Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Croda International PLC (COIHF, Financial) reported a 14% increase in consumer care volumes, indicating strong demand recovery.
- The company has maintained high and stable gross margins despite raw material price volatility over the past three years.
- Beauty care is experiencing significant volume growth, particularly in North America, driven by local and regional customer innovation.
- The company is seeing strong growth in local and regional markets, with notable increases in China, India, Brazil, and North America.
- Solus Biotech acquisition is progressing well, with promising growth potential in both life sciences and personal care segments.
Negative Points
- Consumer care profits declined by 13% despite volume growth, indicating challenges in translating volume increases into profit.
- Margins in life sciences have decreased, with a notable 300 basis point drop compared to the previous half-year.
- The crop segment is experiencing prolonged weak trading, affecting overall margin performance.
- There is pressure on pricing in the consumer health part of pharma due to increased competition and raw material cost reductions.
- The company is cautious about crop recovery, impacting guidance and overall business confidence.
Q & A Highlights
Q: Why is the volume growth in consumer care not translating to higher margins?
A: Steve Foots, Group Chief Executive, explained that the shared service site model and the absence of crop volumes have impacted margins. Once crop volumes return, margins in consumer care are expected to improve. The gross margin remains stable despite raw material price fluctuations.
Q: What is causing the contraction in beauty care volumes despite high NPP levels?
A: Steve Foots noted that beauty care volumes are actually up significantly compared to last year. The contraction is more about regaining lost business, particularly in North America, and the shift towards local and regional customers, which is driving growth.
Q: Can you explain the decline in life sciences margins and the potential for recovery?
A: Steve Foots mentioned that the decline is mainly due to the absence of COVID-related sales and the shared manufacturing model. Recovery in crop volumes to 2021 levels could help margins return to the high 20s EBIT margin.
Q: What are the expectations for life sciences and consumer care in the second half of the year?
A: Steve Foots expects pharma and seed treatment to grow well, with modest improvement in crop. Consumer care does not require sequential growth to meet guidance, as trends from the first half are expected to continue.
Q: How is the shift towards local and regional customers impacting consumer care?
A: Steve Foots highlighted that local and regional customers are driving growth due to their innovation and pricing strategies. This shift is significant across various markets, including China, India, and Brazil, and is beneficial for Croda's business model.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
