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.