Croda International PLC
LSE:CRDA
US |
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
|
US |
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Mastercard Inc
NYSE:MA
|
Technology
|
|
US |
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
|
US |
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
|
US |
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
|
US |
Visa Inc
NYSE:V
|
Technology
|
|
CN |
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
|
US |
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
|
US |
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
|
US |
Coca-Cola Co
NYSE:KO
|
Beverages
|
|
US |
Walmart Inc
NYSE:WMT
|
Retail
|
|
US |
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
3 332
5 092
|
Price Target |
|
We'll email you a reminder when the closing price reaches GBX.
Choose the stock you wish to monitor with a price alert.
Johnson & Johnson
NYSE:JNJ
|
US | |
Berkshire Hathaway Inc
NYSE:BRK.A
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Mastercard Inc
NYSE:MA
|
US | |
UnitedHealth Group Inc
NYSE:UNH
|
US | |
Exxon Mobil Corp
NYSE:XOM
|
US | |
Pfizer Inc
NYSE:PFE
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
Nike Inc
NYSE:NKE
|
US | |
Visa Inc
NYSE:V
|
US | |
Alibaba Group Holding Ltd
NYSE:BABA
|
CN | |
3M Co
NYSE:MMM
|
US | |
JPMorgan Chase & Co
NYSE:JPM
|
US | |
Coca-Cola Co
NYSE:KO
|
US | |
Walmart Inc
NYSE:WMT
|
US | |
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Hello, and welcome to the Croda Q3 Trading Update Call. [Operator Instructions] And just to remind you, this call is being recorded. So today, I am pleased to present Steve Foots, Group Chief Executive; and Jez Maiden, Group Finance Director. Please go ahead.
Thank you, everybody, and good morning to all. Many thanks for joining the call. As usual, I'm with Jez and Conleth as well. A quick introduction from me as usual, and then we'll take your questions.The main takeaway from today's update is that after a strong first half, we see continued momentum through the third quarter. The performance has been very much in line with our expectations and the guidance we provided back in July and at the outset of the year. Constant currency sales were up a healthy 4.5% for the core business in the quarter, which is in line with 4.7% year-to-date, so trading well. This growth is driven by mix and volume improvements and not by raw material pricing. As a reminder to you all, we're in natural economics, not petrochemical economics, so there's no raw material inflation in our numbers.This growth is driven by -- so this is underpinned by record levels of innovation with NPP at 28.4% of total sales and a strong result in our consumer businesses, so both Personal Care and Life Sciences. And margins have remained solid with the group's year-to-date margin slightly ahead over last year.So just turning briefly to each of the sectors, in Personal Care, another very strong performance. It was up 4.9% and 7.8% year-to-date. Growth was exactly in line with what we said in July. You'll recall a comparative period when we started to see a recovery in sales, some tougher comps too. So we continue to see 4% to 5% is more sustainable growth going forward, growing 1.5x the market is our ambition for the business in the near term. We saw a healthy demand across all 3 segments, led by Beauty Actives. Underlying trends were consistent with what we've seen all year, with multinationals growing alongside our regional and local customers base. So all customer categories growing well.All regions were ahead too with Asia and North America being the strongest performers, and Latin America continued its recovery. A most impressive performance in Personal Care has been the NPP pipeline, double-digit sales growth again this quarter. Here, we have an excellent pipeline, and we're delivering very well with our clever products.Life Sciences was the peak of the core businesses and a very impressive performance. Constant currency headline sales were up 8.5% in the quarter, 9.3% if you exclude the exited North American API business. The API exit impact was smaller in quarter 3. And to remind you, quarter 4 is the final quarter we're impacted by the contract exit, and we'll see probably about 4% sales headwind in Life Sciences in quarter 4 as expected.Health Care was especially strong as we continue to see good demand for high purity excipients for complex drug delivery systems and we've [ earned ] it from further expansion into new drug markets. So it's all about good delivery at Health Care.Crop is a little slower, which mirrors recent published data from the majors, but we continue to outperform the sector with growth in small customers. Incotec had a good quarter as we continue to invest in that business. And that, in fact, is still early stage, but with sales development actively supported by Croda's global sales team now, that will help to drive sales going forward.Performance Technologies was up 1.8% in the quarter, in line with growth of 1.7% year-to-date. Sales growth is less of a reflection of how this business is performing, as you know, and we continued to see good price/mix improvements there. Volumes declined, reflecting our ongoing efforts to shed low-margin business, and NPP began to increase as expected.So a lot of positive trends, not least good demand for biodegradable lubricant additives as customers look for ways to improve the sustainability of their products by using Croda ingredients. So over and above all, these programs, we continue to implement initiatives to stretch the growth, the biosurfactants plant is up and running in North America. This will support the growth of our Eco range and meet the increasing demand for more sustainable products. And as you'd expect, there's lots of innovation across the business with some major product launches in each segments, which will start to benefit from 2019. Our pipeline of new opportunities is very exciting.[ So to say], another strong, consistent quarter of growth, very encouraging to see ongoing momentum in our consumer businesses, further value over volume progress at Performance Technologies and plus a rich innovation across the group. So we're on track for the full year.Enough from me, and let's take your questions now.
[Operator Instructions] I see our first question is from the line of Tom Wrigglesworth at Citi.
I have 2 questions. Firstly, with regards to -- could you just provide a little bit more color around how the excipient growth might go -- proceed going forward? And is that going to be a margin positive for Life Sciences? If this is -- or is this just as a one-time effect kind of running through the system? Secondly, in Performance Technologies, could you give us an indication of what the growth would ex the bottom slicing? So how do you see the kind of growth in the other businesses going forward?
Yes. Okay, so existing growth can mean Health Care and Crop Care, but I think your question is around Health Care, if I'm correct. I think on the Health Care side, I mean, we've been very clear this year to strip out the impact of the API Par contract. So everything else, you should see as normalized growth. And we screen pretty well in Health Care for high single-digit sales growth is how we should look at that going forward. And if you look back -- to look forward, the last 2 or 3 quarters a beta have been at those levels as well, we just had -- we've had in quarter 1 or quarter 2, more API sales than we've had in quarter 3. So it sometimes masks the underlying performance. Look, it's the fastest growing technology in the group, bar none. We've got some good technologies there, and this new drug delivery is gathering pace and we're really please with that, so we're tuned into that and we expect that to grow. And then as a reminder on the back of that, we've just put a big capital expenditure through on our plant in the U.S. to just future-proof capacity planning for those products and that comes onstream in the not-too-distant future. So we've got plenty of capacity to grow as well. So Performance Technologies point, around 2% -- it's around 2% in Performance Technologies run rates if I look at stripping out demarketing and we'll see where that goes. But the most important thing in Performance Technologies is the quality of the business, and it's about innovation-led growth, so it's margin improvement and supporting sales growth as well, so a compounding effect to drive profit there. And I'll just pass to Jez who's going add to those comments.
Yes, just another thing worth noting is that on first half year, Performance Technologies was up just under 2%. That was about minus 8% volume and about plus 10% price and mix, primarily mix, of course by the demarketing program. That's about halved in the third quarter because we started this program in the third quarter last year. So we're about minus 3% on volume and about plus 5% on price and mix. So the same 2% but you can see, obviously, as we lap that, the demarketing impact then will have less of an effect, and you'll start to see the reported sales number or the constant currency sales number for Performance Technologies should start to tick up as we go forward towards next year.
Very helpful. Just as a follow-up, what Life Sciences growth for next year? Do you think you can do, what, 4% to 5% is a reasonable pace of assumption for 2019?
We think it'll probably be a little bit more than that. We expect it to be -- we screen in Life Sciences without Par. And if you look at the run rates this year, it's mid- to high single digits, mid- to high sort of 6%, 7%, something like that, is where we would have that. So again, we're very pleased with 2018 performance and see no reason why that can't continue next year.
[Operator Instructions] At this stage, there seems to be no further questions in the queue. So can I just pass it back to you for any closing comments?Okay. Sorry, can you please repeat the closing comments? Steve?At this stage, there seems to be no further questions. So back to you, please.
Okay. All right. Yes, well, so you've seen the update from the group. We're pretty pleased with the performance, we're seeing no slowdown in growth in quarter 3 from what we've seen in the first half. So we are ticking along pretty well. So we'll stop there, and we'll see you again in February.
Okay. This now concludes the call. Thank you all very much for attending. You may now disconnect your lines.
Could you just hold on a minute, please? Sorry, can you check because I think there might be some people trying to ask questions? There might be a couple of messages from a couple of analysts. So I think there appears to be a problem on the line.
Okay. Can you give me the analyst names? I'll see if I can identify them.
Walsh, Evans.
[Operator Instructions]
And also, Mr. Alexander. There's actually quite a few here.
[Operator Instructions] Andrew, please go ahead.
Can you hear me?
Yes, we can now. I think there's obviously sort of a problem in getting questions through to us.
Okay, good. Excellent. Just a couple of things. Firstly, just trying to work through on the margin side, the moving parts of the second half and just check that we're sort of on plan. So the losses from plant impact and the first contribution from Atlas Point, which, I guess, is about 4 months. So I'm just trying to think how those numbers affect the EBIT for the second half. And then, when you say the headline in your outlook statement that you're on track, I guess, that's an endorsement of consensus. I wanted to check that. And then the margin growth comment, you say slight, and I think in the past, you've defined slight as sort of 50 bps or so, and I just wanted to check these definitions, per se.
Well, just on the first one, we are assuming light is what you say. It's a little bit more than flat, so the definition hasn't changed. I mean, the most important thing for the group is PBT. We look at PBT against consensus and we feel very comfortable with the year-end. We'll just -- we believe that, that went up when I had to give profit forecast but we've seen October and we've got 2 months left. And effectively, we've got the orders in the system now for the rest of the year. So we're comfortable to make that statement, so we're fine with that. Jez, do you want to answer the [moving] -- try and answer Andrew's point on the [moving]?
As the -- so in terms of plant impact, I mean, it's mostly a cost to us this year. The sales that we picked up from the acquisition are pretty low. So we've been guiding across the 9 months that we'll have owned it to the year-end that we were expecting a loss of about GBP 3 million to GBP 4 million on that. I think that will be nearer GBP 5 million. That's simply a function of lower sales than we had anticipated. But what we've seen, clearly we said that we've taken out the local sales force, we've integrated that now into the Croda selling force -- selling network. And we really like the technology that we've found in that business, we're very excited by it. So we do have a strong view about the performance about significantly reducing the loss next year and then getting into profit. So we like very much the technology we've seen, but there will be a slightly larger loss in this year. Having said that, that doesn't change our view around our expectations or consensus because clearly, the rest of the business is performing very well. So we're talking about very small variations in one acquisition being offset by the strength of the rest of the business. So yes, comfortable with where people are expecting us to be and where we expect it to be. In terms of the Eco plant, the biosurfactant plant, at this point, yes, so effectively contributing from October, so 3 months. Obviously, the initial focus is around transferring all of the downstream products that we make, all of the alkoxylates, from the petrochemical raw material onto the bio raw material. So that's our focus over the next 3 months. We get a bit of margin pickup on that, which will be worth a small number of millions of pounds, I would expect next year, so we'll get a pro rata share of that. So again, just a relatively small contribution this year. But there is an exciting part where the Eco plant comes from, getting customers -- enabling customers to get a launch of green-based products. And we have those samples out now with the market. We have the range launched now, so we have our very first orders of people deliberately buying green. So that won't be meaningful this year. But as next year develops, that's all been working to develop the new -- the growth in sales which is really the core reason for building that plant. And margins, what we've said is that we're looking to deliver mid-single-digit sales growth overall in the core business on a constant currency basis, and to support that by the increase in margin. And clearly, there's some margin dilution in Life Sciences this year caused by large impact, and we're happy with the broad margin level of Personal Care. And so the growth in margin is really a function of the improving mix and the value of the volume strategy in Performance Tech, and that's what leads us to conclude that the return on sales overall for the year should continue slightly ahead of last year. Does that help with the moving parts together?
It does, that's great. And just one follow-up. On the trajectory for 2019, do we assume that those losses impact are broadly eliminated in 2019? Or do you still think there'll be a small loss?
I think we still need to do that, what our intention, when we acquired it in March, was to get the business to breakeven in 2019. That's still our intention. Clearly, the actual sales we have within that business are low. So we need to do more work around how quickly we can bring the new products to market. But we should see a -- at least a significant reduction in that level of loss, which, as I say, even GBP 5 million is not significant in the context of the group but is a little bit worse than we're anticipating.
Yes. I think just on the plant impact, Andrew, I mean, we're really pleased with the technology. It's great technology. And you see we have that know-how, due to the governance current change, so we had to make a release last week around the fact that we're making some people redundant, but that is all part of the plan. So it's getting [ current ] salespeople in charge of selling the product, and we know what happens when they do that. So we're in a very good place. Our intention is to get it to as close to breakeven as we can next year. So there should be a benefit from where -- from the trajectory and -- a significant lift in the trajectory from what we've seen this year. It's all about the sales growth now, capturing the sales growth. We've got the cost base where we want it. We expect sales growth to come through for the year, the course of next year.
I think it's also worth putting into context that we've done 8 technology investments over the last 12 months. Why are we calling this one out? Because I guess, it's an unusual technology investment for us. Normally, we're buying a business with a handful of scientists, so the costs that we run in the first couple of years while we develop the business are off the radar. Really, we just call out the plant impact because we acquired with about 60 people in that business had obviously no significant sales. So that's why the plant impact one stands out, but all the other technology acquisitions are working well, but you just don't see the costs within the overall group results.
So we now go to the line of Laurence Alexander. [Operator Instructions] Okay, I'm afraid Laurence's line seems to have dropped out. [Operator Instructions] Okay, that seems to be it. I do apologize. So please, back to you for any...
Here we got -- we seem to be getting quite a few questions into -- [ comments see ] from the sell side. So if you want us to read the question out and answer it or this is...
Yes, if you could, please. I do apologize. If you could, and I'll see if I can work through this thing. And so please read out the questions.
Okay. This is from Paul Walsh, talking about the Personal Care. Steve, can you discuss growth in Q3. Has anything changed? What are you expecting from here? And any newest growth slowdown in China?
Well, [ Paul ] of course in Personal Care, we're in very good shape. If you look at the run rates, they were exactly the same in quarter 1 and quarter 2, there's no reduction in run rates. The -- if you look at 2017, the first half of 2017 sales were about minus 2% in Personal Care and second half was about plus 8%. And now what you're seeing is we're coming -- we're lapping the anniversary of some of the strong -- of the weak sales growth and we're back into strong sales growth from quarter 3. If you remind yourselves, about 1.5 years ago, we had 2 issues in Personal Care, one was multinational sales growth. It was pretty anemic, sluggish, you would say. And also, the formulation business was broadly flat. Both of those have been corrected and both of those are in very good shape now. We started -- we reorganized about 18 months ago. We've got 3 managing directors now running the Actives, Effects and Formulations businesses. They're all in very good shape and they're all healthy and growing very well. So we've been pleased with that. So the Effects have moved from 7%, 8%, 9% in the first half this year to 4.5% to 5%, 4.9% in quarter 3, is purely down to strong comparatives in really quarter 3 last year. It's where we started to just lapping the anniversary, but the business is in very good shape and we're really pleased and excited. And I think the other thing I would say with Personal Care is you can see this [ like ] to luxury in Personal Care has continued. And you can read that into all our customers' numbers that have been printed in the last few days, the strong growth with a number of them. And that bodes well. So when you've got the customers growing well, our leading indicators are around customer growth and also around our pipelines and new projects are very important. But I would say the big step-up over the last 2 or 3 quarters has been the strength coming back in the multinationals as well. We've got very good regional and local delivery through the smaller customers. But the multinationals now, it's getting very exciting for us. They are closing in with 2 or 3 significant global product launches now with Croda ingredients, and that's great. And we can't say too much about individual customers, but that's material and that will boost -- help continue with the sales growth through into 2019. So Personal Care is in very good shape. We really can't complain, lots going on. The China -- I mean, China, generally, for the group is very strong. We looked at each of the quarters this year, and quarter 3 was the best quarter of the year, so far, and we've had double-digit sales growth in quarter 3 in all 3 of our businesses, in our core business. There's no slowdown in China. If anything, it's accelerating. Again, a reminder to you all about China is, for the group, we're in small market share positions, so we're not really buffeted by macro or trade wars. Our job is just to give customers what they want and then the demand for that is increasing in China as we find new customers. So double-digit sales growth across all that core sectors in China in quarter 3.
Hugh, I'll continue. I've got several other questions have come through and [ will read ]…
Would you -- is one of them from David Simmons at JPMorgan?
No, it's not.
Okay, well, I've got him. Can we take him first? So David your line is open.
This is actually Chetan Udeshi from JPMorgan. So Conleth, you might have already got my questions because it's been a bit confusing with this call today, whether we are in or out. But the question I had was, maybe Steve, can you give us some sense of the strength in terms of Personal Care growth, in terms of volume versus mix and price? I think you had sort of 5%-ish kind of volume growth in first half. So maybe it would be useful to get some sort of sense in terms of volume price/mix there. And maybe Jez, a question around the finance expense line in the P&L for this year because I think the startup of the biosurfactant plant has been delayed. And so should we expect maybe the interest line to be lower this year than maybe what consensus has it or what was thought to be the case previously? And maybe any updated thoughts on how should we think about the FX impact for the C&L given the pound has probably moved back from first half levels?
If you wait one second -- if I could please ask you to repeat that, Jez and Steve.
Thank you. Okay. Apologies for the problems we're having this morning. So on Personal Care, the constant currency growth of 5% roughly in the third quarter is pretty equally split between price mix on the one hand and the volume on the other, which is very consistent with what we saw in the first half of the year. And the price mix is very much about mix and innovation-driven improvement. We haven't seen material changes in raw material prices that are merely recovering. Obviously, if we see a change in an individual component, then we'll go and recover those increases in cost. But fundamentally, it's about improving the mix through innovation and new products, rather than being a raw material price recovery story. So I think quality of both-wise we feel very positive about that. And the raw material market, while there are specific pockets of increases, overall has not been particularly difficult or aggressive. In terms of the interest line, in the first half year, yes, we undoubtedly had a saving because we are required to capitalize the interest on the Eco plant during construction because obviously, it's a major project for us. But we wouldn't normally capitalize interest on very large projects. So clearly, that is one of the only ones that we are -- we were capitalizing interest. We carried on doing that through the third quarter. But clearly, we stopped capitalizing the interest on the fourth quarter. And the impact of that is the interest line goes up in the fourth quarter because obviously, we have the debt. But instead of going to the balance sheet it starts going to the P&L from the fourth quarter. So the interest line ticks up from the first half run rate that you saw for just half of the second half and then as we go forward into 2019. On the FX side, yes, I mean, right now, as we note in the statement, the translation impact is softening. You can see that in the first half year, we had 3.6% growth for the group sales in constant currency, but we're down 0.6%, so we had about a 4.2% currency impact, you can see that softened to about a 0.5% impact for the third quarter. So clearly, if currency remains roughly where it is at the moment, then we'll have a small adverse impact on the fourth quarter. But clearly, it's becoming much flatter. Chetan, does that deal with your questions?
Yes.
Okay. If you could read out the other question, that would be great, please.
Yes, sure. So the next one is from Martin Evans at HSBC. Can you please comment on your expansion into regional drug markets such as India? What are the opportunities here? And which illnesses are being a drag, including presumably oncology?
Yes. Thanks, Martin. Yes, I mean, India is one of those target markets for our Health Care business. I think the big issue in the past has been to overcome the legislation barriers there. You have to declare a lot of information around the products and we've been reluctant to do that for different reasons, more on intellectual property than anything else. Although, we must remind you, those regulations have been relaxed more recently, which has allowed us to enter the market. So we've started to see good growth. I think it's broad-based growth. It's delivery systems for different types of groups, [ dualities], oncology. There's, as you probably all know that, it's a big base in India for pharmaceuticals, for generic manufacturers particularly. So we're -- we have products into a lot of different applications, ranging from eye care drugs to chronic leukemia drugs to cancer drugs as well, so in lots of different areas. And the big thing that we're seeing is we're penetrating new markets like India and China to follow the same legislation barriers and we're overcoming those as well. So we expect China, which is very -- just very small market for Health Care business, to expand. But I think the big trend in Health Care is around the move to biologics and the move to, if you like, bulkier molecules, which means more difficulty into stabilizing them. So they're looking at delivery systems that can be cuter and cleverer at stabilizing these systems. And we've got a cocktail of these in our makeup. So we can deliver that. So we're seeing -- we're increasingly becoming the go-to company for these type of drug companies.
Well, we've got -- if you don't mind, because there's some problems here. I think if we can ask the sell side, if there's any other questions that can't get through the normal system, just [Audio Gap]
Okay. And here -- the next one is from Gunther Zechmann at Bernstein. He's talking about margin expectation for 2019. It seems like all divisions should expand margins, first of care benefiting from the Atlas Point mix improvement, Life Sciences from the turnaround in plant impact and Performance Technologies from demarketing moving towards 20%. Can you give a rank order or give numbers please?
Jez here. Is my line open?
Yes, it is.
The -- yes, look, I think that's a fair view around the performance in each of the cases. Clearly, the Eco plant actually is a benefit to all 3 sectors. It's not just a Personal Care business. We've got Home Care in there and we've got Crop and some other businesses as well. So that benefit will be spread. As I say, in 2019 the benefit will be limited, a small number of millions of pounds is what we're expecting because that pickup is mostly from the margin that we pick up from basically making a feedstock that our suppliers used to make and the volume, the delivery costs that we pay to get that material historically from the hills of Mexico up to Delaware. But there should be a limited impact, but the exciting part is clearly where we can get the additional sales from green products in the Eco space. But you're right, we should then expect to see a reduction in the loss around plant impact and we'll see the continued benefit of demarketing, although I think we're -- we will always do some demarketing in Performance Technologies. I think we are coming towards the end of the main impact. So now we're turning our attention to improving the innovation pipeline, which is traditionally sort of lagged behind the other 2 sectors in terms of NPP level. So that's more of a medium-term effect that we've got some exciting projects in there, which should -- we think should start to come through. So yes, overall, we would be positive around the outlook for margin next year. I'm not going to put a rank order or numbers around that at this point and I'm sure you understand why.
Just following up again, Jez, from Gunther, can you please give any color on cash generation and balance sheet?
Yes, sure. So obviously, we're sorry that this is really a sort of sales update in the third quarter. But yes, as you'd expect, now we had spent most of the CapEx around the Eco plant in the first half year. There's probably a residual in the third quarter of maybe GBP 5 million spending going through. So what you'll see in the second half year is improving cash generation driven by lower CapEx. We expect to return to our more typical CapEx level around 1.5x depreciation. That's probably about GBP 75 million to GBP 80 million. So that clearly is going to be the key driver to cash generation improving that's happening as we speak, as we finish the main CapEx. And that will return Croda to its normal business of strong cash generation and therefore, reducing debt and therefore, optionality around other technology and bolt-on acquisitions that are of interest or should we return cash to shareholders as per our policy. So yes, that's very much the direction of travel we have at the moment across those 2 choices.
Okay. The next one we have is from Isha Sharma at MainFirst. Is it fair to say that Performance Technologies is a bit more cyclical than other segments? Do you see any impact of the general slowdown there?
Yes, I'll take that one. I mean, and -- it's a little bit more cyclical than Personal Care and Life Sciences but in a very small way that if I look at the trading in that business, we're not really buffeted by anything macro, significantly macro. We tend to look in Europe for that and obviously the numbers are out from a lot of other industrial companies. Europe's holding up pretty well from what we can see in Performance Technologies. I think, as I said, the priority focus is around -- and the priority focus in the last 2 or 3 years is around specializing the business. And when you specialize it, so you're really looking at -- taking it more to a specialty -- a really truly specialty chemical model, then you're actually derisking the cycles because you're looking at really good quality innovation in fast-growing nations. So yes, so we won't expect to give up too much by everything. It remains to be seen whether we do, but we're not seeing that in our order intake or in our activities at the moment. And you probably know better than we do about macro for next year. So I mean, we're in a good place, and [ right now ] it's PBT, we're interested in that business. And it's less looking at the top line, it's more looking at the bottom line. So it's a combination of sales growth and margin improvement that drives the Performance Technologies for the group.
Couple of questions now from Laurence Alexander at Jefferies. In the ag sector, there's order timing and market histories in North America and new product mix support a slingshot effect with accelerating sales in 2019? Or how is second half '18 shaping up? And second one on Industrial Chemicals, should sales stabilize in 2019? Or will [ one ] slightly continue? Not sure if that's Industrial Chemicals or Performance Technologies, probably worth answering both.
Okay, I'll do the Crop one, and Jez can do the Industrial Chemicals. I mean, Crop is very good for Croda. It's in good shape, very good shape. First half, very strong. Quarter 3, slightly just below last year in quarter 3. But quarter 4 looks good from what we can see in Crop Care. And if you look at it, you're obviously going to get some changes in the quarter in Crop more so than any other business that we've got because it's just the nature of Crop. But we're in the Northern Hemisphere and the Southern Hemisphere as well. And if there's a drag in one part of the world, there's probably something else going on somewhere else and it sort of nets out. But pound for pound if I look every year over the last 10 years, it's grown every year and it will grow by the end of this year. As to quantum in quarter four, that's difficult to say. As to the quantum in next year, it's screens for -- well, we already said it screens for probably mid- to high single-digit sales growth. So the Life Sciences business in itself has a very strong driver in Health Care. It's got a very strong driver in Crop Care. I think the interesting thing for us is the MNC businesses, developed year to date, have grown very well. So there'll be 5, 6 companies, their innovation levels are high, which is something that we really do look at. But we're also picking up -- the factor growth rate, as you'd expect for Croda, it's small and medium-sized business -- so the Tier 2 and Tier 3 customers. And we're capturing growth there [ around the ] world as our Crop Care sales team starts to focus on new customers. So Crop Care is a good place. Who knows whether macro will improve the Crop Care next year. But in many ways, we're still very much micro driven in Crop Care as well. And we expect that to come back, growth to continue, no sign of it slowing down.
Okay. And then on the Performance Technology and Industrial Chemicals side, so as we said, Performance Technology's demarketing impact of a couple of percent on the top line growth. And that will slow -- that will have less of an impact as we go forward now, as we've lapped the program starting in the second half of last year. And on Industrial Chemicals, this is -- I mean, we always say -- and the reason we strip out core business separately is that we're happy to see the sales number go down in Industrial Chemicals. And a significant chunk of that business is byproducts and -- that we produce when we're producing main products for the other 3 sectors. And also, there's some tolling contracts in there, which over time we are reducing. So we're quite comfortable seeing Industrial Chemicals go down as we find ways to make less of the byproducts by changing the chemistry or as we exit tolling arrangements, a little bit historical. So the general direction of travel on Industrial Chemicals is likely to be continued reduction, but it has no real impact and generally, we make more profit if we are making less Industrial Chemicals. So that's the direction. There will be a bit more Industrial Chemical volume coming on from the Eco plant because one of the -- there is a byproduct on that stream that is produced in the ethylene oxide manufacture, so there might a little bit of noise as the Eco plant kicks into life. But generally, the direction of travel is to try and reduce the proportion of sales in the byproducts and tolling business in IC and you can expect that to continue.
The next one is from Charlie Webb at Morgan Stanley. It's the first time in a while we have seen you comment on a large MNC product launch. Can you please remind us what scale of contribution do you expect from these type of launches? And should we expect more of these to come?
Well then, you'd be surprised to know -- maybe not surprised to know, we can't talk about individual customers in any particular form, we're contracted to them, but we're delighted with 1 or 2, one big one that's been launched through -- probably, it's been 6 months in launch now, and it's been out in the market for 6 months and it's rolling out globally. And that's still rolling out and it's got another 12 month to roll out, top 5 brand in the world and it's been managed by Croda ingredients and managed by the R&D laboratories in Croda. So we're delighted with our -- and our relationship, as you'd expect, with that customer is outstanding based on that. So a lot of effort gone in marketing with our customer there. And we're also starting to see 1 or 2 more coming through in the advanced stage of pipeline as well. I mean, if you look back at the history of Croda -- I've been in the company 28 years, and over the last 10, 12, we've always been looking for 1 or 2 product customer launches like this, and we'd only get one every 2 years, and it looks like it's starting to come back now. I think the biggest points to Croda is it's getting our trust back with the MNCs and the growth is starting to come back. So you can see this growth coming through our customers now in MNC, and that's really exciting for us because they're innovating again, and they're doing a lot of innovation and they're starting to pick up good growth as a consequence of that.
Yes. I think it's possibly the final one, and it's from Rikin Patel at Berenberg. First one, is moderation in crop protection seasonal? Or are there other factors at play? And what is the growth trajectory we should expect here in 2019? And the final one is, can you please quantify the NPP growth in Performance Technologies?
We -- I mean, the first one, we'd answered it really, it's about Crop. There was a question before around that. There's no moderation in Crop, don't worry about quality or quality fluctuations. Year to date, Crop is in the positive, slightly positive. It will be by the end of the year and there's a [ heathy growth ] next year. Don't see any problem with that. It's very limited to macro effect. There'll be seasonality. You're obviously going to get seasonality here. But our big [ phases ] in Crop are, in geography terms, in Western Europe, North America and Brazil and then the 3 big areas. Clearly, we've got opportunities to expand in Asia, and that's what we're trying to do. So if you look at the 3 major regions, they balance each other out pretty well. But normally, the innovation power through our R&D over the last few years, it takes us forward and ahead of industry average growth rate. So we've always -- we've seen now for -- it has been for 10 years that we've outperformed the industry. So it's a really good business, Crop Care, and I expect that to continue.
Shall I take the NPP question? So, yes, in nutrition, we've had about 40% NPP and Personal Care, about 30% Life Science, about -- a bit under 20% in Performance Tech. It's nice to see Personal Care moving well ahead of 40% now. On Performance Tech, we put the medium-term focus on making sure that we have richer innovation coming through and therefore can drive that NPP number because it's one of the things that supports the margins in Performance Tech. So we remain a bit below the 20% level. But it -- we've seen some encouraging movements in that, supported, of course, by our acquisition of IonPhasE in December last year into the Smart Materials area, which is a very innovation-rich business, which we are in the process of developing through our own Croda sales network. So the key for us in the medium term, having done the demarketing in the short term, will be to drive that innovation pipeline in Performance Tech and get the innovation levels up towards the consumer businesses.
Hugh, that's the end of questions from our end.
Okay. Well, in that case, this now concludes today's call, thank you all very much for attending, and you can now disconnect.