Croda International H1 Earnings Call Highlights

Croda International LON: CRDA said its first-half results met expectations as growth accelerated in the second quarter, supported by Consumer Care and a strong performance in Beauty Actives. The company maintained its full-year 2026 outlook and said its transformation program was producing savings while supporting margin expansion.

Steve Foots said the company delivered the type of growth it seeks as an innovation-led business, with profits rising faster than sales and sales rising faster than volumes. He said demand for innovation, especially from large multinational customers, had been increasing and that new and protected products were growing faster than total sales.

Sales, profit and cash flow

Stephen reported that first-half sales increased 5% in constant currency to £881 million, while new and protected product sales rose 7%. Adjusted operating profit increased 7% to £156 million, and earnings per share rose 9% to £0.78. Croda declared an interim dividend of £0.48.

Free cash flow increased to £38 million from £28 million in the prior-year period. Net debt stood at £578 million, with leverage at 1.4 times EBITDA. Capital expenditure fell to £43 million following a period of elevated investment.

Sales volumes rose 1%, with improvement across every Consumer Care business unit and Pharma Ingredients. Price and mix added 4% to growth, with Beauty Actives a particular contributor. By region, sales rose 10% in Asia and 11% in Latin America, while EMEA increased 3%. North American sales declined 1%, reflecting phasing in Pharma Solutions and a strong prior-year comparison in Crop Protection.

First-quarter sales grew 1%, followed by 9% growth in the second quarter. Beauty Actives grew 27% in the second quarter, benefiting from customer innovation and product launches.

Adjusted operating margin increased to 17.7% from 17.2%. The company said higher volumes, positive pricing and mix accounted for 50 basis points of expansion. Transformation initiatives contributed £18 million of cost savings during the half, bringing cumulative benefits to £46 million.

Consumer Care and Pharma progress

Foots said Croda was reinvigorating its beauty business by refocusing research and development around customer co-creation, new uses for existing ingredients and new ingredient development. The company also opened two sites during the half: a multipurpose facility in Dahej, India, and a combined Fragrances and Beauty Actives facility in Guangzhou, China.

Beauty Actives benefited from international expansion, including the transfer of technology and claim-substantiation capabilities to sites in India, China and Korea. Ceramides sales rose 44% in the first half, according to Foots.

The company highlighted Volufiline, a skin-plumping ingredient that it has repositioned for facial applications. Foots said Deciem, part of Estée Lauder, adopted Volufiline as the trade name for a product in The Ordinary range. Croda said customer requests to use its trademarks had increased threefold over the last year.

In Pharma, sales in Pharma Ingredients increased 7% during the first half. Foots said the company was gaining traction from relaunching flagship ingredients for topical applications and markets including animal health. Customer co-creation projects for topical applications doubled over the past year, he said.

Pharma Solutions, a smaller and more project-driven operation, performed below expectations in the first half due to revenue phasing. However, management said its order book supported an expectation for project revenue to improve in the second half. Foots described the business as naturally “more lumpy” because it is based on larger individual contracts tied to drug-development projects.

Challenges and outlook

Fragrances & Flavours experienced disruption related to the conflict with Iran, while Crop Protection sales declined as higher input costs pressured farm incomes. Croda said the overall effect of the Middle East conflict was limited: targeted price increases to recover input inflation and some early customer purchases were broadly offset by lower Fragrances & Flavours sales in the region.

Management said it expects continued strong Consumer Care growth in the second half, along with improvement in Life Sciences, helped by Pharma Solutions and a modest recovery in Crop Protection. It also expects operating margins to increase sequentially as growth and transformation savings build.

Stephen said working capital remained an outflow during the first half, partly due to higher inventory and receivables accompanying sales growth and inventory built ahead of the Asian factory openings. Croda expects working capital to reduce relatively in the second half and reiterated its objective to generate around £50 million of structural working-capital savings by 2028.

The company maintained its 2026 guidance for organic sales growth of 3% to 6%, a further rise in adjusted operating margin and unchanged adjusted operating profit expectations. Foots said Croda remained on track to meet the targets in its three-year plan through 2028, including a 20% returns target.

“The program we set out at the start of this year is delivering,” Foots said, adding that innovation and transformation were strengthening the company’s platform for longer-term growth.

About Croda International (LON:CRDA)

Founded in 1925 with the aim of turning bio-based raw materials into innovative ingredients, Croda International is a speciality chemicals company focused on consumer care and life sciences markets. The company is focused on creating, making and selling innovative ingredients that deliver real benefits to a diverse range of customers and employs more than 6,000 people around the world. Sustainability is a core part of the Groups strategy with a commitment to be Climate, Land and People positive by 2030.

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