumer Care segment, which is experiencing increased demand for sustainable ingredients.

In the Beauty Actives sub-segment, Croda saw significant growth, especially in China, driven by sales to local and regional customers. Beauty Care sales also improved sequentially, benefiting from more stable demand and regained sales in the U.S. The Fragrance & Flavors (F&F) segment continues to grow ahead of its 'tier one' peers, while innovation in Home Care is driving double-digit sales growth.

The Life Sciences segment remains challenged by lower Crop Protection demand and ongoing destocking in consumer health, though there is notable growth in strategic Pharma platforms. Croda is expanding sales of delivery systems for nucleic acid and protein-based drugs as customer pipelines grow. The introduction of new drug delivery technologies, such as novel lipid-based adjuvants, is also contributing to sales.

Operational Progress

Croda has made significant strides in its operational framework, including the appointment of a new Group Chief Financial Officer and a President for the Life Sciences division. The company’s new organizational structure is yielding benefits in customer engagement, employee satisfaction, and operational efficiency. Robust cost control measures are expected to improve the Group's margin by about half a percentage point this year.

Highlights

• Croda reported stable performance in H1 2024, with a sequential improvement in Group sales driven by Consumer Care and Industrial Specialties.
• Adjusted operating margin was 16.6%, down from 20.0% in H1 2023 but up 1.6 percentage points from H2 2023 when excluding COVID-19 lipids.
• IFRS profit before tax was ￡106.1 million, and adjusted profit before tax was ￡127.3 million.
• Free cash flow increased by 69% to ￡122.7 million, with net debt reduced to ￡507.9 million.
• The Consumer Care segment showed growth across all regions, with strong performance in Beauty Actives and Home Care innovation driving double-digit sales growth.
• Life Sciences underperformed due to lower Crop Protection demand, though Pharma sales increased by 3% compared to H2 2023.
• Croda's strategic and operational initiatives, including new leadership appointments, are expected to enhance margins and drive future growth.

Data Source: https://www.croda.com/en-gb/media-hub/news/half-year-2024-results