Croda Capital Markets Day

7 November 2012
Welcome to Croda Capital Markets Day 2012
Purpose:
Learn more about the many niche
opportunities in our business
Provide more information about
Performance Technologies
Hear from and meet the Croda senior
management team
Provide a greater insight into our
innovation culture
A marketing and technology company that happens to sell speciality chemicals
2
Mega trends driving structural growth
3
Positioned well in very attractive growth markets
Personal Care Personal Care Health Care Health Care Crop Care Crop Care Lubricants Lubricants
Coatings &
Polymers
Coatings &
Polymers
Polymer
Additives
Polymer
Additives
Beauty and ageing Beauty and ageing Health and well-being Health and well-being Sustainability Sustainability
Geo
Technologies
Geo
Technologies
Home Care Home Care
Innovation Unmet customer needs Differentiated technologies
The global leader in natural specialities
4
Positioned well to benefit from growing trend towards natural based products
Innovative benefits Innovative benefits
Plant sources Plant sources
Marine sources
Great customer value Great customer value
Our philosophy
We are a marketing and technology company
We create valuable intellectual property
We work closely in partnership with our customers to help create multi-
million and billion pound brands for them
We make high quality speciality chemicals at world class, flexible
manufacturing facilities, that allow us to deliver outstanding customer
service to our customers
Key themes and agenda for today
6
Specialisation of
Performance Technologies
Niche market growth in
Consumer Care
Emerging Markets
Geo Technologies with
Graeme Tweddle
and
Polymer Additives with
Maarten Heybroek
Geo Technologies with
Graeme Tweddle
and
Polymer Additives with
Maarten Heybroek
Personal Care with
Kevin Gallagher
and
Health Care with
Sandra Breene
Personal Care with
Kevin Gallagher
and
Health Care with
Sandra Breene
Latin America with
Nick Challoner
Latin America with
Nick Challoner
Capital Investment with Sean Christie
Invest Invest Invest
New Technologies
Enterprise Technology with
Keith Layden
Enterprise Technology with
Keith Layden
Innovation Innovation Innovation
The Senior Team at Croda
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Louise Scott
Company Secretary
Legal Counsel
Louise Scott
Company Secretary
Legal Counsel
Steve Foots
Group Chief
Executive
Sandra Breene
President
Consumer Care Europe
Sandra Breene
President
Consumer Care Europe
Stuart Arnott
President
Global Operations
Stuart Arnott
President
Global Operations
Kevin Gallagher
President
North America
Kevin Gallagher
President
North America
Maarten Heybroek
President
PTIC Europe
Maarten Heybroek
President
PTIC Europe
Keith Layden
Chief Technology
Officer
Sean Christie
Chief Financial
Officer
David Barraclough
President
Asia Pacific
David Barraclough
President
Asia Pacific
Graham Myers
Group Financial
Controller
Graham Myers
Group Financial
Controller
Nick Challoner
President
LATAM
Nick Challoner
President
LATAM
Presenting today
Experienced and entrepreneurial
management team
Graeme Tweddle
Vice President
Geo Technologies
Enterprise Technology
Keith Layden Chief Technology Officer
Purpose of the presentation
Explain the importance of Innovation at Croda
Outline the role of Enterprise Technology
Update on key projects
Acrylic Polymers
Biotechnology
Pharmaceutical Omega-3
Staying ahead of the competition
9
Innovation our definition
10
Any aspect of the operation of the business that differentiates Croda from
the competition and by doing so creates value
Differentiation Differentiation Added value Added value
Innovation the Croda Way
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Marketing Sales Technical Operational
Driven by the commitment of the individual
Market and customer driven
Knowledge Experience Enthusiasm Intuition
Role
The role of Enterprise Technology
Acceleration of market led innovation is at the heart of our future growth story
12
Corporate development function
Challenge
Delivery
Find opportunities and innovation
Differentiated technologies, products, effects or
processes
Enterprise Technology organisation
Sourcing new technologies across the globe
13
Chief Technology
Officer
Business
Development
Director
Technology
Development
Specialist
(USA/Canada)
Technology
Development
Specialist
(LATAM)
Technology
Development
Specialist
(Northern Europe)
Technology
Development
Specialist
(Southern Europe)
Technology
Development
Specialist
(Singapore)
Enterprise Technology acquisition
Our goal is to acquire technology that:
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Is, or has potential to
be, class leading
Meets valuable
unmet customer
needs
Has robust IP
Can be
commercialised
globally through the
Croda network
Acquisition criteria
Omega-3 technology at Leek Omega-3 technology at Leek
Enterprise Technology success to date
15
Acquisition of IRB Acquisition of IRB
Acrylic Polymers at Rawcliffe Bridge Acrylic Polymers at Rawcliffe Bridge
Biofermentation at Ditton Biofermentation at Ditton
Acrylic Polymers update
16
The Polymers Plant
The plant has
been constructed
We are now
producing
Our strategy and how we operate
18
Phase 1
Establish our presence
Meet customer expectation
Phase 2
Phase 3
Innovate and differentiate
Satisfy customer need
Step change
Deliver novel effects
What is the opportunity?
33% of top 10 Personal Care brand launches used this technology
15,700 new formulations out of 56,700 total
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Widely used in a number of our markets
with opportunity present to differentiate
further
Products from the technology are key for
future opportunities in many of our
markets
Personal Care Personal Care Crop Care Crop Care
Coatings &
Polymers
Coatings &
Polymers
Geo
Technologies
Geo
Technologies
Home Care Home Care
Investment in our capabilities
20
Experts already
recruited in Process,
R&D, Applications
and Synthesis
Experience from
industry
Understanding of
how to build this
chemistry
Capability to make it
and move forward
Investment Investment Investment
Acrylic Polymers summary
Plant in operation
Relevant global market potential of 500m
Plan is to differentiate and satisfy well understood market needs
Target markets are Personal Care, Crop Care, Home Care and Coatings &
Polymers. Technology will be applied in all market sectors
Supporting technology development with a number of academic partnerships
Initial offerings will be Liquid Dispersion Polymers (LDP), Emulsion & Solution
Polymers
Multi-nationals approvals already in place
21
Biotechnology update
Bio-innovation at Croda
23
White White Green Green Blue Blue
Biotechnology applied to
industrial processes
Biotechnology applied to plant
and/or agricultural processes
Biotechnology applied to
marine and aquatic processes
O.D.A White Kiss Melanin
Goodbye
Biosurfactants - Sophorolipids
Plant cell culture
IRB update
Venuceane
Nautilus collaboration
White biotechnology now
O.D.A. White
Kiss Melanin Goodbye
Yeast fermentation transforms vegetable oleic
acid to dioic acid a conversion that is not
easily achievable by synthetic chemical means
In skin care, O.D.A. White inhibits melanin
synthesis by blocking the translation of
Tyrosinase mRNA.
HOOC
CH
3
COOH
HOOC
Oleic acid
C18:1 Dioic acid / OctadeceneDioic Acid
White biotechnology next
Sophorolipid biosurfactants
26
Green
Highly surface
active
Anti-microbial
Biodegradable
Adaptable
Industrial and home
cleaners
Surfactants for
cosmetics
Anti-microbial uses
Crop Care adjuvant
for pesticides
Other applications
e.g. soil remediation
Green biotechnology now
Plant Cell Culture
A New Process for Green Efficacy
Use of undifferentiated plant cells to
synthesise targeted phytomolecules
Unlimited availability - no reliance on crop
harvest or seasonality
Sustainable approach not taking up
valuable farming land
No fertilizer, no pesticide, no preservatives
Enhanced yields of the phytochemicals of
interest compared to whole plants
extractions
Green biotechnology now
IRB update
Business integration progressing well
Technical team fully integrated with Sederma, product efficacy testing
underway
Fantastic response from our customers to the technology and the
potential opportunities
Growth plans in place
Barriers to entry for this technology are very significant we are way
ahead of the competition
A number of multi-nationals have coded products since - and as a result
of the acquisition
29
Blue biotechnology now
Venuceane
Cosmetic active produced by fermentation of
thermus thermophilus
Marine extremophile micro-organism from deep sea
hydrothermal vents
High pressure (200 bars)
High temperature (about 75C)
No light
Little oxygen
Toxic environment rich in free radicals
Survives by synthesizing an enzymatic cocktail which
also offers beneficial properties for the skin
Blue biotechnology
yet only 1
%
of marine biodiversity
is known
Oceans cover
70% of the
earths
surface
Nautilus collaboration
New bio-manufacturing unit
Biotechnology summary
Investment in fermentation plant at Ditton and IRB fall within this platform
We strongly believe biotechnology is a significant disruptive technology offering
step-change opportunities in Personal Care, Health Care, Crop Care and Home
Care markets
Biosurfactant launch planned for 2013
Technology is aligned with drivers in our markets and is a logical place for Croda
to be
Global partnerships in green, blue and white biotechnology
Strong internal know-how developing
34
Pharmaceutical Omega-3 update
Pharmaceutical Omega-3 update
Co-funded investment in
pharmaceutical Omega-3 capacity at
Leek
Investment supports both
pharmaceutical and nutritional
businesses
Now fully operational
36
Pharmaceutical Omega-3 update
Site successfully inspected by FDA for
supply of Active Pharmaceutical
Ingredients (APIs)
Early stage supply into generic Omacor
market in Europe
Major North American Market probably
inaccessible until 2017
Major project with US partner for non-
Lovaza application
37
Pharmaceutical Omega-3 update
Key condition specific areas for Croda
Cardiovascular
Parenteral nutrition
Elevated blood triglycerides
Brain development / maintenance
Eye health
38
Pharmaceutical Omega-3 update
Barriers to entry
Regulatory approval
Technology
Manufacturing know-how
Reputation
39
Enterprise Technology summary
Now a global function, appropriately resourced
Several bolt-on targets identified and being progressed
Internal technology developments progressing well
Global connectivity with SMEs and Academics
Challenging expectations but confident of achieving
40
Innovation in Personal Care
Kevin Gallagher President North America
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Purpose of the presentation
Provide an understanding of our position in the market
Learn more about the many niche opportunities
Provide a greater insight into our innovation culture
Highlight barriers to entry
42
The Global PC market by region
Region Value bn (2011) Growth
CAGR
(2006 2011)
World 211.6 5.0% 4.9%
Asia Pacific 62.1 5.2% 4.6%
China 14.7 12.5% 12.3%
India 4.4 20.0% 15.1%
Australasia 3.8 2.8% 3.7%
Latin America 34.8 10.0% 12.0%
Brazil 20.2 8.8% 12.5%
Middle East and Africa 9.3 11.8% 11.7%
North America 36.1 3.7% 1.9%
Europe 66.3 2.4% 3.2%
Russia 6.6 7.1% 9.6%
Source - Euromonitor August 2012, retail prices
Note the above information excludes fragrances, OTC Health Care & Oral Care
43
Our position
We sell thousands of products to thousands of customers
Intimate relationship with customers big and small
Our ingredients feature in up to 80% of SKUs launched by the top multi-
nationals
Our market share is 6 8%
Our ingredients are used at small inclusion levels
Provide differentiation
Difficult to remove
Performance for pennies
Formula less than 10% of our customers cost
Our ingredients are a negligible cost in relation to the cost of product to
consumer
Niche is our focus
Understand market needs
Anticipate future unmet needs
Understand Structure Function
Connect needs with function
Identify structure
Create new product
Develop performance data
Communicate benefits
Re-communicate benefits
Get feedback from market
Next new product?
Align marketing platforms with research and development projects
45
Innovation of new and cool ideas is the key to
customer loyalty
46
The Niche is our customers speciality and
provides exactly what they want
Wow, this product
sounds like it was
made just for me!
Our Niche Discovery Process
47
Skin and hair care innovation
Conditioning Conditioning Colour Colour Unique performance claims Unique performance claims
Sun protection Sun protection Anti-ageing Anti-ageing
Rejuvasoft
Simple conditioning solution
Just add water
Conditions and moisturises
Softens hair
Creates a wide range of product types with
a single ingredient
Proven performance comparative to
leading brands
Simplifies product labels
Has label appeal
Silicone free
Sulphate free
49
25 panellists
Preferred the
leading
conditioner
brand
24 panellists
preferred the
conditioner
with
Rejuvasoft
25 panellists
Preferred the
leading
conditioner
brand
24 panellists
preferred the
conditioner
with
Rejuvasoft
Enrich Your Color
VibraRiche
Delivers more vibrant hair colour
Improves the shine of hair dye
systems
Increases the softness of hair
Provides excellent conditioning and
detangling
New test methodology:
The Hair Color Vibrance Factor
50
Keramimic 2.0
Provides targeted, intelligent repair to
the most damaged areas of the hair's
surface
Highly specialized, keratin derived
conditioning agent
Matches peptide sequence present in
human hair
Developed using the most recent
advances in proteomics
51
KeraDyn HH
You can tell her hair is healthy by the
way it moves
Restores healthy hair dynamics to
damaged hair
Reduces inter-fiber friction and
enhances fiber alignment for better
hair movement
No build-up on the hair
Cold processable
Suitable for clear systems
52
Solaveil SpeXtra range
2011 Cosmetics & Toiletries Best New
Technology Winner
Globally approved with Ecocert validated
options available
Physical shield to reduce UV-induced free
radicals within the skin
53
Unprecedented broad
spectrum protection
No compromise on SPF
efficacy
Silky, talc-like skin feel
Legance
Anti-aging of the legs
Reduces leg discomfort
Refines, firms and beautifies
Encourages healthy circulation
Reduces appearance of unsightly veins
Lessens water retention and swelling of
legs and ankles
54
Circulation Dynamism
Legance
Placebo
Basal 3 min
Patented products sales growth
0
2
4
6
8
10
12
14
0
10
20
30
40
50
60
70
2006 2007 2008 2009 2010 2011
$m
% of sales
North American Personal Care Sales
55
Barriers to entry
Marketing memory
Product and ingredient understanding
Subject matter experts
Innovation in our DNA
Marketing mojo
We can reach out and touch them
Same spirit of innovation in approach
Inform, inspire and entertain
High tech and high touch
Direct relationship with customers
Large and small
Relationships valued
56
Summary
Innovation at record levels
Open innovation with our large multi-national customers increasing all
the time
Many new niche opportunities
Barriers to entry increasing
57
Innovation in Health Care
Sandra Breene President Consumer Care Europe
Purpose of the presentation
Provide an understanding of our position in the market
Make you aware of the new niche opportunities in excipients and
nutritional end markets
Highlight the main barriers to entry
59
Health Care
60
Excipients Excipients
Nutritional Nutritional Supplements Supplements Functional Foods Functional Foods
Pharmaceutical Pharmaceutical Dermatological Dermatological Animal Health Animal Health
Global Health Care macro data
61
Supplements Pharmaceutical Dermatological Animal Health
Accessible
retail market
3.4bn 750m 120m 490m
Growth rates
7% 6.7% 7% 6.5%
Key trends
Less APIs
Instability
Insolubility
New respect for
excipients
Cosmoceuticals
Improved patient
compliance
Novel delivery
forms
Condition
specific
lifestyle products
Water-resistant
Green vaccines
Pet Care
Our current position
Opportunity to penetrate the vast pharmaceutical and veterinary markets
Focus on liquid dosage excipients for high value applications
Industry leader in lanolin ingredients and high purity excipients
Leader in Omega-3 concentrates
Fastest growing segment of supplement industry
Delivering performance benefit ingredients
Relationships with key players
Broadening network of contacts to
include Marketing, Brand and Innovation
Management
62
Healthy families, healthy business
Delivering sparkling
smiles for those with
sensitive teeth
On sunny days,
Solaveil can
provide medicated
sun protection
Super Refined
products used in
medicated patches to
relieve lower back pain
Soothe spring
allergies with high
purity esters for
nasal sprays
Beating headlice
with novel
formulations
Children love the
new lemon
flavoured omega
3mulsion
Kill dog fleas with
Spot-ons containing
Super Refined
ingredients
Omega-3
supplements offer a
new generation for
pet nutrition
Future growth in excipients
Customer intimacy
Strong project pipeline
Formulators friend
C
o
m
m
e
r
c
i
a
l
i
s
a
t
i
o
n
Customer intimacy
Strong project pipeline
Formulators friend
C
o
m
m
e
r
c
i
a
l
i
s
a
t
i
o
n
Strengthening market credibility
External relationships
Published trials
P
r
o
f
i
l
e
Strengthening market credibility
External relationships
Published trials
P
r
o
f
i
l
e
New products
and performance data
I
n
n
o
v
a
t
i
o
n
New products
and performance data
I
n
n
o
v
a
t
i
o
n
Focus of key platforms
Stability
Solubility
Formulation
F
o
c
u
s
Focus of key platforms
Stability
Solubility
Formulation
F
o
c
u
s
Future growth in excipients
65
Excipients Excipients
Delivering growth with Crodex M
66
Delivering growth with Crodex M
Delivering growth with Crodex M
The damaging effect of Aqueous Cream containing SLS
Sensitive skin deserves better Crodex M is an SLS free alternative
Delivering growth with Super Refining
69
Unstable Active Pharmaceutical Ingredients
(APIs) for sensitive applications
require highly purified excipients
Cancer treatment
Ophthalmic, optic, nasal
Our Super Refining process
removes polar impurities from
standard excipients
Colour, odour, taste
Peroxides & secondary oxidation products
Heavy metals
Delivering growth with Super Refined Arlasolve
High purity, water white liquid
with excellent solvent properties
Delivery enhancer,
ensuring APIs get to where they
are most needed in the skin
Currently used in a number of
projects to deliver ibuprofen
through the skin
70
Delivering growth with Super Refined Oleic Acid
Oleic acid is a known penetration
enhancer, Super Refining makes
the excipient more skin-friendly
Medicated patches have many
uses and are widely prescribed
in Japan to relieve muscular back
pain
The patch needs to protect and
not damage the skin barrier
High sales of Super Refined Oleic Acid
71
0
2
4
6
8
10
12
14
16
18
Oleic Acid SR Oleic Acid
I
n
t
e
r
c
e
l
l
u
l
a
r

l
e
a
k
a
g
e

%
L
e
s
s

I
r
r
i
t
a
t
i
o
n
Future growth in nutrition
Quality as key differentiator
100% batch testing
High purity and potency
Q
u
a
l
i
t
y
Quality as key differentiator
100% batch testing
High purity and potency
Q
u
a
l
i
t
y
Drive growth of higher concentrates
Move customer up the value chain
V
a
l
u
e
Drive growth of higher concentrates
Move customer up the value chain
V
a
l
u
e
Focus on providing end solutions to
brand owners
Condition specific and lifestyle
D
o
w
n
s
t
r
e
a
m Focus on providing end solutions to
brand owners
Condition specific and lifestyle
D
o
w
n
s
t
r
e
a
m
Continually differentiate
Sustainability
New products
New processes
PureMax brand
D
i
f
f
e
r
e
n
t
i
a
t
i
o
n
Continually differentiate
Sustainability
New products
New processes
PureMax brand
D
i
f
f
e
r
e
n
t
i
a
t
i
o
n
Nutritional Nutritional
Future growth in nutrition
73
Delivering growth with Incromega

3mulsion
Novel delivery form
Great tasting
Child-friendly
Convenience
Quick-to-market
Marketing innovations with the PureMax Brand
PureMax logo now used on 36 branded products
75
Marketing innovations with the PureMax brand
76
Meet Percy the PureMax Puffin
End consumer marketing,
educating on Omega-3 benefits
PureMax.com consumer website
Engaging with social marketing
networks
New Fishing with Percy iPad
app available from iTunes App
store
Barriers to entry
Our capabilities
Manufacturing expertise
Technology differentiation
GMP
Understanding legislation
Registration
77
Summary
Differentiated product range supported by performance data
Significant opportunities, driven by market needs
Industry-leading manufacturing, technology and regulatory know-how
provide barriers to entry
Continued potential for value creation
78
Latin America Capitalising on growth
Nick Challoner President Latin America
Purpose of the presentation
Provide an understanding of our facilities in Latam
Highlight emerging trends within the region
Highlight the technologies and products transferring from USA and
Europe into the region
80
Croda a strong commitment to Latin America
Brazil commercial, laboratory and manufacturing
Argentina commercial
Mexico commercial and laboratory
Chile commercial
Colombia commercial
Peru commercial
Additional commercial and technical operations
being developed
We have invested and will continue to invest in the region
81
Sales office
Manufacturing
Research and development
Regional training centres
Ensuring our customers know how, when and where to use our products
Continued investment in the education of our customers
Expanding in high growth markets R&D
83
Investment to continually move ever closer to our customers and their needs
Formulation support
Customer academy
development
Focused new product
development and applications
research
Responsive technical service
Mexico City, Mexico Mexico City, Mexico
Campinas, Brazil Campinas, Brazil
FilmPerform - performance hair care
Volume control
Improved detangling and combing
Frizz control
Softness and silky sensory attributes
84
Regional manufacturing
High quality manufacturing environment
satisfying local customer needs
Committed to local manufacturing and servicing of our customers
Expanding in high growth markets capacity
86
Investment in capacity to drive exciting growth opportunities
Increased esterification
capacity
All market sectors to benefit
Excellent operations facilities
Looking to provide additional
infrastructure to capitalize on
opportunities responding to
key themes such as
sustainability
Campinas, Brazil Campinas, Brazil
Resourcing customer contact is paramount
87
Customer facing roles are also planned to be increased during 2012/13
Locations where the number of
employees in sales, marketing
and technical functions have
increased
Total increase of over 20 people
in the last 12 months
Latin America ideally positioned for growth
88
More consumers = increasing demand
Economic stability and resilience
Latin America is developing its own trends
A positive approach to sustainable business practices
Latin America ideally positioned for growth
Population increase from 511m in 1999 to >575m in 2011
Increasing numbers of consumers at all levels of the
consumer chain. Mass market consumers entering the
chain. Middle income consumers becoming more prevalent.
In Brazil the number of mid-level C class consumers rose
from 44% to 72% of overall population between 2003 and
2009
89
More consumers = increasing demand
Latin America ideally positioned for growth
With Brazil and Mexico, two of the BRICM countries, Latin
America is expected to yield substantial growth
opportunities, and much faster growth rates than the
developed western economies
Greater stability to the financial crisis compared with other
economic areas.enabled swifter recovery
Globally, it is expected that emerging markets will account
for 1/3 of GDP by 2030
Currently it is 1/5
90
Economic stability and resilience
Latin America ideally positioned for growth
The Latin consumer is different enough to have their own
needs built upon their own cultures and potentially large
enough to be of real commercial interest
Brazilian hair straightening
Brazilian waxing
Sustainability and biodiversity are well recognised as drivers
of consumer interest and behaviour
91
Latin America is developing its own trends
A positive approach to sustainable business practices
Consumer Care trends in Latin America
92
Positioned well to capitalise on these trends
Innovation
Satisfaction of unmet
customer needs
Demand for differentiated
technologies
Personal Care trends in Latin America
Ideal for hair repair
conditioning
Non-irritant emulsifier,
new technology
Good tolerance with
antiperspirant agents
93
Matryixl Incroquat Crodafos
2 years younger in
one month
Activity of Matrixyl
brings important anti-
ageing effect on skin
Fast rejuvenation for
women & men
Focus on delivering
actives for skin
treatment
Sun care SPF
boosting
Moisturizing benefits
Crop Care trends in Latin America
94
Increase crop
production from
available arable land
Atlox Hybrid Adjuvants Atplus
Increased crop
demand for the
creation of energy or
sustainable raw
materials
The use of more
eco-friendly raw
materials
Health Care trends in Latin America
95
Basis for high quality
ointment formulations
Ideal for use in cold
process
Increasing yields from
livestock
Incromega Incromega Crodabase Crodabase Super Refined Super Refined
High purity Omega-3
ingredients to help
maintain health and
wellbeing
Superior quality and
high purity solvents
and surfactants
Maintain both the
stability of the drug
and of the finished
formulation
Performance Technologies trends in Latin America
96
Lubricants Lubricants
Coatings &
Polymers
Coatings &
Polymers
Polymer
Additives
Polymer
Additives
Urbanisation and Infrastructure Urbanisation and Infrastructure Demographic development Demographic development
Geo
Technologies
Geo
Technologies
Home Care Home Care
Communication and contact Developing customer needs
Differentiated service and
technology
Smart-green Smart-green
Intimacy of contact is of paramount importance in responding to these opportunities
Performance Technologies trends in Latin America
97
Stabilising innovative
water based coatings
which contain less or
no solvents to protect
the health of the user
and the environment
Priolube Maxemul and Priplast Natsurf
High performing, high
temperature chain oil
additives which
exhibit higher
oxidative stability and
lower environmental
emissions
Highly efficient and
yet biodegradable
surfactant for
applications in
household and
institutional cleaning
Summary
We are investing with speed in the region
Sales and Marketing
Research and Development
Manufacturing
Increasing intimacy with our customer base
Many new niche opportunities
98
Specialisation in Geo Technologies
Graeme Tweddle - VP Sales & Marketing Geo Technologies
Purpose of the presentation
Outline what encompasses Geo Technologies
Highlight multiple niche opportunities in Oil and Gas
Show how we are adopting Consumer Care approaches to this fast
growing segment
100
What is Geo Technologies?
Strong macro trends
Customer, technology and product overlaps
Thirst for innovation
Focus and growth
Positioned for profitable growth in Performance Technologies
101
Oil and Gas Oil and Gas Water Treatment Water Treatment Mining and Minerals Mining and Minerals
Growth drivers - Oil and Gas
Unstoppable demand for energy
30% growth in demand by 2040
80% of growth in oil demand will be
in developing markets
Unconventional sources will dominate
growth
Environmental and regulatory
pressures will grow further
A market that demands innovation and improved environmental performance
1. 2012, The Outlook for Energy: A View to 2040 Exxon Mobil
2. Schlumberger Oilfield Review, Highlighting Heavy Oil
102
Our position in Oil and Gas
Niche application areas
We are not a service company
The global Oil and Gas majors
We dont compete with our
customers
Why customers buy from Croda
103
Products that provide the solution when others do not
CRODA
Integrated & non-integrated
service companies
Oil & Gas Majors
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Halliburton
Schlumberger
Baker Hughes
Nupark
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Ecolab Nalco
MI Swaco
Champion
Clariant
etc
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Heavy Oil Demulsifiers Kemelix
Oil industry produces 2.5 times more water than oil. By 2025 it will be 5 times
The highest performance for heavy and difficult crude oils
Unique materials, difficult to make, even more difficult to copy
Shale Gas & Oil Kemelix & Brij Series
Huge global potential
Kemelix act as emulsion preventers with improved environmental profile.
Brij are bio based emulsifiers for high temperature acid fracturing
Drilling Additives EstaDrill
Environmental challenges in drilling
Water based rather than oil based drilling fluids
EstaDril to provide lubricity and improved rate of penetration
Our niches today Oil and Gas
Future growth dimensions Oil and Gas
Where will growth come from?
Todays products around the world
New customers, extra territories
New products for existing applications
Innovation focus
Diversification into additional space
New market areas for Croda as the
industry develops
Applying our core capabilities to the latest industry challenges
105
Future growth opportunities Oil and Gas
Drilling fluid rheology control
Deeper wells, higher temperatures, higher pressures
Maintaining well integrity
Bio-based technology
Green and high performance
Oil dispersant technology
Oil mud thinner and dispersant
Greener profile, allowing classification in the North Sea
Applying our core capabilities to the latest industry challenges
106
Future growth new generation Kemelix
Next generation demulsifiers
Improving on the best
Breakthrough performance
Higher performing
Even greener
In-house raw materials
Lower cost process
Investing circa 10m in USA and
France in manufacturing capability
Next generation technologies with robust IP
107
People and resources
Resources
Technical and commercial
Established world class expertise
already within Croda
Latam and Asia
A global business, a global team
108
Continued investment planned in a fast growth market
Summary
Oil and Gas
Strong growth rates
Compelling macro trends
Global in nature
Thirst for innovation
Investing to grow
109
Positioned for profitable growth in Performance Technologies
Specialisation of Polymer Additives
Maarten Heybroek President Performance Technologies Europe
Purpose of the presentation
Outline our niche within Polymer Additives
Highlight differentiated opportunities within our niche
Show how we are adopting Consumer Care approaches to this segment
111
Polymer market and growth development
Source: Applied Market Information LTD, 2011 Polyolefins Additives Market Overview
Polyethylene
Polypropylene
PVC
Polystyrene
PET
Engineering
polymers
ABS
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
Global plastic use is 225m MT in 2011
60% are polyolefins
CAGR 2010 - 2015
Population growth Population growth Health and well-being Health and well-being Energy and resource Energy and resource
Macro and micro drivers
Increased food consumption
and transportation
Increased bottling and
product sophistication
Recyclability and light-
weighting
Increased polymer demand Increased performance
Our niches today
Plastics have inherent problems that require solving!
Slip Anti-static Anti-fogging
Global leader in our niche
The global market leader in Crodamide fatty amides for slip additives
Back integration into our key raw material, high erucic rape oil
Strong Uniqema synergies
Atmer additives extended the portfolio
further increase to our customer base
Global sales reach
Fragmented customer base
Over 1000 customers globally
Reputation with customers
Innovation
Quality
Growth strategy
Organic growth
New product innovation
Diversify our portfolio into adjacent segments
Organic growth driven by new polyolefin plants
77 new plants coming on stream between 2012 and 2015
49 of these are in Asia Pacific
25 are in China
1 2 plants
3 6 plants
10+ plants
Diversify into adjacent segments
IncroMax
Market trend for polycarbonate to replace glass
PC has high impact strength
Clarity is key
How does IncroMax help?
Reduce surface friction
Liquid product with no deposits on surface
No effect on clarity
Diversify into adjacent segments
Wood Plastic Composites
Driven by sustainability
Made from recycled wood and or plastic
Growing market particularly in Europe
Untapped market
High dosage levels
Summary
Global leader in our niche
A robust and profitable business
Diversified customer base
Attractive growth opportunities
Investment and returns in Croda
Sean Christie Chief Financial Officer
121
Purpose of presentation
Highlight how we have got to todays returns
Discuss the key measures used of evaluate investments in Croda
Discuss different classes of capital investment
Give direction for overall returns in Croda going forwards
Other forms of investment are equally important to our future but are not
considered here
R&D
Investment in people
122
Steady increase in ROIC post Uniqema
0
5
10
15
20
25
2005 2006 2007 2008 2009 2010 2011
ROIC
Uniqema initially depressed returns but steady increase in ROIC since 2006
Disposal of low return assets
Steady improvement in business profitability
All new, non M&A capital investment has higher return than Croda average
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Disposal of low return assets since 2006
Proceeds Op. Profit Assume taxed
at 30%
Return foregone
on disposal
Proceeds
Food Service 7.4 0.8 0.6 8.1%
Reflubes 62.0 4.0 2.8 4.5%
Klang 9.8 0.0 0.0 0.0%
Baxenden 13.0 1.1 0.8 6.2%
Chicago 46.7 4.6 3.2 6.9%
Emmerich 49.6 -2.1 -1.5 -3.0%
Cremona 2.0 0.0 0.0 0.0%
Total 190.5 8.4 5.9 3.1%
Disposal of low return assets boosts average ROIC
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Steady improvement in business profitability
0
5
10
15
20
25
2005 2006 2007 2008 2009 2010 2011
ROS %
Again, Uniqema initially depressed returns but steady increase in ROS since
Exit from unprofitable products
Initial re-pricing of Uniqema product portfolio
Launch of higher margin and patented new products
Significant overhead cost saving in retained business
125
Measuring investment returns
Key internal measure: DCF analysis
Used for M&A, disposals and capital expenditure
Our hurdle rates are far higher than our (sub 8%) cost of capital
Projects are risky. High returns compensate for this risk
Most small projects have returns far in excess of the hurdle rate
Key external reporting measure: ROIC
Post tax, includes all goodwill
126
Two ways of getting a high ROIC
Be careful what you wish for
127
Run a brilliant business
Run your assets into
the ground and never
invest
OR
Existing asset base
Very well invested
Fixed assets 340m
Intangibles 210m
Most comes from acquisition of Uniqema in 2006
16 manufacturing operations around the world
All the infrastructure is in place
Land, building (including offices, canteens, toilets)
Utilities (heat, light, power)
Effluent treatment
128
Investing in the business
0
10
20
30
40
50
60
70
80
2012 2013 2014
m
Projected capital investment Estimated depreciation
2012 2014
>70% of spend in capacity
expansion, new technology and
energy reduction projects
More than doubling investment in
emerging markets versus 2008
2011
Forecast excludes M&A
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Different classes of expenditure
Replacement capital expenditure
Capex for growth
Capex for energy reduction
Capex for Group infrastructure
Major acquisitions
Smaller acquisitions
130
Replacement capital expenditure
Depreciation 32m
Theoretically need to spend this to stand still equipment does wear out
Often some incremental return due to improvements in technology
over time
This spend does not add to the existing asset base so any incremental
return, however small, improves ROIC
131
Capital expenditure for growth
Small capex can have VERY high returns and fast
paybacks
Stainless steel tanks, pipes and reaction vessels
with computerised controls, just plug into existing
infrastructure
Major projects on existing sites take a bit longer to
come on stream
Acrylic polymers
Marine bio-fermentation
Pharmaceutical grade Omega-3
Green field site build require serious thought will
inevitably lose money initially before generating
return but ultimate returns can be very high
Singapore (1999)
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Capex to reduce energy consumption
Chemical plants are big users of energy
Energy costs will continue to increase over time
Low commercial risk
We are prepared to accept longer payback periods and lower returns
on energy saving projects
Wind turbine in Hull
Landfill gas at Atlas Point
133
Capex for Group infrastructure
Can be costly and reduce returns initially
Requires very careful planning (otherwise disaster is guaranteed)
IT / communications in Croda
Global single instance SAP system
In place for over 10 years
Recently upgraded to latest software and hardware versions
Global communications network
Video conferencing
134
Major acquisitions
Big acquisitions are expensive and require thorough strategic analysis
Acquisition premium
May need to issue equity
Contain infrastructure (land, offices etc)
Very risky multiple themes have to deliver to get a return (disposals, closures, overhead
savings and business repositioning)
Have profit from day one (hopefully) but tend to dilute ROIC initially before returns build
Very visible
Suitable candidates hard to find at the right price
Anyone can do deals at the wrong price
Uniqema a great deal but immense work involved to deliver
135
Smaller acquisitions
Smaller acquisitions less risky
Lower cost
Can be built into existing group infrastructure (e.g. sales force, IT)
Less risky often just one basic idea in the strategic rationale
IRB they have a product development pipeline that our sales network
can take to market
136
Where are investment returns heading?
ROIC and DCF are not directly comparable but over time give similar
results
Current ROIC is 23.7% and we would not expect internal capital
expenditure to dilute this figure in the long term
M&A evaluated on a case by case basis
137
Summary
Croda is a well invested, high returning business
This is not going to change in the future
138