Croda International Plc

Good morning, everyone. So many thanks for joining us for today's presentation. And it's great to be with you all. As well as running through our financial results, we're going to do a deeper dive on the plan we're expecting to grow, executing to grow earnings and improve results. And we will also set out our financial framework for the next three years. So a slightly longer presentation than normal, which Stephen and I will carve up between us before taking your questions at the end. So, starting with our performance in 2025. Overall, we're pleased with how the business has performed in a very uncertain environment. Sales grew 7% in constant currency, reflecting the benefits of a much stronger portfolio. And sales of patented ingredients were up 9%, with demand for innovation at its highest level since before the pandemic. And our net promoter scores increased by 11 points as service, collaboration and more importantly than that, trust continued to improve across our customer base. And whilst margins remain well below where we want them to be, they improved both in consumer care and in life sciences, contributing to an 8% increase in profits with PBT in line with our guidance. Free cash flow also improved in the second half due to lower working capital and capex strengthening our balance sheet. So good progress. There's much more to do, but our actions are beginning to bear fruit, which is encouraging. So more from me shortly, but first over to Stephen for the numbers.

Thank you, Steve. Good morning, everyone. I'll start with the financial headlines for the full year before taking you through our sales for the fourth quarter. So in constant currency, sales were up 7% to 1.7 billion. Adjusted operating profit was up 8% at 295 million. And adjusted profit before tax also grew 8% to 276 million. Free cash flow was 162 million, supported by reduced capex and lower working capital in the second half. Net debt was 524 million, with leverage of 1.3 times EBITDA. And we proposed a final dividend of 63 pence, bringing the full year dividend to 111 pence, a small increase on the prior year. Turning to sales for the fourth quarter. These are up 5% in constant currency, slightly stronger than we expected. Our consumer care business was up 9%, driven by another strong quarter in fragrances and flavours, and supported by higher growth in beauty actives. Life sciences were up 8%. Within this, pharma delivered its strongest quarter of the year, driven by higher excipient sales. and momentum continued in crop protection with sales up 12%, though we expect this to slow going into 2026. Industrial Specialties was down 19% against a particularly strong quarter in the prior year. The trends we saw in the third quarter continued into the fourth, with volume growth moderating, a more favourable mix than the first half, and like-for-like prices largely consistent with the previous year. Turning to sales now for the full year, we delivered growth of 7% in constant currency, despite an uncertain trading environment. Consumer care sales finished up 8%, with another standout year for F&F, which grew 15%. Beauty actives was up 6% and beauty care grew 4% supported by higher volumes. Life sciences grew 8% with crop protection up 14% as demand returned after an extended period of destocking. Seed enhancement continued to live a good growth of 8%. and pharma sales grew 4%, which was below our expectations, as US policy impacted sales of vaccine adjuvants. Finally, industrial specialties was down 2%, as direct sales growth largely offset a decline with Cargill, which now represents just 20% of IS sales. There was growth across all regions, led by EMEA, where sales were up 9%. Asia lagged other regions as customer exports in pharma and industrial markets were impacted by US tariffs. And growth in North America improved in the second half, supported by a recovery in beauty. As Steve said, we're starting to see early progress from our business transformation. This chart shows how operating margin progressed over the year from 17.2% to 17.4%. Sales growth delivered an uplift of 0.7 percentage points as higher volumes were partially offset by price mix, which was mainly mix. There was also a 1.6 percentage point benefit from transformation cost savings. This more than offset inflation and the costs associated with recent investments coming online. Unfortunately, a foreign exchange headwind of almost 1% masked this margin recovery. With cost savings gaining momentum, second half operating margin was 17.6%, giving us confidence margins will continue to expand over the coming years. Turning now to profit. This shows a bridge of adjusted profit before tax of £276 million to reported profit before tax of £91 million. In addition to recurring amortisation of acquired intangibles, there were exceptional charges of £150 million. We incurred exceptional cash costs relating to transformation of £26 million, including redundancy charges. The rest was largely non-cash. This includes a $45 million full impairment of our lipid site at Lamar in the US, with an associated onerous contract provision of $16 million for standby costs. We've carried out a detailed review of our pharma lipid capacity across our four sites, and whilst we remain excited about the future, we have adequate capacity across three sites to satisfy medium term demand. So we've decided not to start commercial production at Lamar and have instead placed the facility in standby mode. This eliminates future financial exposure and cost while fulfilling our commitment to the US government, who provided most of the site's funding to produce lipids in the event of another pandemic. Other non-cash charges of 62 million include a 29 million write-off for assets under construction, which will save CAPEX, following a detailed review of future investment requirements. A 22 million impairment for closure of our UK distribution centre, which we announced last summer, as we optimise our European supply chain. And an 11 million impairment of acquired technology intangible assets, where we've discontinued certain development programmes. There are likely to be further impairments as we continue to optimise our footprint. Moving now to free cash flow and net debt. EBITDA increased 5% to £397 million. As you can see, there was a working capital outflow of 8 million compared to an inflow of 21 million in the prior year when we benefited from the settlement of a £48 million one-off COVID receivable. Typically, I'd expect a working capital outflow of between 20 and 30 million to fund growth each year, but we can reduce this by making structural improvements, which I will come back to later. Following a detailed review of current and future investments, capex reduced from 138 million to 108 million, below our guidance of 135. Combined with stronger earnings, this supported free cash flow of 162 million. After paying the dividend and purchasing shares for our employee share ownership plan, net debt reduced slightly to 524 million. Leverage improved from 1.5 times EBITDA at the end of June to 1.3 times at year end. Turning to guidance, where my comments are in constant currency. We expect adjusted operating profit to be in line with current market expectations, with organic sales growth of 3% to 6% and a further increase in operating margin. First quarter sales are expected to be similar to the same quarter in 2025, which is a strong comparator with growth of 9%. And we expect sales to split roughly 50-50 between the first and second half. So in summary, We delivered good growth in 2025 despite uncertain end markets. And we're encouraged by early signs that the transformation programme is improving both margin and returns. Now back to Steve to take you through our plans.

Many thanks, Stephen. So the plan we're executing builds on the five points we talked about last year. It combines growth actions with transformation initiatives. to drive improved performance. And it's all about growth and efficiency. We need them both. And that's starting to happen, and we expect that to continue. I'm going to spend some time on what we're doing to deliver more consistent growth. So what we're specifically doing to refocus innovation, improve customer experience, and maximise returns from investments to drive consistent growth in key markets such as beauty and pharma. I'm really pleased with the progress being made, executing on our transformation initiatives. The whole business has responded well. And as we've pushed hard to deliver change quickly, the organisations responded. And by implementing permanent structural improvements, we're becoming a more efficient company. We are streamlining our supply chain and procurement, digitalising key processes and exploiting the use of AI and data in the business. So it's all about simplifying, modernising and standardising the way we do things across the business to make both the customer and the employee experience a much better one. This is leading to an improved financial performance, which Stephen will expand on in a moment. So before I come back to our actions, I want to talk through the foundations of our plan, which are Crota's core strengths. There's three things that sets apart, I believe, from our competitors. Firstly, it's our business model. It's fundamentally a differentiating model built on the importance we place on customer intimacy through direct selling. This allows us to better understand the unmet needs of our customers and drive innovation. And you're starting to see that come through. Secondly, it's our core capabilities. We have a leadership position in both innovation and sustainability across all key markets. And we make it very difficult for our customers to formulate out our products. And thirdly, not last, on the right there is our portfolio. We've come to the end of a period of significant portfolio investment, and it's now pointed to higher growth and focused on niche markets with compelling long-term trends. This has enabled good year-on-year growth over the last 18 months.

We incurred exceptional cash costs relating to transformation of 26 million, including redundancy charges. The rest was largely non-cash. This includes a 45 million full impairment of our lipid site at Lamar in the US, with an associated onerous contract provision of 16 million for standby costs. We've carried out a detailed review of our pharma lipid capacity across our four sites. And whilst we remain excited about the future, we have adequate capacity across three sites to satisfy our medium term demand. So we've started decided not to start commercial production at Lamar and have instead placed the facility in standby mode. This eliminates future financial exposure and cost while fulfilling our commitment to the US government, who provided most of the site's funding to produce lipids in the event of another pandemic. Other non-cash charges of 62 million include a 29 million write-off for assets under construction, which will save CapEx, following a detailed review of future investment requirements. A 22 million impairment for closure of our UK distribution centre, which we announced last summer as we optimise our European supply chain. And an 11 million impairment of acquired technology intangible assets, where we've discontinued certain development programmes. There are likely to be further impairments as we continue to optimise our footprint. Moving now to free cash flow and net debt. EBITDA increased 5% to £397 million. As you can see, there was a working capital outflow of £8 million compared to an inflow of £21 million in the prior year when we benefited from the settlement of a £48 million one-off COVID receivable. Typically, I'd expect a working capital outflow of between 20 and 30 million to fund growth each year, but we can reduce this by making structural improvements, which I will come back to later. Following a detailed review of current and future investments, CapEx reduced from 138 million to 108 million, below our guidance of 135. Combined with stronger earnings, This supported free cash flow of 162 million. After paying the dividend and purchasing shares for our employee share ownership plan, net debt reduced slightly to 524 million. Leverage improved from 1.5 times EBITDA at the end of June to 1.3 times at year end. Turning to guidance where my comments are in constant currency. We expect adjusted operating profit to be in line with current market expectations, with organic sales growth of 3% to 6% and a further increase in operating margin. First quarter sales are expected to be similar to the same quarter in 2025, which is a strong comparator with growth of 9%. And we expect sales to split roughly 50-50 between the first and second half. So in summary, we delivered good growth in 2025, despite uncertain end markets. And we're encouraged by early signs that the transformation program is improving both margin and returns. Now back to Steve to take you through our plans.

Many thanks, Stephen. So the plan we're executing builds on the five points we talked about last year. It combines growth actions with transformation initiatives. to drive improved performance. And it's all about growth and efficiency. We need them both. And that's starting to happen, and we expect that to continue. I'm going to spend some time on what we're doing to deliver more consistent growth. So what we're specifically doing to refocus innovation, improve customer experience, and maximise returns from investments to drive consistent growth in key markets such as beauty and pharma. I'm really pleased with the progress being made, executing on our transformation initiatives. The whole business has responded well. And as we pushed hard to deliver change quickly, the organizations responded. And by implementing permanent structural improvements, we're becoming a more efficient company. We are streamlining our supply chain and procurement, digitalizing key processes, and exploiting the use of AI and data in the business. So it's all about simplifying, modernizing, and standardising the way we do things across the business to make both the customer and the employee experience a much better one. This is leading to an improved financial performance, which Stephen will expand on in a moment. So before I come back to our actions, I want to talk through the foundations of our plan, which are Crota's core strengths. There's three things that sets us apart, I believe, from our competitors. Firstly, it's our business model. It's fundamentally a differentiating model. built on the importance we place on customer intimacy through direct selling. This allows us to better understand the unmet needs of our customers and drive innovation. And you're starting to see that come through. Secondly, it's our core capabilities. We have a leadership position in both innovation and sustainability across all key markets. And we make it very difficult for our customers to formulate out our products. And thirdly, not last, on the right, there is our portfolio. we've come to the end of a period of significant portfolio investment, and it's now pointed to higher growth and focused on niche markets with compelling long-term trends. This has enabled good year-on-year growth over the last 18 months, even in these tough conditions. So coming to each of those strengths in turn, this slide outlines how our business model actually works in practice. At its heart, Crowder is a specialty ingredient company, where we refine and purify natural raw materials and supply thousands of ingredients to thousands of customers that are included in their products, often actually at very low inclusion levels. The pictures across this slide show each step of the model and what our teams are doing to create performance difference through imagination, creativity, but above all, exacting science. And we're selling the benefits of our ingredients, not the chemistry. And whether that is applying our unrivaled purification expertise for drug delivery, utilising high throughput screening to create new beauty claims, tailoring ingredients to meet the demands of our crop customers, or using our expertise in formulation development to combine ingredients into solutions for high profile brands. And we bring all of that together with world class claims, which often transform the value of our customers' brands. Next, it's our core capabilities. We leverage common science with common processes and common products. And the diagram on the left illustrates how smart science is the starting point for everything that we do. It touches the areas, all areas of our business. And the same can be said for our processes as well. Ingredients sold to beauty, home care, crop protection, industrial specialties, as well as many pharma customers, are produced at our shared manufacturing facilities. It accounts for 60% of our sales and 70% of our volumes. And many of our ingredients are sold in different markets. So what might start out as a product in beauty can often end up in a crop application as well, the same product. And we optimize the exact specification by ensuring that our sales teams work in close collaboration with R&D to create solutions for our customers. Our ingredients portfolio is unique. with 1,700 patents and sales of patent ingredients increased by 9% last year. We also lead the way in sustainability, as validated by our external rankings, including our long-standing AAA rating from MSCI. Look, these capabilities are fueling our ability to serve fast-growing niches, each with compelling and common characteristics, which I'll discuss in more detail later. So following a period of heightened investment over the last five years, our portfolio is aligned with the higher growth and long-term sustainable niches. 89% of our total sales now come from consumer, pharma, or agricultural markets. That's up from 73% in 2019. These are the areas where customers value our innovation the most, and those industries have got big, megatrend structural drivers behind them. We've invested in exciting high-growth niches like plant stem cells, fragrance and flavours, and biologics to access faster growth. And they're all growing twice as fast as the market. And we're also selling to faster growth customers, notably local and regional customers, and now represent 82% and 56% of sales respectively for consumer and crop. Geographically, 48% of our sales are now from outside of Europe. and North America, up from 37. Half of our business is in fast-growing countries. So from a market, customer, and regional perspective, there has been a material shift in our portfolio towards faster growth, and you're starting to see the early signs of that coming through. This slide explains operating margin development over the last few years, with each column accounting for approximately one-third of recent margin dilution. Firstly, on the left, it was a consequence of lower volumes which was mainly macro-driven due to volatile demand post-pandemic, but compounded by the divestment of most of our industrial business in 2022. Secondly, it was driven by a higher cost base, as shown in the middle column. And whilst product and gross margins have remained relatively stable, reflecting the quality of our business, our cost base, particularly SG&A, became significantly higher. And thirdly, on the right, whilst this period of heightened investment has positioned us for growth, it's also increased our invested capital base, contributing to lower returns on invested capital and resulted in more incremental costs as new investments come online. So some of our acquisitions are also high growth, but lower margin, notably F&F. So until recently, our margins have set us apart from our peers, a leading position that we are determined to recover. And encouragingly, 2023 was the low point of sales and profit with progress in 24, gathering further momentum in 25. And as we ramped up our growth and efficiency program. So there have been four major challenges that we've learned in the last few years, and we're stepping up this execution around them. Firstly, customer behaviors change post the pandemic, and they temporarily prioritize supply and demand challenges ahead of innovation. And secondly, We allowed our cost base to run ahead of sales. We were slow to address this, and now we're dealing with it. Thirdly, our strategic investments need to make a bigger contribution to profits. And finally, we were too concentrated on higher growth opportunities, notably in pharma, where we focused on vaccines ahead of our heritage business. And our growth and transformation actions are a direct response to these learnings. We're a curious company. We must learn as we go. We've increased our focus on execution, and you can start to see this coming through in our results. There's also more to come, given the natural lag between action and outcome. So we finished the year in 25, much stronger than we started the year. We expect to finish 26, much stronger than the start of the year in 26. So I'm going to go through each of the four growth areas and what we're doing to differentiate our performance. Importantly, our business is very well-invested. So we're not having to ramp up investments to deliver consistent growth. It's already there. So starting with innovation, with consumer and regulatory trends changing quicker than ever, customer demand for innovation has rebounded. But customers now want different things. And we've responded by implementing a more rigorous innovation framework, rebalancing R&D resource, making it more customer centric and focused on three big things. Firstly, launching new ingredients, which is the DNA of Croda. Historically, this is where we focus the hardest. Secondly, creating new benefits for our existing ingredients. And thirdly, increasing co-creation activity with customers. So running through each of these in turn, and starting on the left, sales of new ingredients increased 10% in 25. And last year, we launched Curabio, developed from a new scalable technology platform for hair repair that enables brands to compete with market leaders. We're the first to market with a groundbreaking ingredient, and with the last batch we produced selling out within a day. Next, we're opening up big opportunities by creating new benefits from our existing ingredient range to meet unmet needs. For example, we've developed our existing lipid range to address new markets for pharmaceutical generics. And finally, we're doing much more with our customers to tailor individual ingredients and formulate multiple ingredients to meet their specific requirements. The average pipeline value of each customer co-creation project increased by 12% in 2025. So a good example of this is a PEG-free rheology modifier that we developed in collaboration with a global beauty brand. So turning to customer experience and what we're doing to improve that. Our direct selling model and our co-creation expertise cement strong levels of trust and loyalty. Over 90% of our customers have stayed with us over the last five years, despite the market volatility. We are now deepening those relationships by building a more granular understanding of different types of customers through the new segmentation program that we've got. Introducing more tailored solutions and bespoke service packages for local and regional customers, regional giants and multinationals. They all want different things now. And for local customers... We are now globalizing claims testing and formulation support. So for example, in beauty actives, this has historically been done exclusively from our Suderma site in Paris. We're now replicating this capability in key locations across Asia. And last year, sales to this customer segment grew by 9% in consumer care. We're also deepening the relationships with Asian giants across beauty, pharma, and crop protection, helping sales to top the five helping sales to the top five Asian beauty giants grow by 19% CAGA over the last two years. And crop sales to tier two customers were also up 36% in 2025, partly driven by the rise of Chinese generic pesticide manufacturers. We're powering the world's biggest brands across our key markets and are a core supplier of beauty actives for every multinational company globally. And in 2025, we grew sales with four out of five top beauty customers and by 14 percent with our major crop protection customers. And our net promoter scores, which we value very highly, prove that we're doing the right thing. We're benchmarking at the top of the industry for product quality, the most important driver of customer preference. But we're also in the top quartile for innovation, sustainability and above all that, trust. And we're driving best practice in order delivery, customer service, and access to information. And with 89% of total sales now in strong and niche positions in these structurally advantaged markets, we're in a good position to continue the early growth momentum that is coming through. Turning to investments then, we're scrutinizing future commitments and past performance with much greater rigor. And Stephen will explain how we're applying our capital allocation framework shortly. We're also driving all of our recent strategic investments much harder, leveraging our global distribution network, maximising sales and broad scientific expertise to accelerate technology transfer and development. And starting on the left, with growth-focused CapEx, which was largely spent on assets in Asia and scaling up pharma lipids. Last year, we commissioned our new low-emissions production centre in Dahej, India, further rebalancing our global manufacturing footprint. to higher-growth countries. It will support faster growth in Asia this year, and its lower cost per unit will enhance profitability. Capital expenditure to enable large-scale pharma lipid manufacturing was joint-funded by the US and UK governments. The investment has positioned us for breakout growth in due course, but it's going to take more time, so we've decided to put our new US lipids facility on standby to minimize costs. In hindsight, we should have invested in one scale-up facility, not two. And that's the learning here. But we have world class facilities that can quickly ramp up when needed and enough lipid capacity to satisfy near and medium term demand. Moving across to M&A acquisitions made during this period are delivering good growth. And we have rigorous plans in place for each of these businesses to support continued growth in the year ahead. So over the last five years, we've shifted to highly attractive markets. Primarily small niches which offer prospects for above market growth. It's the principle that runs through Crota for many years. And we've also allocated resources to higher growth geographies. Our beauty business has a circa 10% share in the 8 billion addressable market, as you can see on the left. Ingredient space with top three positions in niches that are growing faster than the market as a whole. In beauty actives in the left-hand column, We have number one or two positions in niches growing at 4% to 7% a year, and we're a top three player in beauty care ingredients in niches growing at least 3% annually. Turning to our F&F business, we're a small but fast-growing player in a $25 billion addressable market. We focus almost entirely on local and regional customers in emerging markets, a segment that is growing twice as fast as the broader market. That unique positioning will continue to drive above-market growth in the years ahead, which we will support through light-touch CapEx, following more significant investment recently. Our agricultural business has a circa 9% share of a $4 billion addressable market. All of these markets have got good growth in them, and we have a top-three position in niches growing at least 1.5 times market growth. And as regulations tighten and crop care formulations become ever more complex, customers have significant development needs, providing us with opportunities to innovate. And this is reflected in strong demand for the highly differentiated ingredients at the top end of our portfolio, which have grown at 10% CAGA since 2019. And finally, Pharma is a top three supplier of delivery systems in niches, growing at least 5% CAGA. And I want to quickly provide an update to some more detail on the actions that we're taking to reinvigorate beauty and Rebalance Pharma. Both these businesses have margins above the cruder average, so driving consistent growth here, of course, helps enhance group profitability. Starting with beauty, where we're looking to drive a more consistent performance in both the top and bottom line. In beauty care, following the pandemic, many of our big customers prioritised tactical competitive activities like resetting supply chains ahead of innovations. This impacted industry innovation, causing it to slow temporarily. Well, ingredient innovation is now firmly back, and we've seen that pick up over the last 18 months, particularly with the multinationals. On top of this, customers want different things from our innovation programs. And at the start of last year, we responded by implementing this more rigorous innovation framework I've just explained, ensuring spending is well controlled by reallocating resources to maximize the value we can create for our customers and, of course, ourselves. In beauty care, we have two key priorities. Firstly, capturing exciting new near-term opportunities in commercializing our advanced biotechnology pipeline. Curabio is the first, you should see this, is the first of a number of new platforms ready to be commercialized. And secondly, showcasing beauty care as a delivery system for actives, leveraging our ability to deliver tailor-made solutions to customers comprising multiple ingredients. And that supported increased growth last year. In actives, we're seeing greater demand coming from outside of Europe. So again, we have two clear priorities there. Firstly, internationalising our actives capabilities beyond the traditional centre in Paris. This will include regionalising testing and claim substantiation capabilities, particularly in Asia. Our new class of ceramide ingredients is helping to accelerate active sales as we globalize our offer as well. Secondly, we're taking advantage of new markets opening up. Our actives have traditionally been used in high-end brands, and that is continuing, but they are now starting to go into more mainstream markets as well. So we're delivering benefits to mass-staged products, affordable luxury, you may say. That's helped support higher sales growth in the second half of the year, particularly in North America. And we expect beauty to contribute to organic sales growth of 3% to 6% to 2028 for consumer care. With beauty actives growing faster than beauty care. And as sales growth across beauty is accretive to group margin, it will enhance profitability at the group level. And finally, pharma. We've improved our focus and the customer experience by splitting our pharma business into two portfolio-led focus areas. These are pharmaceutical ingredients. which many of you will know, which represent over two thirds of pharma sales, but wasn't our priority during the pandemic. And as we concentrated on higher growth opportunities, we've now organized this business on a regional basis, leveraging longstanding customer relationships and through our regional model. It comprises two things, ingredients for consumer health, where we're benefiting from Crota's broader skincare expertise for topical applications and advanced ingredients such as high purity excipients, that are used as delivery systems across the full range of current generation drugs. And to strengthen our leadership, we're creating new high purity excipients for injectables and new bioprocessing aids as well. New market opportunities for us. And for example, our recently commissioned super refining process at our site in Leek has supported the launch of a super refined puloxima, uses both an aid to cell growth during upstream processing as well as an excipient. Great new growth opportunities. And moving across to the right, Pharma Solution provides lipid technologies and vaccine adjuvants, which together represent less than one third of pharma sales. Here we have the opportunity to accelerate overall pharma growth, albeit with a more volatile year on year performance, as illustrated by its exceptional growth during the pandemic, followed by a reset in demand. This is now organised as a specialised global business, working closely with customers and partners principally on new drugs in development. In lipid technologies, we're targeting new applications for lipids in generics and expanding our range of more than 2,000 lipids for drug research, for example, with Sirtest, and to accelerate development of sustainable vaccine adjuvants as well, an important part of our R&D program. We are working with external partners with recent portfolio additions, including Sustainable Squalene, which has demonstrated extended stability, compared with the competitors' shark-based alternatives. Pharma will contribute to organic sales of 4% to 7% each year for life sciences, a growth rate which excludes any breakout growth projects that could represent a potential upside. So growth across all pharma platforms is accretive to group margin and will help enhance the group profitability. So let me pause there, hand over to Stephen. who can talk about our transformation program and how all of this translates into our near-term performance.

Thank you, Steve. Right, so moving on to our transformation program. So last summer, we set out a program designed to enhance growth, drive stronger execution, and deliver cost efficiencies. So what are we doing? First, we're optimizing value by reducing complexity in our product portfolio and customer base. We're also delivering commercial excellence through improved pricing discipline, customer segmentation, and account management. Second, we're transforming our supply chain where there's a significant opportunity to reduce cost and working capital by optimizing our procurement, manufacturing, and distribution. Third, we're simplifying our organization by streamlining management layers, headcount, and support functions. This is underpinned by actions to enhance our performance culture, aligning incentives to our financial framework, as well as a programme to leverage AI, digitalisation and better use of data. Collectively, these steps are expected to deliver total annualised savings of 100 million and a working capital reduction of 50 million for full year 2028. Though it's still early days, we've made good progress in each area. So let me give you some examples, starting with optimising our portfolio. Our customers value the breadth of our product range, which includes over 100,000 individual SKUs. However, this brings complexity and cost to our supply chain with a long tail of low volume items where we don't always make money. So we're rationalising our product SKUs with a minimal impact on sales which will allow us to focus on the most important products, save costs and improve working capital. We've completed a pilot for one global product group and will now apply this to the rest of the portfolio. We've also segmented our customer base so that we can tailor our service better. For example, we're improving account management for our multinationals. We're setting minimum order values for smaller and regional customers. and we're accelerating adoption of our digital portal, reducing cost to serve. We're also driving best practice in pricing across the portfolio. As we told you at the half year, we're closing and outsourcing our UK distribution centre as part of our supply chain transformation, as well as fast-tracking an operational improvement programme for our 11 shared manufacturing sites, which account for around 70% of volumes and 60% of sales. By the end of the year, we'd begun to realise savings in six sites, with a further ramp up this year as we benchmark and standardise best practice. We're also starting to consolidate manufacturing processes into fewer locations. For example, we currently produce our Cox-related products at eight sites around the world, and we'll halve this by the end of the plan. In total, we have more than 40 manufacturing plants and most of our costs are not associated with the 11 shared sites. So we'll also focus on the rest of the footprint in 2026. Centralising procurement is a major part of our transformation programme, rebalancing local agility with the need to exploit our purchasing power. At the moment, Kroger largely buys products and services on a site by site basis. we're establishing regional and global procurement by cost category, starting with raw materials, packaging and logistics. We've also launched a working capital improvement programme and have identified structural savings of around 50 million across inventory, receivables and payables. Looking at simplifying the organisation, we've reduced headcount by around 5% in 2025, excluding F&F. In our back office, we've begun to transform finance, HR and IT with a greater use of shared services and outsourcing, as well as better use of data and automation. Now, this slide aligns the savings we set out last year with the pillars of the transformation I've just outlined. 65 million comes from optimizing our operations and procurement as we transform our supply chain and 35 million comes from simplifying the organisation through headcount reduction and streamlining our support functions. In total, we still expect to deliver recurring savings of 100 million in 2028 at a cash cost of 80 million. As you heard earlier, we delivered 28 million of savings in 2025, slightly ahead of our plan. This offset underlying inflation and the cost of recent investments coming online. From 2026 onwards, we expect transformation cost savings to more than offset inflation and investment costs, contributing to margin recovery. Of course, we'll continue to identify new transformation opportunities, particularly in our supply chain, and we'll keep you updated on progress. So turning now to our financial framework for 2028, as Steve said, we have leading positions in attractive markets and are well positioned to deliver consistent growth. Assuming prevailing economic conditions continue, we expect organic sales growth of three to six percent in consumer care and four to seven percent in life sciences, both underpinned by growth in all our business units. Industrial specialties is not a priority for capital allocation, though we will selectively target growth opportunities. We expect sales here to be broadly flat as modest growth in direct sales is offset by reductions with cargo. Together, this amounts to average organic sales growth for the group of three to 6%. Volume growth will moderate from 10% in 2025 as we increasingly focus on our most highly differentiated, higher margin products, with price mix turning positive. So how does this all translate into margins? We expect to increase adjusted operating margin from 17.4% in 2025 to more than 20% for full year 2028. A 20 percent operating margin is equivalent to an EBITDA margin in excess of 25 percent, which benchmarks favorably against our peers. Our principal cost headwind is salary inflation, which was 12 million in 2025. We also expect a 10 million step up in depreciation in 26 as recent investments come online. But this should be the final significant increase. Margin recovery will be driven by remaining transformation benefits of 75 million, as well as top line growth, with growth contributing a slightly larger portion. Turning to free cash flow, I'm pleased with the early progress we made in 2025, generating 134 million of cash in the second half. We expect to make further improvements, reducing working capital by 50 million, for full year 2028. This will be delivered by improving supplier terms and payments as we centralise procurement, standardising receivables terms and optimising collection, as well as reducing inventory as we transform the supply chain. Capital expenditure has also been coming down as we complete the farmer investment programme and several other large expansion projects. We reduced CapEx to 108 million, or 6% of sales in 2025, and we expect it to continue at around that level over the next few years. The benefit of lower CapEx and working capital, together with growing profits, will support a continued improvement in free cash flow. As you can see, we're targeting free cash flow conversion of 12% for 2028. Our definition of free cash is now more prudent, as it includes the cash cost of delivering transformation. Turning now to capital. As I said at the first half, our capital allocation framework remains unchanged, but we're applying it with greater rigour. Our first priority is organic investment, where there's been a period of heightened intensity and and greenfield site investments, which are now largely complete. We're putting a strong focus on returns, risk and execution in our upfront commercial assessment of future capex, and we'll prioritise smaller, lower-risk opportunities with faster cash payback. Second, our policy is to pay 40% to 50% of adjusted earnings as ordinary dividends, and we remain committed to at least maintaining the dividend as we grow back into this payout ratio from the current level of 76%. Third is acquisitions. After significant M&A activity in recent years, our focus is now on driving greater returns from these investments. We will continue to look at small technology-led bolt-on acquisitions if we see opportunities to accelerate innovation. but any spend here is going to be modest and typically below 10 million. Fourth, we plan to maintain net debt within the range of one to two times EBITDA, providing the opportunity for additional shareholder returns as we generate free cash flow over and above regular dividend payments. So to summarise, our new financial framework sets out our targets for the next three years to 2028 and a scorecard for tracking future progress. Our ambitions, of course, go well beyond this, but let's first get the business back to generating good growth, margins, and cashflow. We expect to deliver average organic sales growth of three to 6% a year through to 2028, based on current market conditions. Together with benefits of our transformation program, this will result in adjusted operating margins of more than 20%. We're targeting free cash flow relative to sales of more than 12%. And finally, with earnings growth and lower capital intensity, we expect return on invested capital of more than 10%. Many thanks, and I'll hand back to Steve.

Many thanks, Stephen. So as you've heard, there's a huge amount of activity going on right across the business. Our plan is built on Crota's core strengths, underpinned by multiple self-help areas to drive growth and transform our business for the next chapter. It's all about delivery. It's all about transformation. And our performance objectives are clear to maximize value to our shareholders by delivering consistent growth and enhanced profits alongside increased cash flows with improved returns. Progress is underway. There's much more to do. But we look to the year ahead with confidence, and we look forward to keeping you updated along the way. So let's stop there and take your questions. I think what we'll do just for housekeeping, plenty of questions going. When you put your hand up, there will be a mic coming. Just say your name and firm. And then for those that are dialing in online, just plug in your questions, and David will read them out later. Thank you. Charles, do you want to start?

Thank you, Charles Eden from UBS. My first question is on margins and how should we think about the cadence of the margin progression over the coming years? Is there any reason why the progression towards over 20 percent by 2028 will not be reasonably linear over the next three years? And perhaps you could also talk us through how you're thinking about the various contributing buckets to this between operating leverage, transformation cost savings, incremental cost inflation and any other factors you want to call out. And I don't want to get ahead of ourselves, but you mentioned your ambitions go way beyond the targets set out for 28. So is it fair to assume that means nothing has changed regarding the EBIT margin trending back towards the mid-20s over the longer term? And then my second question is on price mix expectations for 26. Can I just confirm, is the expectation still for flattish list pricing with mix negative to start the year but to see improvement through the year? Is that the right way to think about it? And are there any variances between consumer care and life sciences to be aware of? A few questions. Sorry, a few.

Stephen.

Margins and mix. I'll deal with your last question first. The way you've described that is exactly right. Just think about the momentum that we've got going through 2025 into 2026. Coming back to margin, I'll talk about the three-year period, not start thinking too far beyond 2028. But let's think about what we've seen. I think good margin recovery in 2025. There is an FX headwind of 1% that masks that. And that's the progression that we will see going into next year. So exiting second half at 17.6%. And yes, you should think broadly linearly across the three years. And as I set out on the slide, we've got the combination of sales growth, and business transformation really driving that, sales growth being slightly more than transformation. And, of course, like any business, we then have inflation, headwinds, and everything else. But the key point to make, of course, is that the business transformation benefits are structural. So that 100 million of savings continues beyond 2028. Look, our ambition is to get beyond 20%. But let's first get to 20%. When we compare the business now back to 2019, it is a much better business. It's a higher value, higher margin business, but it's also a different business, a mix and a more heavily invested balance sheet. But we're not going to rest at 20%. Very clear.

Thanks. Lisa.

Hi. Lisa Morgan Stanley. I have two questions. I would just like to come back to your capital allocation comments. At the end, you talked a little bit about potential special returns. If you could just provide a little bit of detail or framework around that, that would be great. And then, too, you had a quite strong end to the year on the top line. It was quite impressive. How should we think about that trending into the first quarter? I know that you mentioned that comp sales would be broadly flat year on year, but it would be good to get some qualitative color there. especially pharma and sub-segments of consumer care. Thank you. Should we start quarter one then?

Just a high-level message on quarter one and then we'll come back to special returns as well.

Yeah, so Lisa, it's unusual for us to guide for a quarter. I did that because what I don't want is a surprise coming out when we report in April, quite frankly. But there's nothing unusual about what's going on. We've exited 2025 actually in the way that we expected. January is looking bang on expectations it's just for q1 we're lapping a very strong quarter in 2025 as i said with with nine percent growth um but in terms of phasing for the full year it will be kind of a normal 50 50 split okay and then on the special returns i think you know the capital allocation policies has been there for for many years you know we're not doing any more big capex you know it's back to six percent around six percent and um

A lot of it's around – and we're not doing any M&A as well. So we expect to grow the business very hard. I mean, a lot of the focus is on EBITDA growth and free cash flow growth. So we need that free cash flow to grow. And we've got options – we've got optionality on the balance sheet, but Stephen could probably add to that if you want.

Yeah, look, I think for me it's about running a prudent balance sheet. So we're 1.3 levered at the moment. We've been very, very clear that we'll be generating more free cash flow. I think it's important that we grow back into the dividend. And as a point of discipline, we don't borrow to buy back shares or pay special dividends. So we're very clear that the cash will first cover the dividend. As we generate more cash, we and the board will obviously look at how we deploy that.

Okay. Sebastian?

Hello, good morning. Sebastian Bray of Berenberg Bank. I would have two questions, please. The first is on industrial specialties. The company has provided flattish comparable sales growth indication to 28. Can you talk about the expected margin development over that time? Because this business used to make double, if not higher, operating margins versus what it does today. Is sitting within that guidance the expectation that the profitability of the segment will improve on a relative basis faster than the two previous main segments of CRODA, the life sciences and consumer care. And my second question is on part of consumer care, which is flavors. You didn't mention it in the presentation, but this looks like it was the fastest growing business at CRODA in 2025 with, I believe, over 20% growth. What's going on there? And is this an area that, let's say, could become a little more important in the future? Thank you.

Yeah, well, let's do flavors and then back to IS, and we'll both probably chip in on IS. I mean, flavors, it's a good business, minimal distraction at the top of the company. It's part of a very good team in the F&F team. So we've given it about three or four million pounds worth of capital about two years ago. It's all it needs to keep growing. So the growth is coming from that capital that's gone into the business, and it's really good growth around the world. So our job there is it's not easy, but it's increasing its EBITDA without distraction from the top of the company. And we like the business, and it doesn't need any more capital for the future. So becoming more important because of the growth, but it's still part of a flavours and fragrance business, which is growing very well as well. So this last year it's done very well, but we shouldn't forget about fragrances, which is growing 13%, 14% as well. So we like the business, and it should continue to grow. IS, I mean, let me start with IS. IS, so the majority of IS has got good margins in it. You know, in there you've heard that 20% of IS is the relationship we've got with Cargill. A smaller percentage of that is the tolling and the residue, core stream business. So the majority you can work out is, you know, broadly two-thirds of that is good quality quarter business, something that I've run for 15 years in credit to start with. So it's got good margins. We expect that core business to grow. We want it to grow. So we want it to selectively grow. And I think it will help, of course, that growth to the respective businesses in the front here for life sciences and consumer in the shared assets. So it should continue to grow, but a lot will depend on the overall growth with the relationship we've got with our cargo partner and also CoStream should be just a function of the activity that we do as a business.

And Sebastian, margins in IS will recover. but both as we target specific growth opportunities and as the business benefits from transformation, obviously, from a relatively small base.

Hello, Katie Richards from Barclays. Just a quick follow-up on the margins. If I remember correctly, at Q3, you talked said that you felt you'd be able to recover all 750 basis point adjusted EBIT decline and are now targeting above 20%. So is there any reason for your conservatism on this slide? And as well, having now disclosed these sort of midterm targets towards 2028, what can we expect from the CMD in the first half of this year, if that's still happening? And my second question would be on the utilization and the winning back of volumes. If I look at the slide on the bottom left on page 19, it looks like the utilization rate in the second half of this year has been flat or maybe one percentage point up. Are you still comfortable with getting back to 100% of utilization rates by the end of 2026? Okay.

Okay. A few questions in there. Margins, utilization, and your point about capital market stay. So, Stephen, why don't we start with margins and utilization? I'll come back on the capital market stay point. Yeah.

So, look, you know, is 20% a walk in the park? No, it's not. I think that's a stretch. It's early days on transformation, but we're pleased with progress. We've set out a clear path back to more than 20%. As I said earlier, we're not resting on that as our ambition. What was the utilization? Spot on, 93% for the full year. It's up a little bit. Look, we want to get back towards 100%. This isn't an exact science. It's multiple sites. It's multiple processes. When we talk about 93% utilization, that's wonderfully simplistic. What you've seen through the year is the trend of volume coming down and the mix offset coming down as well. So think about 10% volume growth for the full year. Q4 volume growth was 5%. Mix for the full year, 3%. And then that's come down, obviously, in Q4. That's the trend that we expect to continue going into 26 and beyond.

And your Capital Markets Day point is don't expect a full-blown Capital Markets Day for us. What we want to do is similar to 22, for many of you in the room that were there, is start to do deep dives in our businesses. You know, we've got four big businesses, pharma, we've got ag, we've got beauty, and we've got F&F. So we're going to start with pharma. So we'll come out with some dates for a deeper dive on pharma in due course. David, we'll take one from David first.

It's a question from Martin, our covering analyst at Kepler, and it's on the margin again. Regarding your framework and your EBIT margin aspiration of over 20% by 2028, to what extent will this be driven by top-line growth, including the leverage effect, and how much will cost savings contribute? Is it an equal split?

Yeah, thank you, Martin. Look, just to reiterate, that growth is driven by both with growth slightly higher than transformation.

I think the wider point we want to make, and we make in the business as well, is we want every business in Crota where sales value is ahead of sales volume and profits are ahead of sales value. And what we really mean by that is that the growth in margin is driven by innovation, but also with transformation. And we're not far away from that in some of our businesses. Matthew.

Thank you, gentlemen. This is Matthias from Bank of America. Sorry to come back to the margin question again. I'm trying to connect what I think is slide 19, which is the backwards-looking waterfall of effectively what's gone wrong, and slide 36, which is the forwards-looking bridge on your targets. Because when you framed it in the way of these three equal buckets... And I guess my question is, of those respective buckets, how much of the problem do you think you can fix versus what, for whatever reason, unfortunately, is still a persistent headwind? And the second question is on top line. This idea of delivering consistent growth, I think with respect, that isn't necessarily something that CRODA has proven in the past. So the question is, why is this time different? Is it a change in culture, a change in asset base? Why should investors have that confidence when the track record has been so inconsistent?

Let me start with top line and, Steve, no margin. I mean, hopefully what you see from the slides, in top line growth, we've had 18 months of good top line growth in an industry that isn't growing. And you can compare us to anybody in the industry. We're growing very well. I think the encouraging sign, second half, is that our heritage crore of businesses are growing well as well. So you've got beauty care, beauty actives, and farmer ingredients all supporting growth now, which is really important for the group. So that's point one. Point two, 90% of our business, the portfolio is a stronger portfolio today than it was. And if you look at the slide that I presented on, you know, virtually 90% of our business is in structurally growth markets with big, strong positions. We should grow. We expect to grow. We're pointed to customers with a lot of growth, particularly the local and regional customers and the regional dynamos, we call them. And thirdly, virtually half our business is in fast-growing geographies now, whereas it was 37% before. So, you know, the shift in the portfolio is significant to faster growth. So we would expect that. So all of those should come together to give us more consistent revenue growth. And, you know, we're encouraged. We're not getting ahead of ourselves, but we've had 18 months of good growth. I expect that to continue. So we'll stop there and then on the margin point.

Yeah, Matthew, exactly the right way to look at it. So the first slide sets out the margin going down. So that's volume, partly destocking, partly obviously the disposal of the PTIC business. We put a lot of cost into the business and we've been clear that we were too slow in taking that out. And then finally, the third leg is the cost of investments that are not fully paying back, which is obviously what will drive growth. So that's the past. If you then look forward to the future, we've set out that the margin up to over 20%, go back to what I said a moment ago, driven really by growth, top-line growth of 3% to 6%, and transformation growth being a slightly larger portion with 75 million of transformation benefits to go And then, of course, we do have the routine headwinds going the other way. I think Chetan's gone.

Yeah, sorry, Chetan. Hi, Chetan from JP Morgan. Maybe just a bit of a critical question to begin with. You know, I think many of us for the first time is seeing a little bit of, you know, I think, Steve, you mentioned, you know, learnings, which probably, you know, we've not heard enough in the past, at least publicly. And I'm just curious, you know, you are now talking about 6% of sales, which still seems high, you know, because in essence we are seeing we've got too much assets or too many assets which are not fully sweated out yet. So I'm just looking at all the impairments. I'm just curious, how are you managing that so that we don't see four years from now new plan with a lot of impairments?

Have you got another question?

Maybe I have, but if you want to answer this.

Well, let's both do that because I'd be interested to get Stephen's comments. Look, I mean, we're a curious company. We have to learn. We don't like some of the things that happen, but you have to deal with them. And we've lived through four years of a very volatile industry. So I think every management team has to deal with it. We are. I think in terms of the focus in the business, we're really pleased with where the growth is coming. We've got 18 months of good growth. I think the other thing that we didn't mention to Matthew's question is, You've got innovation coming back in a lot of our industries, which has been temporarily subdued, largely by our customers. That's coming back. And the Crota model is we like innovation, but we need it from our customers as well. And you're getting that. And I'm not just talking about beauty. It's farmer ingredients. It's crop. There's formulation churn back in the industries that we operate in. Crota likes that because we get our next best product in there. So they all won't grow at the same speed. They won't be linear. But they'll grow. And we feel, you know, even in these tough markets, you know, as we say, you know, the growth rates that we're posting now, we're encouraged with. And we've got a lot of capacity to grow into. But, Stephen, anything else you want to add?

Yeah, so, Justin, I think as we think about capital investment, capital allocation, the key word for me is discipline. Yeah. All right? We've been through a period of significant investments. And those investments are largely, you know, they're big greenfield sites. that by definition have a longer payback. That's done. We've got all the investments that we need. Growth is being driven by the portfolio and the asset base that we've invested in. We will spend around 5%, sorry, around 6%. That's a combination of both what I call maintenance capital, sustaining capital, with some very small growth unlocks. But what we want there are small investments that are low risk with really fast cash payback. And that bite on cash payback for me is the real discipline.

Maybe if I follow up on the same point, you know, this co-development with customers, is that a new concept at Crota? Because I think historically you wanted to develop and leverage over a wider customer base? Is that a change that has happened over the recent years?

It's an emphasis change. They all want different things now. When we talk about customers as multinationals, as regional dynamos, and as local players, they all want different. But we have to personalize our innovation with some of them. And some of the best returns that we get for innovation are through bilateral relationships. And we've got many in the pipeline, some really exciting stuff. But That comes from a position of trust. So, you know, when we talk about NPS scores and things like that, we are at a very high level of trust with our customers, and that fosters more and more innovation. So we're at our best when R&D and Corota are speaking to R&D at the customer, and you're fostering innovation. And you're starting to see that coming through in all of the businesses. So that's, you know, helping us with your point on growth. Innovation will drive us there, but we've got self-help. We shouldn't forget that transformation is in our hands. It's not in anybody else's hands. It's up to us to deliver. that self-help. So we have that as an additional sort of bow in our armory. Thank you. Yeah, David's been waiting patiently here, our head of IR.

It's a question from Ranul, the city analyst. Please, can you provide an update on the competitive dynamics, particularly emergent from Asia?

Yeah, I mean, look, I mean, you know, probably a China question, but more broadly, I mean, first point we would say is, look, currently, that Chinese competition has pointed to big customers, big products and big volumes. No matter what industry you're in, that's broadly where it is. In our industry, that lends itself to petrochemicals and upstream and some diversified. Some of you call it semi-specialties, which, you know, fair enough. But it's not anywhere near a crore. We don't see that. The second point is, look, we don't take competition for granted. We're not complacent, nor are we fearful for that. We would expect competition. competition to move towards us. And the third point in response, it's the check-in point, it's innovation. It's personalising our customer activities and it's giving our customers something different. And we've got that capability through the business model. It's a very effective business model at meeting customer unmet needs. And you're starting to see Crota get back to its normal cadence with customers on innovation. So that will keep us ahead of the competition.

And just to add... and particularly China, were obviously great growth opportunities for us, and you saw some really good examples of that in the presentation.

Thanks. It's Nicola Tang from BNP Paribas. I just had one, just to do a small mini deep dive into your pharma business, and just can you explain a little bit what's changed versus your previous business, or historic performance and also previous targets because i think he used to talk about low double digit growth for pharma if i'm not mistaken versus this you know greater than five percent so is the change a function of changed expectations on end market growth or is it more a change in terms of what you've done and how you've rebalanced your portfolio yeah um well let me let me answer that um i mean firstly you know we've got two businesses pharma ingredients is two-thirds of the business which is

that business which you know very well. There's no change in that since 2022. We expect growth rates to be mid-single digit there. We're exiting 25 at those rates, actually. So within there is, and you can talk to Thomas afterwards, it's all around refocus, innovation, and it's the nuts and bolts of Crota. So we think there's a lot of opportunities with this rebalancing of our innovation framework to drive further growth. So two-thirds of that business hasn't changed The bit that has changed is the one-third, which is pharma solutions. And all we're saying there is, look, we're not putting any of the breakout growth in our three-year plan. We are still very excited about the progress. Every time we look at the number of projects that we've got in there, it's not reducing. And there's lots of opportunities there. But we will get significant growth in pharma solutions without that. And that's coming from at the heart is Avanti. It's research for lipids. We've got opportunities for generics in lipids. And we've also got opportunities for non mRNA lipids and other new vaccines as well. So we see we see those growth rates being being good. The reason that the headline rates probably come down is because we've taken out some of the three breakout growth because, you know, it's not in our hands. It may come through, but we're being cautious with that.

I've got a long list, so I can keep going. So, again, from Ranov, with regard to the Lomar lipid facility, can you give a view on when operations may resume and what necessary conditions would be?

Yeah, I mean, I'll take that. I mean, look, we don't like impairments at the best of times. It's not Croda, but, yeah, we have to respond to market conditions. I think, you know, we've mentioned before that, look, everything's being pushed out to the right for lipids. but it hasn't gone away. It's definitely not gone away. And we feel that we've got adequate capacity to meet the near-term and medium-term demand. I think we see that as a very important asset. It's got world-class facilities in there. It's probably more valuable than it was 12 months ago. But back to the question, a lot will depend on breakout growth. If we get something in the clinical programs in the advanced stage that hits the market, and it's something which is more significant than we think, and we can't meet