Croda Reports Stable H1 2024 Performance Amid Market Challenges

Croda International Plc ("Croda" or "the Group") has announced its financial results for the first half of 2024, reflecting a performance in line with expectations. The Group witnessed a sequential improvement in sales, primarily driven by Consumer Care and Industrial Specialties, despite challenges in the Life Sciences sector.

Video source: Croda official YouTube channel

Improvement in Group Sales and Operating Margin

In the first half of 2024, Croda saw a sequential improvement in Group sales compared to the second half of 2023, driven by growth in Consumer Care across all regions and positive momentum in Industrial Specialties. According to the company, "New and Protected Product (NPP) sales rose to 36% (H123: 34%), reflecting higher demand for innovation." The Group also achieved a sequential improvement in adjusted operating margin (excluding CV19 lipids), bolstered by higher sales volumes, increased capacity utilization, price discipline, and robust cost control.

Financial Performance Overview

For the first half of 2024, Croda reported an adjusted operating margin of 16.6%, slightly below the 20.0% recorded in the first half of 2023, but 1.6 percentage points higher than in the second half of 2023 (excluding CV19 lipids). The Group's IFRS profit before tax stood at ￡106.1 million, compared to ￡128.7 million in the first half of 2023. Adjusted profit before tax was ￡127.3 million, or ￡133.8 million at constant currency, down from ￡174.3 million in the previous year.

Strong Cash Flow and Balance Sheet

Croda demonstrated strong cash flow performance with free cash flow increasing by 69% to ￡122.7 million, supported by a ￡43.5 million working capital inflow. The Group's net debt decreased to ￡507.9 million from ￡537.6 million at the end of 2023, resulting in a resilient balance sheet with a leverage ratio of 1.4x. The interim dividend was maintained at 47.0p, consistent with the first half of 2023, reflecting the company's commitment to delivering returns from recent investments.

Sector Performance

Consumer Care continued to grow in key markets, particularly in Beauty Actives, which saw strong growth in China driven by local and regional customers. "Sequential improvement in Beauty Care sales was observed due to more stable demand and regained sales in the USA," the company stated. Additionally, Home Care innovation led to double-digit percentage sales growth, while the Fragrance & Flavour (F&F) segment continued to outpace 'tier one' peers.

In contrast, Life Sciences experienced weaker sales due to lower demand in Crop Protection and ongoing destocking in consumer health, although Pharma sales grew by 3% compared to the second half of 2023. Croda highlighted growth in sales of delivery systems for nucleic acid and protein-based drugs as customer pipelines expanded. The company also noted the development of novel lipid-based adjuvants contributing to sales and efforts to innovate sustainable Crop Protection solutions.

Operational Progress and Leadership

Croda made significant strides in strengthening its senior leadership team, including the appointments of a new Group Chief Financial Officer and President of Life Sciences. The company also implemented a new organizational structure aimed at delivering benefits to customers, employees, and operational efficiency. Croda expects that "robust cost control will benefit Group margin by about half a percentage point this year."

Outlook

Looking ahead, Croda remains optimistic about its performance in Consumer Care, key strategic Pharma platforms, and Industrial Specialties, with improving operating margins anticipated. However, the Group is cautious about the weaker-than-expected performance in Life Sciences, particularly in Crop Protection, where destocking is likely to persist. As a result, Croda now expects its adjusted profit before tax for the full year 2024 to be between ￡260 million and ￡280 million at constant currency.

Highlights

• Croda reported sequential improvement in Group sales driven by Consumer Care and Industrial Specialties.
• Adjusted operating margin improved to 16.6%, driven by higher sales volumes and cost control.
• Free cash flow increased by 69% to ￡122.7 million, with net debt reduced to ￡507.9 million.
• Life Sciences performance was impacted by lower demand in Crop Protection and continued destocking in consumer health.
• Croda maintains its interim dividend at 47.0p, reflecting its commitment to shareholder returns.

Data source: https://www.croda.com/en-gb/media-hub/news/half-year-2024-results; https://www.youtube.com/watch?v=LUtfKY6uKcQ;