Croda International PLC

LSE:CRDA

Earnings Call Transcript 2021-Q4

[Stephen Edwards Foots]

Good

morning,

everyone.

It's

great

to

be

with

those

of

you who've

joined

us

in

the

room

and

a

big

welcome

to

those

that

are

on

the

webcast

as

well.

As

ever,

I'm

going

to

go

through

some

of

the

highlights

of

the

year

before

handing

over

to

Jez

to

go

through

the

results

in

more

detail.

I'll

then

come

back

to

talk

about

the

key

trends

driving

the

growth

in

Croda

and

explain

how

we're

well

positioned

to

respond

and

benefit

to

them

as

well.

So,

let's

get

started

then.

So,

2021

was

a

record

year

for

the

business,

an

excellent

performance,

demonstrating

the

benefits

of

executing

our

strategy

with

agility,

speed

and

fast

– and

challenge

in

a

fast

moving

environment.

Investments

and

acquisitions

have

driven

strong

progress

across

all

areas

of

the

business.

And

that's

leading

to

the

best

sales,

profits

and

margins

that

we've

ever

seen,

significantly

ahead

of

last

year

and

well

ahead

of

2019.

High

inflation

related

to

raw

materials,

energy

and

logistics

was

a

significant

headwind.

And

we've

leveraged

our

strong

operating

model

and

pricing

capability

to

control

a

steep

rise

in

costs,

one

of

Croda's

unique

advantages.

Innovation

is

at

the

heart

of

what

we

do,

you

know

that

now,

and

it

defines

Croda.

So

it's

very

pleasing

to

see

that

NPP

growth

is

so

strongly

ahead

this

year.

Acquisitions

have

boosted

our

growth

too.

Avanti

has

established

our

lipid

system

platform,

which

achieved

$200 million

of

sales,

primarily

to

our

principal

vaccine

customers.

And

our

F&F

business,

Iberchem,

delivered

an

encouraging

performance

with

integration

on

track

to

achieve

the

synergy

potential

we

talked

about

when

we

acquired

it.

And

we've

also

accelerated

investment

in

the

business

to

capitalize

on

the

enormous

opportunities

that

we

see

to

drive

future

growth.

So,

overall,

in

the

round,

strong

and

agile

execution

of

our

strategy

as

well.

In

the

space

of

18

months,

if

you

think

about

it,

we've

acquired

Avanti

and

Iberchem

and

we're

in the

process

of

selling

the

majority

of

our

industrial

business

as

well.

So,

Croda

is

looking

very

different,

the

shapes

changing

and

we're

moving

very

much

more

towards

a

pure

play

consumer

care

and

life

sciences

company.

If

you

just

look

–

turning to

the

headline

financials

then.

We

delivered

a

very

strong

increase

in

both

sales

and

profits.

Adjusted

sales

grew

36%,

reflecting

excellent

organic

growth

in

the

core

business

and

the

impact

of

acquisitions

slightly

offset

by

adverse

currency.

So,

you have

big

growth

in

the

core,

plus

acquisitions

on

top.

Profits

grew

substantially

too,

a

testament

to

our

sustained

focus

on

high

value,

high

margin

niche

areas

of

the

market.

So

adjusted

earnings

per

share

43%

higher,

underpinning

the

board's

proposal

to

raise

the

full-year

ordinary

dividend

by

10%,

delivering

30

years

of

consecutive

dividend

increases.

And

finally,

we

grew

organic

capital

investment

by

over

30%

to

nearly

£160

million,

which

will

drive

forward

our

strategy

to

scale

consumer,

health,

and

crop

care

businesses,

leading

to

a

more

consistent

sales

growth

and

even

stronger

profit

margins

in

the

years

ahead.

We're

seeing

strong

structural

growth

too.

If

you

cast

your mind

back, we're

well

ahead

of

pre-pandemic

levels.

2019

is

a

tool

we

use.

The

results

from

other

comparator

for

2019

is

a

tool

we

use

for

management

to

look

at

real

comparisons

rather

than

last

year.

And,

it's

great

to

see.

You

see

the

graph

in

the

top

left.

Great

to

see

all

the

businesses

double

digit

–

showing

double-digit

underlying

growth

in

each

of

the

sectors.

So

top

right

shows

the

reported

operating

profit,

up

38%.

And

below

you

can

see

how

EPS

has

progressed

to

be

35%

higher.

And

there's

also

been

a

marked

increase

in

NPP,

as

I

mentioned

earlier,

increase

from

28%

to

37%.

So

as

we

become

more

knowledge

– more

and

more

knowledge

intensive

company,

we

commercialize

people's

knowledge,

not

network

capacity

in

our

world.

So,

underlying

growth

in

2021

was

strong

across

the

board.

We

had

–

whilst

health

care

was

the

standout

performer,

Crop

Protection

in Life

Sciences

also

had

a

good

second

half

too,

contributing

to

this

40%

increase

in

the sales

of

Life

Sciences.

Consumer

Care

delivered

a

strong

set

of

results

as

well,

consistent

throughout

the

year.

We're

seeing

a

resurgence

in

Personal

Care.

Performance

Technologies

strengthened

in

half

two,

driven

by

improved

demand

in

its

more

cyclical

end

markets.

And

all

regions

also

delivered impressive

sales

growth,

with

the

consumer

recovery

strongest

in

North

America.

I

mentioned

inflation

a

moment

ago,

and

this

slide

helps

to

illustrate

both

the

challenge

and

our

ability

to

successfully

navigate

it.

2021

saw

the

highest

rise

in

raw

material

costs

in

a

decade,

up

17%

on

an

underlying

basis.

Energy

costs

rose

significantly,

with

freight

also

rising

by

25%,

big

headwinds

of

cost,

you've

seen

that

in

the

industry

as

well.

The

underlying

sales

volumes

are

very

healthy

and we're

pleased

about

that.

They

grew

9%,

reflecting a

very

strong

trading,

but

we

fully

recovered

the

impact

of the

higher

input

costs,

demonstrating

the

continued

strength

of

Croda's

operating

model,

and

alongside

an

improving

product

mix

as

well.

So,

if

you

looked

at

the

overall

mix,

up

17%.

The

consequence of

a

strong

demand

and faster

growth

was

record

profit

margins

increasing

to

24.8%.

Our

non-financial

metrics

are

just

as

important

as

our

financial

results.

And,

last

year,

we

became

only

the

third

chemical

company

in

the

world

to

have

our

1.5-degree

target

verified

by

the

Science Based

Targets

initiative.

Our

objective

is

to

be

Net

Zero

by

2050

and

to

ensure

that

we're

investing

in

our

site

decarbonization

roadmaps.

Whilst

the

divestment

of

PTIC

will

make

us

less

carbon-intensive,

we

will

rebase

our

climate

targets

to

maintain

the

challenges

that

we've

set

ourselves.

We're also

improving diversity

and inclusion,

achieving both

targets

of

the

Hampton-Alexander

and

Parker

Reviews

at

the

start

of

this

year.

The

proportion

of

women

in

leadership

across

the

business

now

increased

to

36%

leadership

positions. And

we've

established

the

Croda

Foundation

through

which

we're

providing

£1

million

of

funding

annually.

And

this

year,

we've

given

an

additional

£2

million

on

top

to

reflect

the

progress

in

Health Care

– our

Health Care

business

and

the

first

projects

will

help

deliver

vaccines

to

over

50

million

people

in

India,

Brazil

and

Uganda.

So,

a

sale

of

the

majority of

PTIC,

which

was

agreed

in

December,

was

a

significant

strategic

step

for

the

business

for

lots

of

reasons.

And

on

completion,

Croda

will

become

a

more

carbon-light

business

but

will

also

have

more

intellectual

property

as

NPP

sales

in

Consumer

Care

and

Life

Sciences

are

nearly

half

the

total

in

the

in

the

business.

So,

our

increased

exposure

to

fast

growth

markets

will

translate

to

faster

top

line

growth

and

increased

margins.

And

we

will

be

more

focused

and

an

even

stronger

position

to

drive

consistent

superior

returns

in

the

future.

So,

let

me

stop

there,

more

from

me

in

a

moment

and

I

hand

over

to

Jez,

for

a more

detail

on

the

numbers.

Thank

you.

[Jeremy Kim Maiden, Group Finance Director, Croda International Plc]

Thanks,

Steve,

and

good

morning

everybody.

As

Steve

has

said,

2021

has

seen

a

record

financial

performance

for

the

group.

Sales

were

up

36%

in

reported

currency

at

almost

£1.9

billion,

an

increase

by

43%

in

constant

currency.

Sterling

strength

means

that

reported

currency

numbers

are

about

7

points

below

the

constant

currency

numbers.

Adjusted

operating

profit

increased

by

47%

to

£469

million.

With

a

better

product

mix

and

volume

growth,

return

on

sales

increased

by

180 basis

points

to

24.8%.

Adjusted

profit

before

tax

was

£445

million,

up

almost

50%

on

the

prior

year.

The

tax

rates

reduced

to

21%

with

a

one-off

benefit

from

settlement

of

a

previous

uncertain

tax

position.

We

expect

to

revert

to

around

25%

tax

rate

from

2022.

Adjusted

earnings

per

share

rose

by

43%

to

£2.50

with

the

proposed

full-year

dividend

increase

to

£1.00,

up

£0.10

per

share

and

14%

in

cash

terms

following

the

Iberchem

funding

for

the

equity.

This

is

the

30th

successive

year

of

dividend

growth,

as

Steve

has

said,

and

earnings

cover

is

at

the

lower

end

of

our

range

of

40%

to

50%

of

adjusted

earnings.

So,

we're

in

a

good

place

there.

Free

cash

flow

reduced

by

13%

to

£154

million

due

to

higher

capital

investment

and

working

capital

build

and

I'll

talk about

that

later.

Adjusted

profit

items

charged

in

the

period

totaled

£34

million.

This

reflected

an

increased

charge

for

intangible

amortization

following

the

recent

acquisitions.

Exceptional

items

were

netted

to

pretty

close

to

zero.

Profit

before

tax

on

an

IFRS

basis

was

up

53%

to

£412

million.

The

left-hand

chart

shows

the

sales

bridge

for

2021

versus

2020.

Underlying

sales,

that's

from

the

existing

Croda

businesses

pre-acquisitions,

were

up

26%

in

the

year,

of

which

price/mix

was

plus

17%

and

volume

was

9%

higher.

We're

particularly

pleased

with

the

volume

growth

as

it

demonstrates

the

strength

of

the

existing

business.

Price/mix

includes

the

recovery

of

inflationary

costs

but

with

a

significant

benefit

as

well

from

product

mix,

reflecting

the

growth

of

the

high-value

businesses,

particularly in

Beauty

Actives

and

Health

Care.

The

first

year

of

acquisitions

added 17%

to

group

sales,

giving

the

43%

increase

in

constant

currency

sales.

Now,

the

right-hand

chart

shows

the

impact

of

lipid

systems

growth.

As

at

the

half

year,

this

has

had

a

meaningful

impact

on

the

full-year

performance

and

it

would

be

easy

but

incorrect

to

conclude

that

the

overall

record

result

has

been

driven

solely

by

this.

Of

the

total

constant

currency

growth

of

43%,

10

percentage

points

have

come

from

Avanti

and

the

lipid

systems

platform,

20

percentage

points

have

been

delivered

from

Croda's

existing

business,

reflecting

the

strong

growth

in

Consumer

Care

and

the

rest

of

Life

Sciences

as

well

as

Performance

Technologies

and

the acquisitions

in

Consumer

Care

added

13

percentage

points

of

growth.

So,

the

growth

is

very

broad-based.

This

sales

growth

has

also

been

reflected

in

the

profit

bridge.

The

underlying

business

delivered

£116

million

of

profit

growth.

We

saw

growth

across

all

sectors

and

all

businesses.

We're

now

trading

well

ahead

of

pre-pandemic

levels

across

the existing

Croda

business.

Acquisitions

are

shown

separately

up

to

the

first

anniversary

of

their

purchase.

Profit

from

acquisitions

added

£58

million

in

2021

and

currency

translation

reduced

overall

reported

profit

by

£25

million.

Turning

now

to

look

at

each

sector

and

how

it has

contributed

to

the

growth.

Consumer

Care

sales

grew

by

45%

and

adjusted

operating

profit

was

29%

higher.

The

lower

profit

growth

here

reflects

the

fact

that

Iberchem

operates

at

a

lower

margin

than

the

Personal

Care

business.

And

as

a

result

of

this

dilution

effect,

return

on

sales

overall

for

the

sector

was

around

25%.

The

standout

performer

was,

again,

Life

Sciences.

Sales

grew

in

2021

by

46%

and

with

a

stronger

product

mix,

adjusted

operating

profit

rose

by

two-thirds,

with

return

on

sales

of

36%.

Performance

Technologies

saw a

strong

sales

recovery,

with

sales

up

18%,

all

organically

driven.

The

benefits

of

greater

volume

and

the

operating

leverage

impact

saw

adjusted

operating

profit

32%

higher

and

return

on

sales

of

around

15%.

Now,

looking

at

each

of

the

three

principal

sectors

in

turn.

2021

saw

the

creation

of

the

Consumer

Care

sector,

comprising

Croda's

leading

Personal

Care

business

in

Personal

Care,

our

growing

Home

Care

business

and

the

Iberchem

fragrance

and

flavors

business.

Personal

Care

saw

a

strong

rebound

in

sales

in

2021,

with

underlying

sales

now

15%

above

the

pre-pandemic

level

of

2019.

Growth

was

strongest

in

the

high-end

IP-rich

engine

of

Beauty

Actives,

including

Sederma,

with

sales

up

by

29%

on

2020.

And

after

a

challenging

couple

of

years,

the

Beauty

Care

business

saw

a

progressive

improvement

in

demand

for

skin care,

sun

care,

cosmetics

and

hair

care,

with

sales

13%

higher.

The

business

is

focused

on

sustainability-driven

innovation,

including

products

from

the

US

ECO

plant.

After

strong

demand

for

hygiene

products

in

2020,

Home Care

sales

growth slowed

to

8%. Fabric

care

and

ECO

products

are

the

key

drivers

of

growth

here.

The

Iberchem

business

is

proving

to

be

everything

that

we

hoped

it

would

be.

The

innovation

in

particular,

is

very

exciting.

Integration

is

on

track.

And

the

first

cross-selling

synergies

are

being

delivered.

2021

saw

an

encouraging

performance

despite

combination

of

slower

growth

in

COVID-impacted

emerging

markets

and

a

lag

in

full

inflation

recovery,

but

our

profit

was

in

line

with

the

acquisition

plan.

Looking

at

the

bottom

chart,

with

Beauty

Actives

sales

strong,

product

mix

improves

in

Consumer

Care.

Price/mix

was

13%

higher

and

volume

was

5%

up.

Acquisitions

added

35

percentage

points

to

the

sector

and

the

consumer

sector

is

now

well

set

to

deliver

our

objective

of

mid-single-digit

percentage

sales

growth

before

inflation

recovery.

Life

science

continues

to

develop

into

a

business

to

rival

Croda's

long

held

leadership

in

Consumer

Care.

With

its

focus

on

drug,

vaccine

and

crop

science

delivery

systems,

the

sector

is

growing

sales

through

organic

expansion

and

by

leveraging

acquired

technologies.

2021

saw

sales

up

46%

and

adjusted

operating

profit

up

67%.

Within

this,

Health

Care

delivered

an

outstanding

performance

with

rapid

expansion

in

all

three

patient

healthcare

platforms.

Sales

of

vaccine

adjuvants

were

up

over

40%

alongside

specialty

excipients.

And

meanwhile,

the

lipid

systems

platform

saw

sales

of

approximately

$200

million

for

COVID-19

vaccines.

Crop

Protection

delivered

double-digit

percentage

growth

year-on-year

in

what

was

a

great

year

for

agricultural

demand

globally.

The

growth

in

Seed

Enhancement

was

more

subdued

due

to

slower

markets

in

Europe

and

North

America.

The

growth

of

Health

Care

and

the

top

end

of

crop

is

driving

a

focus

on

value,

not

volume.

Innovative

products

sell

at

much

higher

prices

and

volumes

are

measured

in

kilos,

not

tonnes.

As

a

result,

price/mix

added

35

percentage

points to

sales

growth,

whilst

volume

rose

by

6

percentage

points.

The

broad-based

sector

growth

can

be

seen

in

the

chart

on

the

right-hand

side,

with

an

overall

contribution

of

17

percentage

points

from

Croda's

existing

business,

supported

by

37

percentage

points

from

the

Avanti

acquisition

and

the

broader

lipid

systems

platform.

Life

Sciences

is

expected

to

see

high-single-digit

growth

in

the

medium

term,

excluding

inflation

recovery.

In

Performance

Technologies,

2021

saw

a

continued

improvement

in

sales,

driven

by

a

recovery

in

high-end

markets

and

sustainability-driven

demand.

Margins

also

improved

due

to

a

better

business

mix

and

operating

leverage.

Sales

increased

by

18%,

equally

split

between

price/mix

and

volume.

In

December,

we

reached

agreement

to

sell

just

over

three-quarters

of

the

combined

Performance

Technologies

and

Industrial

Chemicals

business

or

PTIC

and there

was

no

impact

on

the

2021

results

from

the

divestment

other

than

an

exceptional

charge

for

the

advisory

costs

incurred

during

the

year.

However,

had

the

divestment

occurred

at

the

start

of

2021,

we

estimate

that the

sales

in

PTIC

would have

been

around

£360

million

lower

and

the

impact

on

adjusted

operating

profit

from

the

divestment,

together

with

resultant

stranded

costs

in

the

business,

would

be

just

short

of

£60

million

per

annum.

We're

now

working

through

the

separation

process

and

expect

completion

during

the

summer

of

2022.

We've

already begun

the

redeployment

of

capital

from

the

PTIC

divestment.

In

2021,

we

increased

our

capital

spend

to

almost

£160

million.

We're

following

our

buy

and

build

strategy

of

acquiring

into

exciting

technology

adjacencies

like

vaccine

adjuvants

and

lipid

systems

at

sensible

multiples

and

then

expanding

them

organically

through

capital

investment,

which

reduces

the

risks

and

avoid

significant

goodwill

thereby

accelerating

returns.

In

2021,

we

invested

£70

million in

Health

Care.

We

also

expanded

our

range

of

sustainable

technologies

in

Consumer

Care.

And

we

began

investment

in

botanicals

and

fragrances

as

part

of

our

fast

growth

China

strategy.

The

other

key

cash

outflow

in

the

year

was

the

£100

million

working

capital

build.

This

reflected

an

increase

in

raw

material

costs

and

selling

prices,

higher

sales

volume

and

tactical

increases

in

inventory

to

mitigate

the

global

distribution

challenges

that

we

faced

similar

to

many

other

companies.

The

impact

of

higher

values

of

working

capital

at

a

constant

level

of

days

cover

added

almost

£70 million,

as

you

can

see

on

the

right-hand

chart,

while

the

increase

in

contingency

stock

added

a

further

£45

million.

And

this

will

reverse

as

price

increases

and

distribution

challenges

normalize.

As

a

result,

free

cash

flow

was

£154

million,

£23

million

behind

2020.

We're

following

our

long-established

capital

allocation

policy,

which

guides

the

way

we

deploy

capital.

Firstly,

we're

investing

in

organic

growth,

as

you've

seen,

while

increasing

the

ordinary dividend

as

part

of

our

long-term

commitment

as you've

seen, while

increasing the ordinary

dividend

as part

our

long-term

commitment

on returns

to shareholders.

We

invested in

acquisitions

through

Alban

Muller

and

Parfex

in

Consumer

Care,

and

closing

leverage

was

1.4

times

EBITDA,

well

within

our

target

range

of

1

to 2

times.

We'll

continue

to

follow

this

policy,

investing

for

the

future,

increasing

the

regular

dividend,

and

returning

excess

capital

as

and

when

this

is

identified.

I'll

now

hand

you

back

to

Steve

who

will

update

you

on

our

strategic

priorities.

[Stephen Edwards Foots]

Thanks, many

thanks,

Jez. Right.

A

little

bit

more

from

me

then

on

Croda's

strategy,

and

it's

all

about

moving

into

faster

growth

markets.

Yeah, you've

heard

this

from

me

many

times.

We're

focused

on

those

markets

that

can

value

our

innovation

and,

through

high

margins,

are less

cyclical,

as

well

as

capital

and

carbon

light.

So,

we'll

combine

our

leadership

position

in

sustainability

with

our

leadership

position

in

innovation.

You

need

them

both

to

deliver

profitable

growth.

And

at

that

intersection,

you

get

fast

growth.

So,

if

you

just

look

at

our

strategy,

our

strategic

priorities,

we've

done

some

of

our

best

strategic

thinking

during

the

COVID-19

pandemic

with

the

board

and

Executive

Committee

together

recently

finalizing

our

strategic

plan

for

the

next

five

years.

And

our

priorities

are

shown

on

the

outside

of

the

rim

of

the

circle.

And

in

addition

to

expanding

and

strengthening

our

core

sectors,

we'll

also

scale

biotechnology

and

invest

to

faster

growth

in

China

as

well

where

the

personal

care

market,

for

example,

is

growing

at

9%

a year.

We'll

continue

to

look

to

acquire

disruptive

technologies

as

well

along

the

way

and

also

continue

to

what

we

call

do

the

basics

brilliantly

and

increase

both

our

responsiveness

to

customers

and

engagement

from

our

employees.

So,

today,

if

you

look

about

sustainability,

consumers

care

more

and

more

about

it

and

their

impact

on

the

wider

environment

as

well,

too,

in

the

brands

that

we

sell

to.

Our

customers

want

us

to

deliver

novel,

sustainable

ingredients

that are

ethically

sourced

and

produced

from

lower

carbon

manufacturing.

And

this

is

how

we

think

about

sustainability

and

the

opportunity.

So,

we're

seeing

a

big

shift

from

the

pandemic.

We're

ramping

up

innovation

too,

and

it's our

lifeblood.

As

you

know,

we've

invested

50%

more

in

R&D

resource

in

the

last

year,

undertaking

bigger

bets

with

more

ambitious

projects.

And

we'll

roll

some

of

these

out

with

you

through

the

calendar

this

year.

So,

we've

got about

seven

major

projects

that

we're

working

on

at

the

moment. And

at

the

heart

of

our

strategy

is

our

Purpose,

Smart

science

to

improve

lives,

which

will

control

and

continue

to

guide

the

strategic

choices

that

we

make.

Across

the

markets

we

see,

we

like

trends,

and

there

are

two

mega

technology

trends,

which

we

think

are

the

most

important

for

us

driving

our

future.

The

first

is

the

demand

for

sustainable

ingredients.

As

I

mentioned

earlier,

consumers

want

more

products

from

natural

and

ethically

sourced

ingredients.

And

that's

benefiting

consumer

as

well

as

the

Crop

business.

And

the

second

is

the

move

towards

biologics

in

Crop

Care

and

pharmaceuticals,

which

offer

transformational

opportunities

for

Croda,

which

I'll

come

on

to

shortly –

big

opportunities

presenting

themselves

in

biopesticides

and

biopharmaceuticals,

which

is

really

exciting

for

the

group.

And

the

way

we

look

at

Croda

now and

the

way

I

want

you

to

look

at

Croda

now

is

we've

got

eight

growth

businesses

supported

by

industrial

specialties.

And

within

Consumer

Care,

most

of

you

are

familiar

with

our

Personal

Care

business,

where

we

deliver

thousands

of

products

to

thousands

of

customers,

all

of

which

with

rich

IP.

We've

got

eight

businesses

like

that

now

run

by

dedicated

management

teams,

and

thereon

forward-thinking,

customer-led

R&D

capabilities.

They're

all

supplying

critical

ingredients

at

low

inclusion

levels

and

often

selling

in

test

tube

quantities

rather

than tanker

loads,

replicating

the

model

we

have

in

Personal

Care

for

many

years.

So,

all

eight

businesses

have

excellent

growth

prospects

and we

see

a

great

opportunity

for

each

of

them

to

deliver

as a

minimum

1.5

times

GDP,

so if

there's

a

takeout

for

the

slide,

multiple

opportunities

for

growth

across

multiple

sectors. 10

years

ago,

some

investors

would

have

invested

in

Personal

Care

as

a

priority.

Take

a

look,

you

can

invest

in

Health

Care,

you can

invest

in

Crop

Care,

you

can

invest

in

fragrance

and

flavors,

and

you

can invest

in

Personal

Care

as

well.

You

can invest

in

all

of

them

now.

So

turning

to

each

of

these

areas

in

a

bit

more

detail.

Beauty

Actives

is

a

really

important

business

for

Croda.

We're

market

leader

in

peptides,

naturals

and

biotechnology,

all

of

which

are

seeing

higher

growth

than

the

average

global

beauty

market

and

we

expect

that

to

continue.

Our

genre-defining

peptide,

such

as

Matrixyl

are

formulated

into

80%

of

all

new

antiaging

products

containing

a

peptide.

We're

also

developing

next-generation

active

ingredients

including

peptides

using

synthetic

biology

and

80%

of

our

Beauty

Actives

R&D

pipeline

is

green.

We

acquired

Alban

Muller

deliberately,

which

develops

innovative

botanical

ingredients

such

as

anti-inflammatories

made

from

pomegranate

of

all

things.

And

we've

also

introduced

botanical

ingredients

into

China

as

well

and

acquired

land

for

a new

facility,

which

we

expect

to

build

in

2023.

So

a

third

of

our

active

products

as

well

are

biotechnology

derived

in

revenue

terms

today,

most

well-known

of

which

is

Majestem

for

skin

and

neck

lifting.

Some

of you

might

have tried

that

before.

And we

acquired

Nautilus

as

well

in

2018,

a

technology-rich

marine

biotechnology

business,

which

has

recently

launched Venuceane, an

active

derived

from

marine

microorganisms

as

well

to

repair

sun

damage,

Sederma

moving

increasingly

into

sustainable

ingredients

into

faster

growth.

And

we're

winning,

too,

in

sustainable

ingredients

in

both

Beauty

Care

and

Home

Care

as

well.

We're

the

market

leader

in

metal

oxides

on

the

left-hand

side,

use

a

sustainable mineral

UV

filters for

sun creams, and

have

invested in

Entekno

partnership, which

has launched

a

range

of

high-protection

mineral

products

with additional

non-whitening

benefits, so positioning

through

a partnership

to

meet

sustainable

ingredients.

And

in sustainable

surfactants,

we're

displacing

petrochemical

competitors

in

formulations

increasingly

with

our

broad

range

of

ECO

products.

And,

in

2021,

we

secured

a

three-year

contract

with

a

major

beauty

brand

covering

six

ECO

surfactants

for

high-end

skin

and

hair care,

the

start

of

things

to

come.

And,

in

other

areas,

we're

also

seeing,

in

sustainable

surfactants,

legislation

change

through

sulfation,

sulfate-free

brands

now

are

on

the

market

everywhere.

And

we're

getting

the

benefit

of

that

through

our

ingredients

through

clean

beauty

products,

with

sales

doubling

over

the

last

four

years.

So

we're

starting

to

see

this

big

shift

materially

improving

the

growth

profile

for

our

Consumer

Care

business.

And

in

Home

Care,

it's

just

the

same,

but

what

you

see

there

is

a

big

move

in

the

wash

cycle

to

low-temperature

washing.

That's

allowing

us

to

provide

active

biopolymer

ingredients,

and

we

just

signed

some

lucrative

contracts

with

a

big

customer

to

improve

their

fabric

conditioner

range

around

the

world

that's

been

launched

in

30

countries

improving

their

brand.

So,

lots

of

good

opportunities

coming

through

and

you're starting

to

see

that

in

the

numbers

with

Consumer

Care.

In

fragrances

and flavors,

as

Jez

said,

we're

really

happy

with

where

we

are.

We're

on

track

with

the

€48

million

of

annualized

revenue

synergies

by

2025, and

we're

leveraging

our

combined

sales

network

with

10 target

countries

identified

and

opportunities

across

customers

of

all

sizes,

including

major

brands,

regional

dynamos,

and

indies.

In

Brazil,

a

new

Iberchem

business

and

R&D

laboratory

has

been

set

up

and

established

at

an

existing

Croda

site

there,

and

it's

delivering

its

first

sales,

too.

So,

this

year,

we

also

acquired

Parfex,

again,

sustainable

ingredients,

big

shift

there.

They

create

fragrances

principally

for

premium

personal

care

and

fine

perfumery

markets.

And

we're

leveraging

their

natural

raw

material

base

to

their

portfolio,

all

part

of

the

plan

to

capitalize

on

growth

opportunities

for

Ecocert-accredited

products.

We

doubled

sales

of

these

product

lines

during

the

year.

So

turning

next

to

Crop,

we've

talked

to

you

a

lot

about

the

traditional

crop

care

market

on

the

left-hand

side

of

the

slide, a

big

market

with

compound

annual

growth

of

about

3%.

An

existing

partner

to

the

major

crop

companies,

we've

also

successfully

increased

our

sales

to

medium

size

and

small

customers

who

now

account

actually

for

about

50% of

sales.

So

it's

not

just

about

the

four

or

five

big

multinationals.

We've

got

a

broad

breadth

to

our

programs

now.

But

more

exciting

is

the

move

to

biopesticides.

Whilst

it's

currently

a

smaller

market,

it's

growing

rapidly.

And

we're

now

increasing

our

innovation

for

next-generation

delivery

systems

for

microbials

and

RNA,

things

like

that.

Sustainability

trends

are

driving

Seed

Enhancement,

too,

where

we

have

secured

our

first

customers

for

seed

treatment,

seed

coatings

that

are

microplastic-free.

And

we've

recently

opened

an

innovation

center

in

Brazil

too

there,

state-of-the-art

facility,

including

formulation,

microbiology

and

seed

treatment

laboratories.

And

keeping

the

best

to

last,

let's

talk

about

moving

to

biopharma

in

our

Patient

Health

business.

As

you

know,

our

drug

delivery

capability

is

founded

on

three

world-class

platforms,

all

of

which

meet

the

need

for

specialist

delivery

systems

for

biopharma

applications

and

where

we're

seeing

compelling

opportunities

for

future

growth.

I'll

talk

more

about

the

pipeline

shortly.

But

just

as

a

recap

slide,

growth

in

excipients

has

been

driven

by

expansion

in

injectable

drugs

using

biological

active

ingredients,

which

dominate

new

drug

launches.

The

opportunity

here

is

vast,

extending

to

the

newest

biological

drug

innovations,

such

as

monoclonal

antibodies,

say

that after

a few

[indiscernible]

(00:29:38),

more

than

5,000

of

which

are

currently

in

clinical

trials.

And

our

adjuvants

provide

the

important

accelerator

to

a

range

of

new

global

vaccines.

The

market

for

prophylactic

vaccines,

say

that

after a

few more

[indiscernible]

(00:29:52),

has

more

than

doubled

in

the

last

two

years.

And

in

addition,

more

than

1,500

clinical

trials

are

currently

underway

for

therapeutic

vaccines.

Lipid

systems

offer

significant

potential

beyond

COVID-19

as

a

preferred

delivery

system

for

the

developing

science

of

nucleic

acid

therapeutics.

You'll hear

a

lot

more

about

that

from

Croda.

The

mRNA

market

alone

is

expected

to

reach

about

$35

billion

over

the

next

15

years

and

180

clinical

trials

are

already

underway

for

applications

across

preventative

and

therapeutic

vaccines

and

therapeutic

drugs.

So,

we've

got

three

world-class

platforms,

all

of

which

are

offering

great

opportunities

for

Croda.

So

the

pipeline

then,

so

turning

to

it,

it's

getting

bigger,

much

bigger.

In

2021,

we

secured

130

new

customers;

250

new

clinical

and

preclinical

programs

with

our

products,

we're

involved

in;

and

interestingly,

two-thirds

of

those

programs

are

non-COVID-19

applications.

We're

not

a

one-hit

wonder

in

Croda

in

COVID.

You'll

have

a

look

at

the

non-COVID

growth

profile

for

Croda

in

the

next

few

years

in your

five-year,

ten-year

spreadsheets.

In

terms

of

providing

some

color

on

the

variety

of programs,

we

can

say

that

oncology

programs

make

up

the

majority

of

our

specialty

excipient

pipeline,

as

well

as

immunosuppressants

for

diseases,

such

as

diabetes.

In

vaccine

adjuvants,

we're

becoming

more

involved

with

the

fight

against

WHO-listed

diseases,

too.

So

we're

now

contributing

in

high

profile

projects

to

combat

15 of

those 24

priority diseases, including

new

projects

for things

like

HIV and

Ebola.

And

in

lipid

systems,

we're

involved

with

multiple

projects

and

multiple

customers,

and

we

have

relationships

with

over

two-thirds

of

companies

developing

mRNA

vaccines

and

drugs.

So,

we're

very

well-placed

there

to

satisfy

future

growth.

And

I

think

taking

a

big

step

back

from

this,

Jez

and

myself

will

say

these

are

the

hallmarks

of

a

terrific

new

Croda

business,

probably

the

most

exciting

thing

I've

seen

in

my

career

to-date.

And

given

the

rapidly

developing

pipeline,

it

should

come as

no

surprise

that

we're

investing

our

money

in

it,

putting

our

money

where

our

mouth

is,

investing

ahead

of

future

growth

to

satisfy

future

growth

as

well.

Our

preferred

approach

is

to

adopt

this

buy-and-build

model, secure

a

new

technology

platforms

like

Avanti

and

the

knowhow

that

we

get

through

that

with

modest

acquisition spends

and

building

site

expansion

around

that. Their

model

was

a

good

one,

but

it

didn't

capitalize

on

the

big

growth

coming

through

the

clinical

programs.

We

think

we

can

do

that.

So,

overall,

we've

invested

more

than

£100

million

in

the

last

two

years,

including £70

million

in

2021,

with

a

similar

amount

committed

in

the

future.

So,

in

speciality

excipients,

we've

doubled

capacity

–

yeah,

in

speciality

excipients,

we've

doubled

capacity

in

the

US.

We're

also

expanding

in

Asia,

investing

£15

million

to

increase

our

capacity

there

as

well.

And

in

adjuvants,

you'll

see

we've

doubled

capacity

at

our

site

in

Denmark

as

well.

And

for

lipid

systems,

we've

doubled

the

number

of

employees

at

Avanti

with

£35

million

of

investment

to

double

capacity

at

their

Alabama

site.

This

has

been

complemented

by

£20

million

of

investment

to

create

a

new

scale-up

capability

in

the

UK.

These

are

already

some

of

the

highest

returning

investments

in

our

portfolio,

and

we're

confident

that

this

trend

will

continue.

So

in

addition,

we've

also

increased

people

numbers

by

40%,

which

has

hit

the

Life

Science

margin

you've

seen

in

the

second

half

of

the

year,

but

it's

because

of

growth,

future

growth,

and there's

lots

of

it

so

lots

of

progress.

And

all

part

of

our

plan

is

to

build

an

unbeatable

global

drug

delivery

capability

with

three

world-class

technology

platforms.

It's

not

just

lipid

systems.

It's

not

just

vaccine

adjuvants.

It's

specialty

excipients

of

three

platforms.

So

finally,

coming

to

our

outlook,

we

expect

to

see

continued

underlying

growth

in

the

year

ahead

driven

by

this

robust

consumer

demand

we're

seeing.

We

expect

that

to

continue.

Raw

material

prices

are

increasing

and

growth

investments

are

offsetting

any

further

customer

destocking.

We're

navigating

inflation

very

well.

And

as

guided

to

previously,

we

expect

lipid

systems

to

be

at

a

similar

level

to

2021

and

margins

will

remain

strong

due

to

an

increased

proportion

of

sales

from

higher value-add

solutions.

So,

in

summary,

it's

been

an

outstanding

year

for

Croda

with

strong

financial

and

strategic

progress,

and

we're

well

ahead

of

pre-pandemic

levels

and

demonstrating

our

ability

to

navigate

this

high

inflationary

environment

very

well.

We're

more

knowledgeable

and

a

more

intensive

business

as

well

with

that,

focused

on

higher

growth,

higher

R&D,

higher

return

markets

in

a

stronger

position

to

deliver

more

consistent

sales

growth,

stronger

profit

margins

in

the

future.

And

it's

an

exciting

time

for

Croda.

Of

that,

there

is

no

doubt.

And

now,

Jez

and

I

are very

happy

to

take

your questions

from

the

floor

and

from

the

webcast.

Thank

you.

[Operator Instructions]

[Charles Eden, Analyst, UBS AG (London Branch)]

Charles

Eden,

UBS.

Thank

you

very

much.

Two questions

from

me,

please.

You

mentioned

strong

margins

in

Life

Sciences

in

2022.

Could

you

help

us

define

strong

if

possible,

please?

And

then

secondly,

you

mentioned

raw

material

inflation,

no

surprise.

Can

you

help

us

what

that

looks

like

for

Croda

in

2022

and

if

there's

any

variants

between,

I

guess,

core

Croda

now,

so

Consumer

and

Life Sciences

and what

it

might

be,

including

PTIC,

if

you

could

break

that

out?

Thank

you.

[Stephen Edwards Foots]

I'll

do

one.

Jez

can

do

two.

Yeah,

I

mean,

on

the

margins,

and

the

Life

Science

margins

come

off

in

the

second

half,

you've

seen

that.

But

it's

all

to

do

with

the

increase

in

numbers

that

we're

seeing

and

the

increase

in

capital

we're

putting

in

the

business.

So,

I'll

come

back

to

answer

your

question

in

a

minute.

But

Avanti,

particularly,

we

started

with

125

people

in

Avanti.

We've

now

got

nearly

300

people.

And

the

model

that

we're

adopting

is

that's

a

preclinical

machine.

It's

sending

out

samples

at

a

veracious

rate

right

across

the

spectrum

to

pharma

companies.

So,

we're

in

a

lot

of

preclinical

programs.

And

as

anybody

knows,

in

the

pharma

industry,

once

you're

in

pre-clinicals,

then

your

job

is

nearly

there,

nearly

complete

because

we

should

roll

into

the

clinical

one,

two

and

three

programs

with

the

support

we've

got

from

the

preclinical

relationships

that

we've

got.

So,

the

most

important

thing

is

making

sure

that

we're

responding

quickly

to

new

molecules,

existing

molecules,

and

synthesizing

things

in

a

slightly

different

way.

So,

the

lipid

system

market

needs

slightly

different

products.

So,

a

lot

of

these

clinical

programs

we've

got,

not

just

the

lipid

systems,

probably

multiple

products,

slightly

different

products

for

multiple

customers.

So,

there

isn't

one

standard

product

that

serves

this.

So,

there's

a

lot

of

craft

needed

from

our

Avanti

team

to

make

sure

that

we

are

adopting

the

right

products

in

the

preclinical

programs.

So,

we've

put

a

special

emphasis

on

that.

And

you've

seen

that

margin

come

off

in

the

second

half.

I

think

the

way

we

look

at

that's

stabilized

now

because

we've

put

a

lot

of

those

people

in. I think we're

talking

about

35%

margins

for

Life

Sciences

this

year

on

an

ongoing

basis.

The

growth

outside of

lipid systems,

the

growth

is

still

at

the

higher

margin

area.

So,

you

would

expect

that

margin

increase

to continue.

So,

we're

not

seeing

a

sort

of

deterioration

in

margin,

which

is

uncontrolled.

It's

all

targeted

for

growth

because of

our

confidence

in

the

growth.

There's

a

little

bit

of

depreciation

in

there

coming

off

some

of the

assets.

And

also

actually

to

a

smaller

degree,

crops

had

a

great

second

half

as

well.

So,

there's

a

bit

of

dilution

in

crop

in

there

as

well.

So,

there

is

absolutely

no

problem

with

margins

in

Life

Sciences,

far

from

it.

You're

just

seeing

a stabilization

once

we

put

a

lot

of

energy

into

these

preclinical

programs

through

people, putting

people

on

the

ground.

So,

that's

really

important.

And it's

testament

to

our

confidence

in

the

business

going

forward,

our

capital

confidence

but

also

our

people

confidence

in

putting

resource

in

as

well.

This

market

could

get

very,

very

interesting

for

Croda

in

the

next

decade.

Jez,

on

the

second

point?

[Jeremy Kim Maiden, Group Finance Director, Croda International Plc]

So,

Charles, so raw

material

recovery

and

so

forth.

So,

in

2021,

we

had, as Steve

said,

17%

increase

in

raw

materials.

So,

clearly,

there's

an

annualization

effect

to

flow

through –

probably

about

half

of

that

to

flow

through

in

2022, just

a

straight

sales

price

recovery.

And

then,

we've

seen

some

further

increases

in

the

first quarter

with

maybe

some

early

signs

in

the

second

quarter

that

there's

fewer

of

those

increases

because

we

feel

it's

got

inflation, raw

material

inflation

should

slow

down

at

some

point

and

maybe

we'll

see

that second

quarter.

But

it's

still

quite

early

to

confirm

that

maybe

we're

seeing

that.

And

what

we

showed

in

the

model

is

we're

very

successful

in

recovering

that

little

bit

of

a

lag

in Iberchem,

which

is common

to,

I

think,

all

of the

flavors

and

fragrance

businesses.

But,

yeah,

they'll

get

there

and

so

forth

in

there,

but

the

Croda

model

works

very

much

on

achieving

that

recovery

on

a

quarter-to-quarter

effect.

And

as

you

can

see,

there has

been

no adverse

margin

impact

in

terms

of

doing

that.

So,

I'm

confident

of

seeing

that

recovery.

Now,

then

when

we

break

down

sales

and

margin,

we

sort

of

think of

sales growth

sort of

independently. So,

we're

certain

that

we're

going to

recover any

raw

material

inflation

that

we

see

sort

of

going

forward

as

we

did

last

year.

So,

what

we're

doing

is –

what

we're

then

saying

is,

okay,

so

then

think

about

the

underlying

sales

growth

that

we're

seeing.

And

I

think

in

Consumer

Care,

we're

seeing

that

as

mid-single

digit.

But

there'll

be

price

recovery

on

top

of

that,

but

that's

sort

of

passed

through

in

effect

to

maintain

profit.

And

in

Life

Sciences,

we

think

there'll be

high-single

digit.

So,

although

we

expect

to

see

lipid

systems

flat

in

2022

in

sales

terms

at

$200

million,

we

still

expect

to see

very

strong

growth

in

the

other

two

platforms.

And

we expect

to

see

strong

growth

in

crop.

So

I

think

we

can

see

high-single-digit

sales

growth,

as

Steve

says,

at

margins

which

is

certainly

in

the

mid-30s

for

the

Life

Science

business.

And

then,

in

Performance

Tech,

we'll

expect

growth

to

be

more

in

the

GDP

range,

but

again,

with

margins

at/or

a

little

better

than

the

level

that

we've

seen

in

2021.

So,

I think

what

we

should

be

seeing

is

some

really

steady

growth,

some

raw

material

price

inflation

recovery

on

top and

as

well

as

the

annualization

effect

and

then

some

margin

improvement

as

well.

So,

then

if

that

sort

of

deals with

the question.

[Charles Eden, Analyst, UBS AG (London Branch)]

Yeah.

Also

maybe

just

on

the

17%

raw

material

inflation,

is

there

a

big

different

by

divisions?

I'm

just

thinking

with

PTIC

being

here

for

half

the

year,

just

thinking

in

Consumer,

in

Life

Sciences,

is

17%

still

about

the

right

ballpark

or

is

it

more

or

less?

[Jeremy Kim Maiden, Group Finance Director, Croda International Plc]

Yeah.

It's

quite

interesting.

If

you

look

at

the

release

where

we've

broken

out

the

sort

of price/mix

in

the

underlying

businesses,

actually,

I

think

it's

pretty

sort

of

consistent.

So,

if

we

look

at

– 17%

raw

material

recovery

is

probably

about

6%

on

sales,

given

that

raw

materials

are

just

over

a

third

of

our

sales

value.

But

there's some

inflation

recovery

going

on

in

terms

of

energy

and

distribution

costs

and

so

forth

in

there

as

well.

So,

I

think

when

you

then

look

at

the, as

it

happens,

17%

increase

in

sales

price/mix,

that's

probably

about

half

of

inflation

recovery,

8

or

9

percentage

points,

and

then

the

rest

is

the

mix

effect

coming

through,

particularly

in

Consumer

and

especially

in

Life

Sciences.

So,

interestingly,

when

you

look

at

the

price/mix,

we're

up

13%

in

Consumer.

So

that

feels

like sort

of

9

percentage

points

of

sales

price

and

3

percentage points or

4

percentage

points

of

mix,

with

Actives

doing

well.

If

you

look

at

Life

Sciences,

it's

very

heavily

mix-driven,

because

you've

got

these

very

small

volumes,

but

at

very

high

values

per

kilo

compared

with

the

normal

model

of

selling

in

tonnes.

Then,

if

you

look

at

Performance

Tech,

you've

got

11%

and

you'd

expect

in

Performance

Tech

that

to

be

almost

all

price

recovery,

because

there's

some

innovation

going

on

there

obviously,

but

it's

not

of

the

same

scale

as

the

other

two

sectors.

So, I

think

from

that

point

of view,

you

can

see

that

actually

the

price

effect

is

pretty

equally

spread

across

those,

but

the

mix

effects

are

quite

different,

particularly

in

the

two

sectors

that we're

focusing

on

going

forward.

[Charles Eden, Analyst, UBS AG (London Branch)]

That's

really

helpful.

Thank

you.

[Jeremy Kim Maiden, Group Finance Director, Croda International Plc]

Thanks.

[Charles Eden, Analyst, UBS AG (London Branch)]

Thank

you.

[Nicola Tang, Analyst, Exane BNP Paribas]

Thank you.

Hello, it's

Nicola

from

BNP

Paribas

Exane.

The

first

question

was

actually

just

to

pick

up

on

the

outlook

and

the

comments

you

made

around

destocking

or

customer

destocking.

I

just

wanted

to

clarify

if

that's

something

you've

seen

already

and

if

so,

which

areas

and

what

should

we

be

looking

out

for?

And

the

second

question

was

around

investments.

You've

clearly

talked

about

already

reallocating

some

of

the

PTIC

proceeds.

You

talked

a

lot

about

the

Life

Sciences

investments.

How

should

we

think

about

CapEx

or

investment

going

forward,

not

just

for

2022,

but

in

future

years?

And

is

it

still

mainly

in

Life

Sciences

or

is it

also

on

the

Consumer

Care

side?

Thank

you.

[Stephen Edwards Foots]

Well,

let's

start

with

investments then.

I

mean

the

way

to

look

at

the

investments

really

and

new

Croda

really,

if

you

call

it

that

post

the

sale

of

majority of

the

Industrial

business,

we

still

screen

by

and

large

for

about

6%

of

revenues

in

CapEx.

It was

capital-light.

It's

not

getting

any

– it's

definitely

not getting

any

more

capital-heavy,

if

you

like.

The

incremental

spend

on

top

of

that

is

virtually

all

going

into

this

drug

delivery

platform

around

the

world

to capitalize

on

the

growth.

We're

sitting

on

250

big

projects.

There

was

a

time

in

Croda

where

one

or

two,

we

got

excited

with.

We've

got

a

lot

more

now.

So,

clearly

not

– a lot

of

them

won't

get

there,

but

all

we

need

is

a

few

of

them

to

get

there

and

we

can

satisfy

that

growth.

So,

the

model

is

about

the

normal

screening,

for

us,

about

6%

plus

the

incremental

spend.

That

incremental

spend

will

continue

in

2022,

but then

probably

moderate.

I

mean

it

all

depends

on

what

we

see

in

terms

of

looking

through

our

intelligent

platforms

around

the

conversion

rates

through

the

clinical

programs.

But

at

the

moment,

we've

guided

to

around

£160

million

for

this

year. But

a

lot

of

that

is

because

of

the

incremental

stuff

on

top

is

all

into

the

slide

you

saw

on

the

build

and

scale

for

drug

delivery.

It's

all

about

the

incremental

spend

there.

Jez,

mate,

I

don't know if

you

got

any

other

comments

on

investment on

top of that.

[Jeremy Kim Maiden, Group Finance Director, Croda International Plc]

No.

That's

fine.

So,

yeah,

it's

still

spread

across

the

two,

but

this leaves

us

the

extra

spend,

which

we

think

is

probably

a

three-year

period

of

additional

spend

at the

moment

that

we

can

see.

So,

we

think

we'll

run

at an

elevated

level

through

three-year

period

and

then

return

to

the more

normal

level,

which

is

probably

nearer

maybe

£100 million,

6%

of

sales,

that sort

of

level,

but

so

probably

three

years

of

this

elevated

level,

as

Steve

said,

very

much

focused

on

Health

Care.

[Stephen Edwards Foots]

And

I

think

in

terms

of the

demand,

we're

cautiously

optimistic

looking

at

next

year.

What

we

didn't

see

like

many

in

the

industry

in

quarter

four,

we

didn't

see

the

seasonal

downturn

expected,

it

just

continued

and

it's

continued

very

strongly

at

the

start

of

this

year

as

well.

So,

there's

no

surprise

there.

A

bit

of

inflation

in

there

as

well.

So,

raw

materials

are

going

up

further

in

quarter

one

and

we

expect

that

to

moderate.

And

the

inflation

around

Croda

businesses,

it's

quite

interesting,

because

it

means

that

there's

volume

growth

that's

demand-led,

by

and

large. So,

you

get

the

volume

growth

and

then

you

also

get

pricing

on

top.

So – but

we

would

expect

raw

materials

–

in

a

world

that

we

can

see

today,

we

expect

raw

materials

to

start to moderate

off

their

tops

from

quarter

two

onwards.

So, I

think

if

you

look

through the

12-month

period,

a

little

bit

of

raw

material

increase

weighted

to

the

front end.

In

terms

of

stocking,

I

mean

we

don't

see

any

big

changes.

And

there's

some

moderation

and

I

expect

it

to

come

in

the

consumer

industry

more

than

anything,

Consumer

Care,

where

L'Oréal, who

are at with

7%

or

8%

market

growth

rates

for them

2021

and

about

5%

for

Personal

Care

in

2022.

We're

not

too

far

away

from

that

in

terms of

what we

see.

So,

I

think

it's

still

very

buoyant.

There's

a

resurgence.

I

think

that

resurgence

will

continue

at

a

high

level,

but

there's

probably

a

little

bit

of

stock

trimming

that

comes

on

top

of

that.

So,

still

very

pleased

with progress.

So,

in

the

round,

we

don't

see

any

big

destocking

effects

coming,

but

just

more

trimming,

trimming

around

the

edges,

I

think.

[Jeremy Kim Maiden, Group Finance Director, Croda International Plc]

I

think

it

may

be

more

pronounced.

If

you

get

any

effect,

it

tends

to

be

in

the

Performance

Technology

business,

which

is one

of the

reasons

that

we've

gone

for

the

divestment

moves

us

away

from

some

of

the

cyclicality

that

Steve

spoke

about

on

one

of

the

earlier

slides.

So,

I

think

you

tend

to

see

a

little

bit

more

cyclical

variations

in

automotive

and

industrial

markets.

The

whole

move

to

Life

Sciences

and

Consumer

is

about

making

the

business

more

consistent

in

terms

of

– and

accessing

the

higher

growth

rate,

and

we

don't

see

that

changing.

[Sebastian Bray]

Hello.

Good

morning.

Sebastian

Bray with

Berenberg

Bank,

speaking.

I

just

have

a

few

questions,

please.

The

first

is

on

the

definition

of

lipid

systems

sales

and

visibility

out

to

2025.

Steve,

you've

talked

earlier

about

the

opportunity

from

preclinical

Phase

1,

Phase

2,

Phase

3

trials

in

this

area.

Can

I

just

confirm,

the

$200

million

sales

figure

that

Croda

cites

does

not

include,

as

a

rough

guess,

the

$40

million

to $50

million

of

sales

for

Polar

Lipids

separately

that

flow

to

the

preclinical

market.

And

if

that's

the

case,

Steve,

I

think

you've

mentioned

in

the

past

achieving

a

$200-million-sized

business

by

2025

or

maintaining

it

at

that

level.

Does

that

effectively

imply

a

net

loss

of

$50 million

of

sales?

Because

at

the

moment,

we

have,

let's

say,

$250

million if

you

include

the

preclinical

applications.

And

does

that

go

to $200

million

by

2025?

Or what

type

of

visibility

do

you

have

there?

[Jeremy Kim Maiden, Group Finance Director, Croda International Plc]

Yeah.

I'll get to –

hi,

Sebastian.

So,

the

lipid

systems

definition

includes

Avanti

sales

where

they're

going

into

the

LNP

platforms.

So,

Avanti

has

this

50-year

history

of

being

an

R&D

house,

basically,

of

being

able

to

produce

different

delivery

systems

for

customers

who

are

primarily

in

preclinical

and

clinical

trial

stage,

and

some

of

those

are

lipid-based

and

some

of

them

are

other

chemistry-based.

So,

what

we're

including

in

the

lipid

systems

is

just

those

which

are

going

into

LNP

applications,

which

right

now

is

pretty

much

COVID-19

applications.

So

they're

either the vaccine

contracts

with

the

principal

customers

or

they're

the

other

COVID-19

areas

that have

been

developing

over time,

and

those

are the

sales

that

we're

making.

You're

right

to

say

that

on

top

of

that,

there's

a

bunch

of

sales, $40 million, $50 million

might

be

a

little

bit

strong,

but

there's

some

more

sales,

which

are

all

part

of

that

R&D

development

capability

that

serves

about 2,000

pharmaceutical

customers.

It's

the

$200

million,

which

is

currently

very

focused

on

the

COVID

application

that

we

see

developing

into

non-COVID.

And

that's

where

the

projects

that

Steve

talked

about

in

terms

of

the pipeline

are

really

coming

through

with

two-thirds

of

those

being

non-COVID

applications.

And

we're

great

with

the

COVID

applications,

but

obviously,

the

non-COVID

ones

are

also

about

longer

term

treatments,

other

vaccines,

therapeutic

drugs,

et

cetera.

So, what

we

want

to

do

is

to

morph

this

portfolio

over

time

to

a

$200 million

portfolio

with

lots

of

customers

and

lots

of

applications.

So,

increasingly,

that

$200

million,

which

is

right

now

focused

around

three

or

four

pieces

of business

with

one

big

piece

of business

in

there,

obviously,

will

develop

into

multiple

customers

and

multiple

applications

in

COVID

and

non-COVID

applications.

So,

on

top

of

that,

you

have

the

Avanti,

I

call

it

catalog

business, but

that's

not

really

fair.

It's

the

sort

of

thing

where

R&D

people

in

the

pharmaceutical

industry

are

ordering

very

small

amounts

of

different

things.

That

business

will

carry

on.

That

carries

on

growing

very

nicely

at

probably

5%.

But

the

big

opportunity

is

the

development

of

the

lipid

systems

capability

into

a

whole

new

range

of

different

ingredients

for

mRNA

and

gene

therapy.

So,

definitionally

wise,

we're

just

focusing

on

those

sales

that

are

going

into

sort

of

LNP-based systems

basically.

[Stephen Edwards Foots]

So,

[indiscernible]



(00:51:04)

just

to

add

to that, the 2022

and

2023,

we

see

three

lipid

systems

with

three

different

types

of

revenue

stream.

We

see

obviously

from

the

big

partnership

we've

got.

That

will

continue

into

2023

as well. We're

contracted

there.

So,

the

rollout

will

continue.

We

might

think

in

the

UK

we're

near

at

the

end

of

it,

but

we're

just

starting

in

some

parts

of

the

world.

So,

that

rollout

will

continue

there.

And

also,

you've

obviously got these

booster

jabs

and

the

sort

of

regular

annuity

that

might

come

with

that.

And

also

on

top

of

that

for

that

revenue

stream,

one,

is

the

potential

flu

vaccine

and

RNA

together,

which

could

be

quite

significant,

and

again,

a

lot

of

R&D

in

there

as

well.

But

that

could

be

a

solution

which

extends

actually

RNA

a

bit

longer

than

you

think

in

COVID

because

it

could

be

wrapped

up

in

a

flu

vaccine

as

well

together,

which

would

be

a

neat

thing

to

do.

So,

that's

revenue

one.

Revenue

two

is

we

have

other

customers

in

the

COVID

space

with

lipid

ingredients.

So,

as

Jez

said,

there's

a

small

number

of

those

that

will

be

tracked

in

revenue

with

2022

and

2023.

And

then

also

on

top

of

that,

it's

the

non-COVID

applications

in

clinical

programs

and

we

already

have

some

revenue

streams

coming

later

this

year

at

the

start,

relatively

modest

but

hopefully

building

as

we

start

to

launch

our

new

products,

let's

just

say

that,

with

our

own

IP

in,

let's

just

call

it,

non-COVID

application

areas.

So,

three

revenue

streams

running

through

building.

But

as

Jez

says,

we're

looking

at

this

market

as

a

minimum of

like

$200 million

market

by

2025.

And

we

said

that

openly

with

everybody

last

time

but

with

lots

– this

has

the

hallmarks

of

hundreds

of

products,

hundreds

of

customers.

It's

not

one

product

and

it's

not

one

customer.

We

don't

want

to be

there. It's

like

the

old

API

days

of

a

lot

of

companies.

We

had

an

API

in

our

stock

a

few

years

ago.

It's

great if

you

get

them

in

but

they're

pretty

volatile.

So,

for

us,

it

looks

like

a

very

good

expanding

opportunity

for

us.

Our

job

is

really

to

update

ourselves

anew

as

we

progress

through

the

conversion

rates

through

these

projects

and

these

clinical

programs

through

the

next

few

years.

And

so,

at

the

moment,

three

revenue

streams

coming

through

in

the

next

couple of

years.

[Sebastian Bray]

That

is

helpful.

Thank

you.

If I could

quickly

follow

up,

I

don't

want to

outstay

my

welcome,

so

to

speak.

As

a

rough

guess,

if

I

look

at

the expected

Sanofi

RNA

flu

doses

and

then

your

potential

revenue

split,

is

it

fair

to

say

that

$200

million

is

roughly

50%

COVID,

50%

non-COVID

in

terms

of

the

split

or

could

you

comment

on

that

or...

[Stephen Edwards Foots]

What

today

or?

[Sebastian Bray]

No,

by

2025.

[Stephen Edwards Foots]

We

won't

comment

on

that.

No.

I

mean we

don't

know.

But I

think $200

million,

it'll

be

certainly

a

good

number

for

us.

And

a

lot

will

depend

on

the

speed

at

which

the

clinical

programs

[ph]



confer (00:54:05).

And

the

combination

of

flu

and

RNA

is

something

interesting

and which,

again, it's

in

advanced

research.

We'll

see

where

that

takes

us

as

well.

So,

we

can't

comment

because

we

don't

know,

not

because

we're

trying

to

be

evasive.

[Sebastian Bray]

Just

a

quick

one

on

the

quantitative

side,

am

I

right

in

saying

that

the

dis-synergies

now

guided

for

PTIC,

net

of

any

contractual

additional

volumes

or

tolling

arrangements,

is

about

£10 million,

is

that

right

from

the

number

that

was

shown

or?

[Jeremy Kim Maiden, Group Finance Director, Croda International Plc]

Yeah.

That's

the

sort

of

right

order

of

magnitude.

So,

yeah,

the

dis-synergy

costs

are

essentially

costs

which

are

currently

borne

by

that

PT

business

but

which

don't

change,

you

know?

Me and

Steve

might

be good

examples

of

that

because,

obviously,

we

charge

all

of

our costs

to

sectors.

But,

of

course,

it

will

be

transitory.

The

whole

idea

is

to

release

the

capital

from

the

majority

of

the

PTIC

business

and

reinvest

it

in

the

Consumer

and

into Life

Science.

So,

clearly,

as

we

look

forward

two,

three years,

you

would

expect

to

have

the

same

sort

of

revenue,

certainly

more

profitability.

So,

the

dis-synergy

costs

will

be

there

post-sale,

but

only

until

we

redeploy

the

capital

fully.

[Sebastian Bray]

Thank

you.

[David Bishop]

Steve,

there's

a

related

question

on

the

lipid

systems

from

Sam

on

the

webcast,

who

says

Pfizer

recently

spoke

about

their

relationship

with

Acuitas.

How

does

this

impact

Croda

in

the

medium term

with

regards

to

future

projects

outside

the

scope

of

the

COVID

contract?

[Stephen Edwards Foots]

Yeah.

I

mean

we

view

that

positively

because

what

it's

basically

saying

is

Pfizer

are

fully

committed

through

their

R&D

program

to

really

invest

heavily

in

the

new

generation

platforms

with

RNA.

And

Acuitas

have

technology

ownership

to

some

products

in

lipid

systems.

So,

what

Pfizer

have done

is

they've

agreed

effectively

a

scale-up

license

and manufacturing

license

of

some

arrangement.

So,

Acuitas

are

the

owner

of

the

technology

and

then

they

don't

manufacture.

The

job

is

then

partnering

up

with

the

Crodas

of

the

world

and

ultimately

the

Pfizers

of

the

world

to

make

sure

that

they

can

utilize

their

R&D

and

use

that

through

either

scale-up

or

scale-up

through

with

partners.

But

that's

a

big

confidence

boost

for

the

world

of

RNA

because

it's

basically

saying that

they're

moving

very,

very

quickly.

There's

10 different

agreements.

So,

there's

a

minimum

of 10

different

types

of

product.

And

it's

back

to

our

point

that

the

rollout

of

this

through

clinical

projects,

it

won't

be

one

of

–

this

isn't

one

product

that's

going

to get

commoditized

like

you

might

see

in

the

battery

world.

We

don't

see

it

like

that.

There's

some

companies

that have

invested

in

that

and

you

see

prices

drop

very

quickly.

This

is

very

science-driven,

lots

of

complexity

and

lots

of

tweaks

needed

for

specifications

and

products

to

–

you're all

about

stabilizing

the

mRNA

and

that's

tricky

in

different

applications.

So,

we

like

that

because

we

like

the

complexity

of

it.

[Georgina Fraser, Analyst, Goldman Sachs International]

Hi.

Morning.

It's

Georgina

Fraser

from

Goldman

Sachs.

It's

good

to

see

you

in

person.

Thank

you

very

much

for

having

us

here.

[Stephen Edwards Foots]

We

as

well.

[Georgina Fraser, Analyst, Goldman Sachs International]

I've

got

three

questions.

The

first

is

if

you

could

comment

on

how

you

think

prices

for

lipid

systems

outside

of

coronavirus

applications

might

look.

The

second

question

is

a

clarification

from

your

print

this

morning.

It

said that

in

Life

Sciences,

the

double-digit

growth

can

continue

in

Patient

Health,

and

I

was

wondering

if

you

could

clarify

if

that

was

across

all

three

of

the

platforms

or

just

specialty

excipients

and

vaccine

adjuvants.

And

then

my

final

question

is

we've

seen

last

year

Consumer

Care,

the

top

line

outgrowing

the

bottom

line,

which

is

not

necessarily

the

typical

Croda

model.

Wondering

at

what

point

in

time

the

bottom

line

will

start

outgrowing

the

top

line

in

Consumer

Care

again.

[Stephen Edwards Foots]

Yeah.

Okay.

Yeah.

So

on

the

price, yeah,

I

mean

we

don't

expect –

we're

not

factoring

in

any

significant

attrition

in

price

in

the

lipid

space

generally

I

would

say.

But

in

particular

in

non-COVID

applications,

what

you

find

we've

got

a

lot

of

intellectual

property

in

that

space

as

well,

and

I

don't

think

we're

back

to

the

point

before

that

it's

not

one

product

that's

going

to drive

this

whoever

it is

going to

replicate

the

same

product.

I

think

you've

got

to

–

it's

on

a

case

by

case,

treatment

by

treatment

basis.

And

there'll

be

lots

of

similar

technology

platforms

but

slightly

different.

So,

we're

not

factoring

that

in.

I

think

the

big

thing

for

us

and

for

you

is

how

quickly can

this

be

commercialized

through

the

pipeline and

what

does that

mean

for

us

because

the

revenue

stream

and

the

profitability

in

those

products

is

very

high

as

you'd

expect.

We

really

want

chemical

industry

risk,

pharmaceutical

margins.

That's

what

we

want

in

our

products,

and

we

think

we

can

do

that

in

most

– because we're

selling

through

effectively

a

specification.

It's

slightly a

different

risk

environment

which

we're

looking

at

through

our

risk

framework.

But,

ostensibly,

it's

a

different

margin

in

pharmaceuticals.

Jez,

on

Life

Sciences,

do

you want

to –

and

I'll

come

back

on

the,

well,

on

Consumer

Care

on

the

shape

of

the

[ph]

profit (00:59:33).

[indiscernible]

[Jeremy Kim Maiden, Group Finance Director, Croda International Plc]

(00:59:34).

Yeah.

So,

the

double-digit

growth,

I

mean,

we

always

said

on

the

first

platform,

which

was

specialty

excipients,

which

is

one

we've

grown

organically

over

the

last

10 to 20

years,

and

then

moved

into

these

areas

on

biologics

and

oncology

drugs

and

so

forth.

I

mean,

we

certainly

see

10%

to

30%,

which

has

always

been

our

medium-term

range

on

that

platform

as

ongoing

because

there's

lots

of

opportunities

there.

We

doubled

capacity

last

–

well,

brought

that on

stream

at

the

beginning

of

last

year,

and

that

will

last

us

three

to

five

years.

So,

we're

thinking

about

the

next

project

sort

of

in

that.

So,

definitely

see

very

strong

growth

continuing in

specialty

excipients.

I

mean,

the

vaccine

adjuvants,

smaller

business

that

we

acquired

through

Biosector

in

2018.

But,

really,

we

could

sell

as

much

as

we

could

build

the

capacity.

Every

time

we

build,

we

expand

capacity.

And

as

Steve

said,

we

doubled

capacity

last

year.

It's

sold

out

within

a

few

months.

So,

we

think

the

opportunities

in

vaccine

adjuvants

from

a

smaller

base

are

very

exciting.

And

then

the

lipid

systems,

absolutely.

I

mean,

as

Steve

said,

I

think

that

what we're

trying

to

do

at the

moment

is

bridge

between

2021

and

2025,

I

guess,

in

terms

of

lipid

systems

platform,

which

is

why

we

sort

of

say,

look,

it's

$200 million today

and

it

will

be,

we

believe, $200 million

then,

but

a

very

different

mix.

And,

of

course,

from

there,

as

that

mRNA

market

rises

towards

the

$35

billion

that

Steve spoke

about, then

our share of that

market means

that,

that

should

be

growing

very

rapidly

as

well.

But,

clearly,

we're

getting

from

this

slightly

unusual

position

of sort

of

single

products,

single

application

to

the

classic

Croda

position

of

big

portfolio

of

customer's

ingredients.

So,

they'll

all

be

driving

growth

for

many,

many

years

to

come,

in

our

view.

In

terms

of

Consumer

Care,

probably

2021

is

the

low

point,

and

then

I

think

we

would

expect

to

see

margin

move

forward

in

2022

and

beyond.

I

mean,

clearly,

it's

just

a

function

of

maths.

It's

the

dilution

effect

of

having

a

full

year

of

Iberchem

having

acquired

it

in

November

of

2020,

and

its

margin

is

in

the

mid

to

high

teens,

sort

of

natural

level.

And,

clearly,

even

at

the

top

of

that

industry,

you're

only

looking

just

into

the

bottom

end

of

20%.

Whereas

in

Personal

Care,

last

year,

we

achieved

30%,

and

that's

despite

a

high

remuneration

charge

from

the

bonus

and

share

plan-based

costs

that

drove

there.

So,

that's

the

one-off

dilution

effect

effectively.

And

unless

we

see

exceptionally

strong

growth

from

Iberchem

or

we

do

some

more

acquisitions

in

that

space

which

are

dilutive,

then

you'd

expect

the

margin

in

Consumer

Care

to

move

steadily

forward.

Certainly,

into

the

high-20s,

we

believe,

is

achievable

over

a

period.

And

when

you

think

about the

drivers

to

that,

Iberchem,

we're

investing

now,

you're

going to

have

the

sales

synergies

coming

through

that

Steve

talked

about,

the

€48

million

by

2025.

You've

got

the

benefits

of

– we haven't

talked

about

it,

but

the

ECO

plant

in

the

States

where,

clearly,

that's

moving

from

a

loss

situation

to

a

profit

situation.

So,

that's

additive,

of

course,

it's

not

exclusive

to

Consumer

Care,

but

Home

Care

and

Personal

Care,

Beauty

Care

are

the

big

drivers

behind

that

area.

You've

got

stronger

growth

in

Beauty

Actives,

which

is

always

mix

beneficial

to

Consumer

Care.

So,

I

think

you've

got

lots

of

reasons

to

believe

that

there's going

to

be

good

margin

accretion.

It

would

just

be

a

little

bit

noisy

depending

on

the

relative

rate

of

growth

of

fragrance

compared

with

the

personal

care

market

in

particular.

But,

yeah,

good

strong

opportunities

there.

[Charles Bentley, Analyst, Jefferies International Ltd.]

Thanks.

Charlie

Bentley

at

Jefferies.

I

just

wanted

to

follow

up

on

the

kind

of commentary

around

lipids

into

kind

of

2023.

I

know

obviously

we're

quite

a

way

away.

But,

I

mean,

as

you

talk

around

the

balance

of

those

two

of

the

kind

of

three

pools

there,

can

you

just

give

any

kind

of indication

on

the

absolute

level

what do

you

think

it

might

be

today?

And

then

you've

talked

about

Nicola's

question

around

kind

of like

investing

in

organic

growth. If

we

talk

about

M&A

priorities,

I

mean,

are

they

still

squarely

bolt-ons

in

Life

Sciences

or,

I

mean,

there's

an

indication

on

Personal

Care

there.

Yeah,

just

any

color

you

can

give

there.

Thanks.

[Stephen Edwards Foots]

Yeah.

Well, I

mean,

we'll

start with

the

M&A.

I

mean,

M&A

for

Croda

is,

the

organic

growth

model

has

got

a

long

way

to

play

out

now.

We're

very

pleased

with

the

acquisitions

that

we've

done

recently

and

we

see

a

lot

of

growth

opportunities

there, and

you

can

see

that

we're

investing

in

that,

both

in

capital,

but

also

in

knowledge,

in

research,

and

in

clever

people.

So,

we

expect

that

to

continue.

But

we've

also

got

the

option.

We've

got

great

optionality

now,

once

we

get

the

proceeds

from

the

sale.

That

gives

us

flexibility

to

look

at

different

things

as

well.

But

the

priority

is

organic

growth,

plus

probably

bolt-ons.

We

like

the

Avanti-type

model.

I

think

you

do

as

well,

which

is

knowledge –

you're

buying

knowledge,

you

buy

125

people

and

you're

buying 100

of

them,

maybe

110

of

them

are

scientists. So,

you're

buying

clever

people.

And

what

we

do

is

commercializing

that

knowledge.

That's

what

we

do

very

well.

So,

that's

the

type

of

business

that

we're

looking

at.

And

there's no

surprise,

if

we

see

opportunities

in

the

drug

delivery

space,

we'll

move

pretty

quickly

if

we

thought

that

was

the

right

thing

to

do.

But

we'll

also

spend

quite

a

bit

of

time

looking

in

sustainable

ingredients,

positioning

of

Consumer

Care

as

well

because

there

is

a

shift

there.

You

can

see

it,

we

can

feel

it,

and

when

we

talk

to

our

customers,

that's

structural.

And

we

saw

it

before

the

pandemic

to

a

little

degree,

to

a

small

degree.

But

now,

it's

firmly

embedded

in

the

mantra

of

all

the

big

multinationals.

They're

all

moving

away

from

petrochemical-based

ingredients,

L'Oréal,

Unilever,

more

to

follow.

They'll

lead

the

industry

in

that

way. And

we're

starting

to

see

that

with

the

rest

of

the

industry

following.

So

that's

the

sort

of

the

direction

to

travel

from

an

inorganic

point

of

view,

and

there should

be

no

surprise

there.

In

terms

of

2023,

it's

a

good

question, as I say.

It's

a

difficult

one

to

answer

here,

but

we're

very

heartened

with

the

revenue

streams

emerging

from

these

three

different

areas.

The

big

–

with

our

big

partnership,

a

lot

will

depend

on

where

we

are

with

the

rollout,

where

we

are

with

the

booster

program,

where

we

are

with

the

vaccine

combination

hybrid

mRNA-type

product.

And

that

has

a

– that

could

have

a

very

positive

effect

as

well.

But

I

think

it's

– it'll

be

a

healthy

revenue

stream,

and

it's

not

going

to

deteriorate

to

nothing

as

some

people

say.

I

mean,

we've

got the

revenue

stream

we're

contracted.

We'll

get

what

we –

we'll

get

from

our

share

of

our

big

contract

there.

The

question

will

be

the

other

two

revenue

streams,

how

quickly

they

progressed.

And

I

think

it's

too

early

to

say

because

we

could

call

a

number.

We

could

give

you

a

number.

And

I

think

that's

difficult

to

back

up

at

the

moment.

I

think

as

we

go

through

the

year,

we

can

start

to

see

what

that

looks

like.

But

again,

as

we

say,

we're

heartened

with

and

very

encouraged

with

2024, 2025

plus

where you

can

start

to

see

this

business

emerging

as

a

really

–

a

great

Croda

business

like

a

nascent

Personal

Care

business

from

many

years

ago

with

a

very

different

shape

to

it.

So,

yes,

so

I

think

that's

the

difficulty

in

putting

a

big

number

on

that.

[David Bishop]

Thank

you.

There

was

a

question

from

[ph]



Andre

(01:07:09) on

the

webcast

who

asked

about

guidance

on

use

of

disposal

proceeds.

I

think

you've

largely

covered

that.

Anything

you

want

to

add

on

use of

proceeds from

the

PTIC

disposal?

[Stephen Edwards Foots]

Well,

I

think, we

just

say,

the

capital

allocation

policy,

which

Jez

led

when

he

first

came

to

Croda,

it's

very

clear,

very

consistent.

If

you

look

in

the

pack,

Jez's

last

slide

just

shows

you

how

we're

inconsistent

with

that.

We

have

no

problem –

we'll

follow

that

through.

So, we

first

look

at

capital

investment

in

the

business.

We

then

look

at

the

shape

of

M&A

as

an

opportunity

going

forward

for

us

in

the

next

12, 18

months.

If

we

don't

need

or

if

we

have

spare

cash

that

we

don't

need

to

deploy

in

either

of

those

two

areas,

then

we'll

return

it.

We'll

return

it

in

the

usual

way

and

we've

demonstrated

that

in

the

past

and

we'll

demonstrate

that

in

the

future.

So,

we're

not

going

to

sit on

an

inefficient

balance

sheet

for

any

length

of

time.

But

I

think

it's

fair

to

say

most

of

our

investors

will

want

us

to

invest

in

the

business

if

we

see

some

good

opportunities

for

it, particularly

if

it's

into

these

exciting,

fast

growth

spaces.

So,

that's

what

we'll

be

looking

to

do

if

we

can.

But

we're

not

here

to

waste

money.

We're

here

to

do

the

right

thing

with

it.

[David Bishop]

We'll

go

back

to

Adam

for

questions

over

the

telephone

line,

please.

[Operator]

And

our

first

question

today

comes

from

Matthew

Yates

of

Bank

of

America.

Matthew,

please

go

ahead.

[Matthew Yates, Analyst, Bank of America]

Hey.

Good

morning, everyone.

Apologies

I

couldn't

be

there

in person.

Couple

of

questions,

please. An

amazing

job

to

pass

through

so

much

raw

material

inflation.

Can

I

ask

about

the

volume

trends

in

consumer?

I

think

you

had

11%

volume

growth

in

the

first

half.

So,

if

you

saying

6% in

the

full year,

I

guess is

that

implying

that

the

second

half

was

basically

around

flat?

Is

that

right

and

is

that

the

sort

of expectation

that

you're

seeing

in

early

2022?

And

the

second

question

is

around

NPP

and

I

think

that's

slide

6 in

your

deck.

It

was

a

notable

step-up

as

you're

saying

that

most

of

that

was

acquired.

So,

there's

a

60 basis

point

increase

organically.

And

actually

over the

last

two

years,

it's

negligible.

So,

I

guess

the

question

is

are

you

getting

enough

innovation

coming

out

of your

internal

efforts

or

is

it

simply

that

the

target

is

to

offset

the

natural

attrition

in

the

portfolio

in

order

to

protect

your

overall

sort

of

pricing

and profitability

model?

Thank

you.

[Stephen Edwards Foots]

Yeah.

Fine.

And

thanks,

Matthew.

Yeah.

So,

on

NPP

first

then,

yeah,

I

mean,

the

way

you

should

look

at

that

is

what

we've

seen

in

the

last

two

or

three

years,

the

innovation

is

not

slowing

down

in

Croda.

What's

happening

is

the

base,

the

non-NPP

business

is

growing

very

well,

too.

So,

what

you're

seeing

is

normally,

you'd

expect

your

NPP

to

outstrip

your

base

business.

But

because

we've

seen

this

rebound

of

this

resurgent

Personal

Care

recovery

in

industrial

markets,

what

you

see

is

the

base

business

coming

back

very

strongly,

too.

So,

whilst

the

numbers

aren't

– the

percentage

of

NPP

is

not

changing

significantly,

you

shouldn't

read

into

that

the

innovation

projects

that

we've

got.

So,

that's

more

in

effect

of

the

non-NPP

rebounding

much

stronger

than

[indiscernible]



(01:10:22)

that

will

reach

its

natural

level

and NPP

will

then

outstrip

that.

I

think

the

other

thing

to

point

out,

though,

is

we

want to

buy

knowledge,

we

want

more

knowledge

in

the

business

anyway,

because

I

think

every

company

has

to

keep

reshaping

and

keep

doing

things

differently.

So,

it's

about

moving

into

new

markets

but

with

knowledge.

And

in

Avanti

and

in

Iberchem,

they've

got

a

lot and

you'll

see

that

as

we

start

to

show

you

those

facilities.

You'll

start

to

see

they've

got

some

great

innovation

programs

and

quite

a

high

level

of

R&D

scale.

Much

higher

R&D

in

their

businesses

than

in

the

average

Croda

business, across

the

board.

So,

that's

the

direction of

travel

we

want to

move

anyway.

So

we

would

expect

the

NPP

growth

generally

anyway

to

move

ahead

of

a

more

stable

looking

non-NPP

environment

when

things

start

to

moderate

in

the

next

probably

couple

of years.

So,

that's

that.

I

mean, it's

a

good

point

on

the

price/mix. I

mean we're

sort

of exiting

around

about

5%

volume

in

the

price/mix

generally

for

the

company.

And

Consumer

Care

was

below

that.

But

a

lot

of

that

is

a

function

of

just

capacity.

We're

flat

out

on

a

lot

of

our

units

at

the

moment.

And

the

order

book

is

strong

now

for

well

into

this

year,

much

longer.

Our

outstanding

orders,

for

example,

are

much

bigger

than

we

would

normally

expect.

But

I

think

that's

more

an

industry

issue

than

everything

else.

But

it's

a

reflection

of

demand.

Demand

is strong.

So,

our

model

for

this

year

is

clear.

There's

quite

a

lot

of

price

riding

into

this

year

with

some

probably

modest

volumes

in

Consumer

Care.

We'd

expect

some

volume

growth

in

Personal

Care

as

we've

been

investing in

the

past

for

this

year

and

next

year,

but

it

will

be

relatively

small,

low

digit

volume

growth

for

Consumer.

[Jeremy Kim Maiden, Group Finance Director, Croda International Plc]

Right.

Yeah.

Hi,

Matthew.

I

think

as

well,

think

about

the

comparatives

for

last

year,

I

mean

the

first

half obviously

was

compared

against

quite

a

weak

first

half

of

2020

because

of

the

COVID

impact,

which

was

sort of

down

20%

in

Consumer

Care

in

the

second

quarter

of

2020,

whereas

we'd

already

seen

full

recovery

by

the

end

of

2020.

And

therefore,

the

growth

last

year

is

on

top

of

that.

So, I

think

the

overall

5%

volume

growth

is

very

encouraging

on

top

of

that.

The

other

element

was

that

Home

Care

was

relatively

weak

last

year

because

it

had

such

a

strong

2020

on

the

back

of

hygiene

demand. But

we saw

good

growth in

Personal

Care,

particularly at

the

top end and,

as

Steve

says,

I

think

going

forward

that

mid-single-digit

growth,

excluding

raw

material

inflation

recovery,

that

should

be

a

good

mixture

of

volume

and

mix

driving

that

mid-single-digit

growth.

So,

we're

quite

comfortable

around

that.

[Stephen Edwards Foots]

Okay,

Matthew?

[Matthew Yates, Analyst, Bank of America]

Thank

you,

guys.

[Operator]

The

next

question

comes

from

Chetan

Udeshi

from

JPMorgan.

Chetan,

your

line

is

open.

[Chetan Udeshi, Analyst, JPMorgan Securities Plc]

Yeah.

Hi.

Thank

you

and

morning.

Can

I

ask

a

question

on

the

price/mix

in

the

Life

Sciences

business,

which

at

least

on

my

numbers,

went

to

like

29%,

30% in

second

half

from

42%

in

first

half.

So,

can

you

comment

on

what's

going

on

within

the

mix

in

the

Life

Sciences?

I

know

there

are

different

businesses,

but,

I

mean,

the

key

question

there

is,

is

there a

read

on

pricing

in

any

of

the

businesses

in

second

half

versus

first

half?

That's

the

first

question.

And

then, there

was

an

interesting

slide

in

the

deck

showing

the

growth

by

different

sub-segments

within

Consumer

Care

and

clearly,

the

Beauty

Actives

part

seems

to

have

grown

much

faster.

But

when

I

still

do

the

math,

ex

the

acquisitions,

ex

the

Home

Care

business,

the

margin

is

still

sort

of

29%

to

30%,

which

is

still

quite

a

bit

below

33%,

34%

that

you

guys

had

in

2019,

I

think.

And

so,

the

question

is,

even

with

the

mix

going

back

in

those

old

Personal

Care

business,

why

is

the

margin

still

lagging

so

much?

Thank

you.

[Jeremy Kim Maiden, Group Finance Director, Croda International Plc]

Yeah.

Hi,

Chetan.

So,

in

terms

of

Life

Science,

I

think

it's

– well,

it's

the

mix

that's

going

on

there.

So,

there's

no

price

erosion

or

anything

happening

in

any

of

the

platforms and

in

particularly

in

three

patient

health

care

platforms

in

Health

Care

there.

What

you've got

in

the

first

half

year

is

you've

got

a

very,

very

strong

growth.

We

were

up

over

60%

in

sales

in

specialty

excipients

and

vaccine

adjuvants

in

the

first

half

year.

And

that

was

really

a

function

of

really

uncorking

the

bottle.

That's

when

the

new

capacity

came

on

stream

in

both

the

US

specialty

excipient

plant

and

in

vaccine

adjuvants

in

Denmark.

And

so,

you

had

this sort

of

release

of

pent-up

demand

where

people

were

waiting

obviously

for

–

in

pharmaceuticals, you

can

have

several

months

of

stock

basically

in

the

pipeline.

So,

people

can

manage

on

a

longer

wait.

So,

you

had

this

very

strong

sales

of sort

of

60%

in

the

growth

in

the

first

half.

And

in

the

second

half,

it

settled

down

to

more

sort

of

growth

in

those

two

platforms

in

the

20s

and

therefore

overall

growth

of

over

40%.

And

as

I said,

the

20%

growth

is

much

more

consistent

with

where

we

see

growth

being

10%

to

30%

on

those

two

platforms

going

forward.

So,

because

you

have

that

big

effect,

that's

why

you

get

this

price/mix

change.

Although

35%

price/mix

is

still

pretty

stunning,

I

think,

in

terms

of

delivery.

So,

there's

absolutely

no

price

erosion

going

on

in

there.

We've

got

a

contractual

price

reduction

in

the

second

year

of

the

principal

contracts

in

lipid

systems,

which

reflects

the

fact

that

obviously

we're

now

in

full

scale

production

and

therefore

the

efficiencies

and

so

forth

improve.

But

that's

the

only

built-in

price

reduction.

As

we've

said,

we

expect

pricing

to

remain

strong,

particularly

as

lipid

systems

develops

into

a

wider

portfolio

of

products

for

different

customers.

In

terms

of

Personal

Care,

I

think

the

key

difference

between

2019

and

2021

is

remuneration

charge.

As

we

note

in

the

statement,

remuneration

charge is

about

2 percentage points to

2.5

percentage

points

of

margin.

There

were

no

bonuses

paid

in

2019

and

the

share-based

payments

were

relatively

low.

And

they

were

very

strong

last

year,

Croda's

variable

remuneration,

which

affects

the

top

600

people

in

the

organization,

is

very

much

about

profit

growth

year-on-year.

And

although

2019

and

then

2020

were

pretty

decent

performances,

they

were

still

down

by

5%

to

10%

in

terms

of

profit.

So,

there

was

no

bonus

paid.

In

2021,

you've

got

a

full

bonus

and,

of

course,

you've

got a

very

strong

share

price

into

the

end

of

the

year.

So,

that's

about

2.5

percentage

points. So,

as

I

said,

Personal

Care

sitting

around

about

30%

return

on

sales.

If

you

gross

that

back

up,

you'd

be

at

32.5%,

which

is

pretty

much

around

the

33%

peak

that

you

refer

to

back

in

2019.

So,

it's

just

a

function

again

of –

all

of

these

costs

have

to

be

borne

by

the

sectors.

And

therefore,

you're

going to

get

a

bit

of

volatility

according

to

what's

happening

in

those

variable

remuneration

programs.

Other

companies,

BASF,

et cetera,

they

pull

them

out

as

a

separate

division.

But

we

don't

do

that.

We

allocate

it

to

the

sectors

in

our

reported

numbers.

[Stephen Edwards Foots]

I

think

the

other

thing,

Chetan,

as

well,

is

we

look

at

it

from

a

divisional

point

of

view.

We

judge

them

on

gross

margin.

We're

glued

to

gross

margin

in

the

business.

It's

a

good

crude

indicator

for

us.

And

we're

not

seeing

any

gross

margin

attrition

in

any

of

the

businesses.

And

it's actually

quite

consistent

across

them

all

where

you're

seeing

this

robustness.

So,

we're

navigating

well

through

the

inflation

environment, but

the

central

cost

adjustment

is

significant.

And

we

can

talk

to

you about

that separately,

I'm

sure. Okay?

[Chetan Udeshi, Analyst, JPMorgan Securities Plc]

Thank

you.

[Operator]

The

next

question

comes

from

Charlie

Webb

of

Morgan

Stanley.

Charlie,

please

go

ahead.

Your

line

is

open.

[Charles L. Webb, Analyst, Morgan Stanley & Co. International Plc]

Morning,

everyone.

Again,

apologies

for not

being

there.

Just

a

couple

for

me.

So,

just

first

off

on

the

CapEx

in

the

Health

Care, obviously

not a

chunky

investment

year

ahead,

perhaps

just

give some

more

details

in

terms

of

which

platform

that's

kind

of been

allocated

to.

You

mentioned

high purity excipients

already

have

capacity

to grow

into.

Just

trying to

understand

where

that's

going.

And

maybe

if

you

could

let

us

know

the

type

of

payback

you'd

expect

on

that

investment.

Second

question,

just

on

working

capital, obviously

quite

a

big

working

capital

build

in

2021.

What

do

you

anticipate

there

in

2022?

You

built

up

some

stock,

just

wondering

whether

that's

likely

to

repeat,

unwind,

etcetera,

for 2022

would

be

helpful.

And

then,

lastly,

just

on

Consumer

Care,

as

you

think

about

the

mix

heading

into

2022,

what

trend do

you

continue

to

see?

Do

you

expect

to

continue to

see

Beauty

Actives'

effects,

etcetera,

outgrow

kind

of

formulations,

Home

Care,

and

therefore

you're

just

trying

to

sense,

where

does

that

take

margins

plus

at

this

point

for

Consumer

Care

in

2022

relative

to

where

we

ended

up

in

2021?

[Stephen Edwards Foots]

Okay,

Charlie.

I'll

let

Jez

do

the

working

capital

one,

and

I'll

kick

off

with

the

other

two.

I

mean,

CapEx

Health

Care,

there

is

a

slide

in

here,

I

don't know

if

you've

seen

it,

but

– which

sort

of

describes

that

sort

of

third

slide

of

the

biopharma

pack.

I

mean,

extensively,

what

we're

trying

to

do

is

the

Avanti

model

is

a

great

preclinical

model.

It's a

preclinical

machine,

and

it's

getting

samples

out

to

all

of

these

pharma

companies.

They

do

that

very

well.

We've

been

scaling

that

up

with

people

resource

to

turbocharge

that.

We

don't

really

know

how

many

preclinical

projects

were

in,

but

we're

in

a

lot,

which

is

great.

But

with that

model

wasn't

great

at capturing

the

future

growth

when

they

came

through

the

clinical

programs

because

they

outsourced

that

volume

to

two

other

providers,

CDMOs,

contract

manufacturers,

call them

what

you

want.

So,

our

job

is

to

then

build

that

capability.

So,

we

decided

to

build

that

capability

in

North

America.

So,

the

idea

there

is

in

our

Mill

Hall

facility

just

around

the

corner,

where

we're

looking

to

invest

space there

to scale

and

lease things

up. So,

it's

all

about

scaling

up,

expecting

some

of

these

clinical

programs

to

be

successful

and

being

available

to

scale

those

up

there.

So,

there's

investment

targeted

there

and

also

in

our

UK

lipid

facility

there

as

well

as

we

plan

for

future

growth.

But

I

mean

the

paybacks

are

very

modest.

The

paybacks

are

very

fast,

very modest.

So,

they

are

in

the

region

of

about

three

years'

payback,

maybe

even

less

than

that.

And

it's

not

huge

infrastructure

we're

putting

in.

We're

building

kilo

quantities

rather

than

oil

refineries.

As

they

say,

these

are

relatively

small

but

they've

got

to

have

flexibility

to

refine,

purify

and

separate.

That's

effectively

where

the

craft

is

and

we've

done

that

for

40

years,

50

years

pretty

well.

So,

it's

more

in

that

area

if

you

see

that

on

the

slide.

So,

that

was

the working –

that

was

the

CapEx.

In

terms

of

mix,

I

mean,

I

think

the

actives,

if

you

look

at

the

Consumer

Care

mix,

we

say,

as

Jez

commented,

we

expect

margins

to

generally

move

upwards

over

the

next

near

term

and

medium

term

steadily,

we

would

say.

You're

going to

see

the

mix

I

think

between,

as

you

say,

the

actives

and

the

formulation

area

will

be

broadly

similar

to

what

it

is

now.

I

think

we

would

expect

the

actives

business

to

grow

in

percent

levels

higher

than

the

formulation

business.

It's

a

smaller

business.

But

I

think

– we're

not

disappointed

with

the

formulation

growth

as

well.

So,

I

think

that

sort

of ratio

is

about

right

where

it

is

now

for

this

year.

And

I think

the

other

drivers

are

things

like,

as

you

say,

ECO.

We're

now

starting

to

displace

a

number

of

petrochemical

companies

in

formulations

now

on

the

back

of

L'Oréal,

Unilever's

moves.

Big

statements

on

moving

to

bio

based

by

2030

for

both

of

them.

You're

starting

to

see

that.

We've

seen

that

quite

significantly.

So,

we

expect

a

profit

move

forward

therefore

in

the

[ph]



Mantis (01:22:51)

and

therefore

that

tends

to

benefit

more

the

Consumer

Care

business

than

in

it

does

the

Life

Science

business.

So,

the

few

drivers

there

and

also

just

the

pace

of

the

projects

that

we've

got.

If

you

look

at

the

number

of

projects

that

we've

got

in

the

pipeline,

we're

starting

to

see our big

customers

really

now

moving

with

some

of

them.

There's

been

a

delay

at

the

– during

the

pandemic

as

you'd

expect,

but

a

lot

of

this

is

sort

of pent

up

innovation

demand

from

their

R&D

stables

as

well.

Jez,

anything

on

either of

those

and

then you

on

working

capital?

[Jeremy Kim Maiden, Group Finance Director, Croda International Plc]

No,

nothing

to

add

I

think

on

those,

Steve.

On

working

capital

Charlie,

the

–

so

we

have

these

two

components,

the £70

million

increase,

which

is

sort

of

pro

rata

to

the

increase

in

value

with

a

constant

number

of

working

days

cover.

So,

we

– I

expect

that

to

drift

upwards

at

the

moment

from

what

we

can

see

because,

obviously,

we've

got

price

increases

as

Steve

mentioned

in

the

first

quarter

of

2022.

So,

the

values

I

think

will

be

up

a

bit,

but

not

at

the

moment

by

that

order

of

magnitude.

And

then

on

the

tactical

contingency

stock

that

we

held,

£45

million

of

extra

stock,

one

would

hope

that

we

could

start

to

allow

that

to

reduce

now

and

to

reverse.

It

is

incredible.

I

mean,

it's

been

a

really

stellar

performance

in

terms

of

2021,

but

it's

been

delivered

against

the

backdrop

of

much

increased

customer

demand

at

a

time

of

really

challenging

global

distribution

position.

So

–

and

the

teams

internally

have

worked

superbly

well

both

at

manufacturing

level

and

at

sort

of

customer

service

and

distribution

level

to

overcome

those

problems.

We're

starting to

see

some

normalization

now

in

the

distribution

chains

around

the

world,

not

quite

so

stressed

at

ports

and

so

forth

because

I

suspect

that's

added

about

two

weeks

to

our

stop

that's

been

on

the

water,

just

the

difficulty

of

getting

things

through

ports.

So,

that,

hopefully,

is

starting

to normalize

now

and

that

can

mean

that

the

tactical

inventory

should

reduce.

So,

I

think

there

will

still

be

a

small

working

capital

build

in

2022,

but

nothing

like

the

same

scale

as

we

saw

in

2021.

[Charles L. Webb, Analyst, Morgan Stanley & Co. International Plc]

Pretty

helpful.

Thank

you

very

much.

[Stephen Edwards Foots]

Thanks,

Charlie.

[Operator]

Our

final telephone

question

comes from

Isha

Sharma

from

Stifel

Europe.

Isha,

please

go

ahead.

[Isha Sharma, Analyst, Stifel Europe Bank AG]

Hi.

Good

afternoon.

Thank

you

for

the

presentation.

I

have

just

one

left,

please.

On

the

Iberchem

margin

was

already

impacted

in

2021

as

far

as

my

calculations

show.

And

this

was

probably

due

to

the

raw

material

costs,

which

is

in

contrast

to

the

F&F

players

where

they

haven't

seen

any

impact

yet

with

the

guide

for

7%

to

9%

inflation

in

2022. How

should

we

think

in

general

about

Iberchem?

How

comparable it

is

to

their

guidance

and

what

kind

of

margin

impact

are

you

expecting

after

the

already

low-margin in

2021? Thank

you.

[Stephen Edwards Foots]

Yeah.

Okay, I'll

start,

and

then

Jez

can

add.

I

mean,

yeah,

I

mean,

we've

been

happy –

very

happy

with

the

trading

performance.

It

screens

for

about

10%

underlying

sales

growth,

and

it's

just

a

bit

below

that

at

the

moment.

But

when

you

think

about

it,

they've

had

the

perfect

storm

because

they're

in

most

of

the

emerging

markets

that

have

been

really

in

heavy-duty

lockdown

for

most

of

the

year.

So,

yeah,

trading

performance

is

good

despite

that.

So,

we're

pleased

with

that.

Margins,

yeah,

I

mean,

their

raw

material

increase

through

the

year

was

significant.

It

wasn't

17%,

but

it

wasn't

far

away

from

that.

So,

of

the

region

of

about

13%

to

15%,

they

see

it.

They

don't

have

any

clever

hedging

systems.

They

just

take

it

like

we

did

with

raw

material

costs

every

quarter.

So,

they've

had

that.

They've

carried

that

through

the

year.

I

think

that will

moderate

through

the year.

So, that's

obviously helped

the margin

improvement

as

well.

So,

I

think

the

worst

of

it

is

behind

them.

Whereas

with

some

of

the

other

players,

I

think,

because

of

– whether

it's

hedging

or

other

things,

they

have

to

carry

that

into

the

year

ahead.

So,

the

margin

headwinds

for

some

of

the

bigger

players

are

more

significant

than

the

smaller

ones.

Well,

certainly

for

Iberchem.

So,

for

us,

we

–

I'll

let

Jez

comment

on

the

numbers,

but,

we've

had

a

drag

on

margins

this

year

of

2021,

so

we

expect

some

of

that

to

come

back

next

year.

[Jeremy Kim Maiden, Group Finance Director, Croda International Plc]

Yeah.

Agreed,

Steve.

Hi,

Isha.

The

other

thing

to

remember

in

the

Iberchem

margin in the

short-term,

is

we've

put

additional

cost

in

like

Avanti

but

not

in

the

same

scale.

We've

put

an

additional

resource

so

that

we

can

really

take

advantage

of

these

sale

synergies.

And

therefore,

I

think

while

you've

got a

little

bit

of

short-term

dilution

in

line

with

our

acquisition

plan,

the

mid-term

prospects

looked

good.

I

mean,

we

think

that

with

those

sales

synergies,

every

reason

to

believe

we

can

get

the

margin

on

Iberchem

to

be

sort

of consistent

with

the

best-in-class

of

the

Tier

1

players,

even

though

Tier

2

players

have

traditionally

operated

probably

2

or

3

percentage

points

below

that.

But

because

of

the

synergies

we

can

release

by

leveraging

the

Croda

sales

force

and

leveraging

our

strength

in

developed

markets,

while

then

getting

more

sales,

particularly

in

the

Consumer

Care

business

from

their

emerging

market

exposure,

the

Iberchem

performance

itself

margins

should

certainly

get

up

into,

I

guess,

the

–

around

the

low

20

EBITDA

margins

that

you

see

at

the

top

end

of

this

industry.

So,

I

think,

yeah,

a

little bit

of

short-term

investment

to

make

sure

that

we

deliver

midterm

margins

that

are

best

in

class.

[Isha Sharma, Analyst, Stifel Europe Bank AG]

That's

very

helpful.

Thank

you.

Just

maybe

a

conclusion.

Is

it

– does

it

make

sense

to

assume

the

reversal

of

the

share-based

compensation

negative

impact

of

2%

next

year

and

take

the

underlying

margin

as

what

we

have

seen

in

the

second

half

for

the

group?

Is

that

rough

calculation

makes

sense

for

next

year?

[Stephen Edwards Foots]

You have

a

lot

of

Croda

people

on

this

call

as

well,

by

the

way.

And

we

will

be

delighted

to

pay

a

full

bonus

next

year

– this

year.

Very

much

delighted

for

the

bonus

and

the

PSP.

But,

yeah,

we

quite

like

it.

We

like

good

bonuses

as

well.

But,

yeah,

it

will

be

what

it

will

be

but

it's

a

significant –

it's

been

a

significant

impact

this

year

relative

to

a

couple

of

other

years.

That's

for

sure.

[Jeremy Kim Maiden, Group Finance Director, Croda International Plc]

Yeah.

For

Croda,

we

got –

we're

very

proud

of

the fact

that

over

80%

of

the

UK

workforce

members

have

share

schemes.

Over

60%

of

the

global

workforce

are

members

of

the

–

they –

that

use

of

share-based

payments

is

very

strong

across

the

organization

and

there's

two

functions

really.

One

is

performance

but

the

other

is

share

price.

And,

of

course,

the

share

price

was

very

strong

at

the

end

of

the

year.

So

that

– as

Steve

said,

it'll

be

what

it'll

be.

I

wouldn't

like

to

make

any

assumptions.

[Stephen Edwards Foots]

And

finance

directors

know

better

than

the

chief

execs,

by

the

way.

No.

And

I

think

the

other

thing

we

would

say

as

well

is

that

we've

just

agreed

a

free

share

plan

for

the

company.

So

when

the

senior

team

of

600

got

a

bonus

then,

we

expect

free

shares

to

be

delivered

down

the

organization.

So,

everybody

in

Croda,

the

junior

levels

gets

a

share

of

that

as

well

and

we

think

that's

very

much

good

for

distribution

of

the

reward.

Everybody's

been involved

in

a

great

year,

great

resilience

from

the

team

in

what's

been

a very

challenging

and

we've

delivered

knockout

results.

So, they

should

benefit

from

that

as

well.

[David Bishop]

No

further

questions.

[Isha Sharma, Analyst, Stifel Europe Bank AG]

I will go check the

careers

page

on

Croda.

[Stephen Edwards Foots]

Well,

thanks

to

everybody who's

attended,

both

in

person

and

on

the

call. So,

it's

great,

great

to

see

you

all.

And,

we'll

see

you

when

we

see

you

in

the

summer.

All

right.

Take

care.

Thank

you.