Earnings call transcript: Croda International’s Q3 2025 growth driven by innovation

Croda International reported a sixth consecutive quarter of sales growth in its Q3 2025 earnings call, with group sales increasing by 6.5% in constant currency. The company maintained its full-year guidance, expecting adjusted profit before tax to reach between £265-295 million. Despite facing foreign exchange headwinds, Croda’s strong performance was underpinned by innovation in its Beauty Actives and Fragrances & Flavors segments. The company’s stock remained stable following the announcement, with no significant changes in its price.

Key Takeaways

• Sixth consecutive quarter of sales growth, up 6.5% in constant currency.
• Full-year profit before tax expected between £265-295 million.
• Strong performance in Beauty Actives and Fragrances & Flavors.
• FX headwinds impacted financials but were offset by innovation-driven growth.
• Stock price remained stable post-announcement.

Company Performance

Croda International continues to demonstrate robust performance with its sixth consecutive quarter of sales growth, reflecting a 6.5% increase in constant currency. This growth is largely attributed to the company’s innovation-led strategy, particularly in the Beauty Actives and Fragrances & Flavors segments. The ongoing recovery in the Crop segment also contributed to the positive results. Despite facing foreign exchange challenges, Croda’s balanced growth across various sectors and regions has kept it on a steady path.

Financial Highlights

• Revenue: Increased by 6.5% in constant currency.
• Full-year adjusted profit before tax: Expected between £265-295 million.
• FX impact: £10 million translational and £10 million transactional for the full year.

Outlook & Guidance

Croda maintained its full-year guidance, anticipating a smaller Q4 due to seasonal factors. The company expects volume growth normalization in 2026 and aims for a mid-twenties operating margin. Cost-saving measures are projected to yield £25 million in 2025, with a target of £100 million annualized savings by 2027.

Executive Commentary

Steve, an executive at Croda, emphasized the importance of innovation, stating, "Innovation will win in the end in this market." Stephen, the CFO, expressed excitement about the pharmaceutical opportunities and noted, "We’re coming to the end of our major CapEx investment program."

Risks and Challenges

• Foreign exchange headwinds: Continued impact on financial performance.
• Low order book visibility: Potential risk for future sales projections.
• Fixed cost increases: Concerns from new facilities impacting margins.
• Supply chain and logistics: Structural opportunities and challenges ahead.
• Market saturation: Potential pressure on growth in mature segments.

Croda International’s Q3 2025 earnings call highlighted a strong performance driven by innovation and strategic growth across key segments. While foreign exchange challenges persist, the company’s robust strategy and cost-saving initiatives position it well for future growth.

Full transcript - Croda International Plc (CRDA) Q3 2025:

Laura, Conference Coordinator: Hello, and welcome to Prado International q three twenty twenty five sales update. My name is Laura, and I will be your coordinator for today’s event. Please note this call is being recorded. And for the duration of the call, your lines will be on listen only mode. However, you will have the opportunity to ask questions at the end of the call.

This can be done by pressing star one on your telephone keypad I will now hand you over to your host, Steve Boots, to begin today’s conference. Thank you.

Steve, Executive (likely CEO), Prado International: Good morning, everyone, and thanks for being on call. I’m here with Stephen. He’ll join me in answering your questions in a moment. Let me start by quickly highlighting three key points coming from the quarter three update. Firstly, group sales were up 6.5% in constant currency, a sixth consecutive quarter of sales growth and we’re pleased with that.

Quarter three hasn’t seen any big surprises for us with customer demand for our ingredients broadly the same as quarter two and most encouragingly we’re seeing sales growth with innovation led driven by an improvement in beauty actives, continued strength in FNF and an ongoing recovery in crop. Secondly, we continue to optimize utilization at our shared production sites through targeted sales of ingredients in beauty care, crop and industrial specialties, as part of the actions we’ve been taking since 2024 to increase operating margins. Alongside good growth in actives and FNF, this resulted in another quarter of low double digit sales volume increases compared with the same period last year and as a result of these actions the mix continued to be negative year on year due to both product mix and business mix and like for like prices remained largely consistent with the prior year. Thirdly, we’ve continued to make good progress with our transformation plan to improve earnings and returns. We’re driving sales by maximizing returns from our portfolio, leveraging our proximity to local and regional customers and stepping up innovation with all customers where we are seeing strong demand.

And we’re driving margin recovery by finding more ways to optimize capacity and by taking out costs as we simplify and modernize the business. We’re on track to realize 25,000,000 of cost savings this year and continue to expect to deliver 100,000,000 of annualized savings by the 2027, all contributing to margin recovery. Finally, our guidance for the full year is unchanged. We expect a more challenging trading environment and low order book visibility to continue for the remainder of the year. In line with previous years, absolute sales in quarter four are likely to be seasonally lower than in the first three quarters as customers typically manage their working capital into year end.

Despite this, the combination of good sales growth year to date and anticipated cost savings means that we continue to expect GBP $265,000,000 to $295,000,000 of group adjusted profit before tax at constant currency. So let me stop there and hand over to you for questions from the sell side analysts. So thanks for that.

Laura, Conference Coordinator: Thank you. We’ll now take our first question from Lisa DeNaive of Morgan Stanley. Please go ahead.

Lisa DeNaive, Analyst, Morgan Stanley: Hi, good morning. Thank you for taking my questions. I have two. Could we just run through the full year guidance, which was unchanged on a currency neutral element? But just taking into consideration the unchanged translation FX guidance, but small incremental negative transactional effects, but then your third quarter volumes were slightly ahead.

How do we picture that into the full year against market expectations? Would be very helpful to get a little bit of color on that. And then secondly, in terms of the fourth quarter, you called out the normal seasonal slowdown, but it would be very helpful to get some comments on what you’re seeing more globally in specifically in Asia and LatAm in terms of trading trends and how the customer is feeling and what the implementation is on that in terms of life science and consumer care demand? Thank you.

Steve, Executive (likely CEO), Prado International: Yes. Let’s Stephen do the guidance, and I’ll come back on the wider, broader customer point.

Stephen, CFO, Prado International: Morning, Lucie. Good to hear from you. So look, we’ve reiterated full year guidance. That shows the confidence, obviously, in the business. We’re on track.

We have highlighted market uncertainty and just shorter visibility on the order book, so that’s why we’re keeping the guidance unchanged. Worth saying that on ForEx, you pointed out two elements there, both headwinds. We have translational Forex of around GBP 10,000,000 for the full year. And then on a transactional level, you recall we had an adverse impact in underlying profit of £7,000,000 in the first half. We expect that to be about 3,000,000 in the second half.

So again, think £10,000,000 overall for the year as a headwind.

Steve, Executive (likely CEO), Prado International: Yes. In terms of the broader point, Lisa, yes, I mean we expect the trends to continue from quarter three into quarter four. What you’re seeing is consumer care. You’ve got consumer care growing well, particularly with innovation led growth in Actors and Beauty Care as well. I think Crop is recovering well too as well.

And you say that FNF has been consistent with its growth. I think we’re cautious on quarter four like many others because of the order book more than anything else. The order book visibility is very low. But customer sentiment is not changing. You know, innovation will will win in the end in this market.

And as long as we continue to innovate, we’ll be fine, but we’re just taking a cautious view because of the low level of visibility in the order book.

Lisa DeNaive, Analyst, Morgan Stanley: Okay. That’s great. Thank you so much.

Laura, Conference Coordinator: Thank you. And we’ll now take our next question from Charles Ayden of UBS. Please go ahead.

Charles Ayden, Analyst, UBS: Hi, good morning, Steve. Good morning, Stephen. Two questions for me also, please. Firstly, you mentioned you’re implementing the actions required to realize the GBP 25,000,000 cost savings in 2025. I wonder if you could just give us a couple of examples of specific measures you’ve already taken and what you’re seeing in terms of the reward or cost savings as a result of those.

And then my second question and a comment, I guess, well is thanks, firstly, for breaking out the mix and the pricing component separately in the release. That’s very helpful. Can I just ask, given pricing is broadly flat year on year now, is the expectation that, that will remain the case? And then, I guess, at some point through 2026, return to positive territory and back to sort of the old code, if you like, where pricing is an accretive component to group organic sales growth or group constant FX sales growth going forward? Yes.

Steve, Executive (likely CEO), Prado International: A few questions in there, Charles. But we’ll let Steve do the cost transformation and examples and then also the mix.

Stephen, CFO, Prado International: Yes. Let me just start with the mix. So yes, we expect pricing trends we’ve had both in the first half and then this quarter to continue. What we said next year is that volumes as volumes come in and the business normalizes, we would expect to see that volume price mix trend essentially reversing. So volume growth will come to an end as we get to the end of next year, and then you’ll see positive trends on price and mix.

And as you pointed out, prices are largely consistent year on year on a like for like basis, which is important. On the cost savings, yes, we’re on target for the GBP 25,000,000 of savings for this year. We’ve set out in the summer a clear program to deliver GBP 100,000,000 savings by the 2027. You can imagine the savings at the moment are what I’d call slightly more tactical, so early procurement savings, headcount reduction across the business in the back office, sort of early moves on shared services. As we go into next year, we start to tackle the more structural opportunities that we’ve outlined, particularly in supply chain and logistics.

Charles Ayden, Analyst, UBS: Very clear. And and just for clarification, I think I know the answer, but you you talked about volume trends normalizing. You’d still expect volumes to grow in ’26,

Stephen, CFO, Prado International: just to be clear. Absolutely. So we’ve talked about getting back to the historic levels of utilization in our core plants. That will take 2026 to achieve that level, and that will give us good operational leverage that drops through to margin accretion as you saw in the first half. That will continue.

Once we’re at those levels, Charles, we then see the pricemix margin accretion from that.

Laura, Conference Coordinator: And we’ll take our next question from Chetan Dahishi of JPMorgan. Please go ahead.

Chetan Dahishi, Analyst, JPMorgan: Yes. Hi. Thanks for taking my questions. The first question was no, I think this is probably the first quarter in many quarters where your Actives business has grown double digit. I’m just curious, is this some freak accident because of the launches from your customers, timing, etcetera?

Or do you see now a clear trajectory here where we should see at least some positive growth in coming quarters because of the new products that you are referencing in terms of innovation? The second question was, I mean, I’m a bit curious. You are almost now in Q4. The range of your guidance still seems pretty wide, given that we have only one quarter left. Are you still anchoring us to sorry, you’re still suggesting that we should be anchoring to the midpoint of the guidance?

Or do you want us to take a view on either low or top end of the guidance? And the last quick question would be on crop. Very, very strong growth again in Q3. It seems some of your customers are starting to sound a bit more cautious. Is that something you see in your order book or any of your discussions with customers?

Okay,

Steve, Executive (likely CEO), Prado International: Chetan. Thanks for the questions. I’ll do Actives and Crop and Stephen on guidance. Yes, Actives, I mean, I was in Sederma last week for two days, just running the rule of the business. And I mean, great progress there, innovation led growth.

We are we have been growing, by the way, Chetten over the last few quarters, but this is bigger growth, and we’re very pleased with that. Well balanced across local and regional and multinationals, actually. It’s USA led, and there’s many behind the growth figures. It’s not one or two customer wins. It’s many product launches with customers of all different shapes and sizes.

So primarily, virtually all of it is on innovation, some great new products coming out and some existing products with new data. We feel very confident about the Actives business. I think in crop, the good recovery continues. Europe is getting stronger, which is where the recovery started and that’s now supported by America as well. So it’s mainly multinational driven, but tier three customers are growing as well too and we don’t see any deterioration in the order book as we look at that into the remaining part of the year.

So we’re okay with that.

Stephen, CFO, Prado International: Yeah. And then, Chesson, just on the Q4 and guidance. So we’re very happy with the way the business is trading. It’s in line with our expectations. It’s just given the external environments and uncertainties, the reason why we’ve just not not changed the the guidance at all.

Don’t don’t forget when we set that back in early in the year, we weren’t expecting those FX headwinds that are hitting our underlying profit. So I think the the key takeaway for me is that I’m absolutely comfortable with with where consensus sits, and I would not expect that to change.

Chetan Dahishi, Analyst, JPMorgan: That’s great. Thank you.

Laura, Conference Coordinator: And we’ll now take our next question from Nicola Tong of BNP Paribas. Please go ahead.

Nicola Tong, Analyst, BNP Paribas: Thank you. Hi, everyone. I wanted to just clarify all the comments around seasonality for Q4. I think we only really have disclosure on a quarterly basis for the past two years, which perhaps weren’t normal years, but wasn’t necessarily down Q on Q in Q4 versus Q3. Think if I look at Bloomberg consensus, it implies Q4 sales will be down around 6% or 7%.

So I just wanted to check that versus Q3. So I just wanted to check if that was roughly in line with the usual seasonality that you’re referring to. And then the second question, you referenced in the release lower the fact that lipid sales, management sales were a bit lower due to uncertainty relating to U. S. Regulation or the regulatory environment even.

Does this relate to sales going towards existing commercial applications, I. E, lower uptake of vaccinations by U. S. Consumers today? Or does it relate more to development projects, I.

E, consumers slowing down their pipelines or slower FDA approvals? Yes.

Steve, Executive (likely CEO), Prado International: Let’s go in the order of the questions. And Stephen, on the quarter four seasonality, I’ll come back on pharma.

Stephen, CFO, Prado International: Good morning, Nicolas. Yes. Just on on seasonality, q q four has always been traditionally the smallest quarter, and that just simply reflects the the the buying patterns with our customers. What we would expect to see are the trends that we’ve seen through the year so far. In other words, in Q4, year on year growth, but just the cost of being smaller in absolute terms.

Steve, Executive (likely CEO), Prado International: Yes. I think on pharma, I mean, I would make a wider point. It’s good to see the early signs of growth in pharma ingredients, as a reminder, for every last two thirds of the business. The liquids point is slightly behind driven by America, That’s against tough comparators in the quarter and some customer hesitancy. But outside of America, it’s fine.

So we don’t see any we’re not overly concerned with anything in liquids. Avanti preclinical lipid pipeline will continue to grow. We have no problem with that.

Lisa DeNaive, Analyst, Morgan Stanley: Thanks.

Laura, Conference Coordinator: Thank you. And we’ll now take our next question from Arton of Redburn. Please go ahead.

Arton, Analyst, Redburn: Hello. Good morning. Thanks for taking my question. Firstly, on the shared side, I remember after the first half results, you provided this chart where you indexed your volumes on the shared side to the pre COVID levels. I think last time you showed that slide, it was eight percent down relative to the pre COVID levels.

Would you get any indication where these volumes are today? Or in other words, how do you feel about your capacity utilization rates right now?

Steve, Executive (likely CEO), Prado International: Yeah. Well, it’s a little bit better than that as you’d expect. And and I think more broadly, back to Steven’s point, you know, we’ve got one more year to get back to optimized rates. So, you know, the plan’s working for us, and and we’re pleased with that.

Sebastian Brie, Analyst, Berenberg: And

Laura, Conference Coordinator: we’ll take our next question from Sebastian Brie of Berenberg.

Sebastian Brie, Analyst, Berenberg: I have two, please. The first is on Life Sciences. Can I ask about your thoughts on the run rate of this business into ’26? And what I’m referring to is the following. If the lipids plus vaccines part is roughly onethree and constant currency sales were flat, let’s say high purity and other excipients were up mid single digits, it implies that this fraction was down by close to 10% when there is quite a lot of new facility coming online that introduces fixed costs that needs to be covered for ’26.

Do you think life sciences as a whole is going to grow very much if ag is flattish because it’s pretty tough comps in ’26? How to think about the moving parts for that segment? In other words, are you comfortable with the balance of expectations for Consumer Care EBIT and Life Sciences EBIT for ’26? And then secondly, Fragrances, any signs of cycle which has been very nice is starting to soften? Or is everything pretty much as it was in Q2?

Yes.

Steve, Executive (likely CEO), Prado International: Thanks, Sebastian. Well, let’s Steven go first on the life sciences trajectory, and then I’ll come back on FNET.

Stephen, CFO, Prado International: Yeah. Morning, Sebastian. So, look, in terms of because I think about next year, you will absolutely see year on year growth across the life sciences portfolio. What you’ve seen in the quarter is is a sort of a slowing or flatter pharma business overall. But as we’ve said, only a third of that is in lipids and adjuvants and and better growth in the excipients business in pharma.

I’d expect that to to con continue in terms of accelerated growth in the excipients as we focus on that and rejuvenate that part of the portfolio. Look, we’re really excited about the pharma opportunity. We’re coming to the end of the investment cycle there in our facilities. We’re really excited about what that gives us, particularly US based manufacturing. We will grow into that.

I think it’s just worth saying that that environment, the lithium environment, was a little bit more difficult than we thought given US policy, but we’re still very excited about the long term potential of the business.

Steve, Executive (likely CEO), Prado International: And we’ve and just to add to that, on the Lamar side, we’ve got central revenue streams for consumer care going in there as well to protect profitability. So I’ll just go after that. On FNF, it’s broad based growth virtually everywhere. This quarter is led by both fragrances and flavors and also the Parfex business which is more of the business pointing to beauty care. Regionally, the big growth is Middle East, Africa Europe driving that.

And the research and commercial pipelines are being expanded as we move research capability more locally there. We’re not back to your point. We would expect the revenue growth to moderate from 15% to 17%, but it still should be pretty strong for the next couple of years. We’re not weighted on a high level of what I call really fine fragrances in the portfolio as well. So we expect that business to continue good growth trajectory.

Sebastian Brie, Analyst, Berenberg: That’s helpful. Thank you for taking my questions.

Steve, Executive (likely CEO), Prado International: Thank you.

Laura, Conference Coordinator: Thank you. And we’ll now take our next question from Katie Richards of Barclays. Please go ahead. Hi, good morning, everyone. Thank you for taking my questions.

First, just could you just provide us some more color on how adjusted EBIT margins have trended this quarter versus the first half of the year? I know you haven’t disclosed them explicitly. There was also some criticism of potential lack of operating leverage exhibited in the first half of the year as you’ve been winning back some volumes. So what would you say towards this? Just another question on the transformation program, please, as well.

You’re targeting 35,000,000 of cost savings for optimizing operations. Can you give some more color on what part what this part of the program means towards you? Would you consider targeted divestments, for example, maybe of the shared manufacturing assets or elsewhere in the portfolio? And then finally, I just want to pick up on the fixed point the fixed cost point Sebastian just made. You’ve guided towards £15,000,000 SG and A inflation per annum going forward as part of the transformation program with £10,000,000 expected this year.

But given the ramp up of what looks to be about £200,000,000 in new assets, including the Lamar sites, Indian surfactants and the China FNF sites, how can we expect the SG and A inflation to trend into next year? I’m just struggling with the timing of the ramp up of these businesses and the fixed costs that come with them. Thank you.

Steve, Executive (likely CEO), Prado International: Okay. A few questions there. So I’m going point them to Steve and margins, top leverage, transformation program detail and fixed costs going into next year for the plans.

Stephen, CFO, Prado International: Yeah. Morning, Casey. Thanks for the questions. Just on on my view, obviously, we’ve not given margin for Q3. It’s a it’s a trading update.

Just all all I’d say is we’re very comfortable with the progression of the business and the continuation of what you saw in the first half. On operating leverage, the point here is that we’re bringing back business into into the company that’s rightfully ours. If you look at the first half, the benefits of that volume growth on a net basis were around 2% improvement in our operating margin. That’s the plan that we’re executing on, and that will continue, as I said earlier, through to the end of end of next year. On the cost savings, yep, remember, 100,000,000 by the ’27.

The the largest individual parts of that around supply chain and and logistics, We talked there about optimizing the footprint globally. So that is both within individual facilities and the network as a whole. And you saw a good example in July where we’ve announced the closure of one of our distribution centers to optimize that footprint. What we’re looking at is both supply so both manufactured within the individual sites. So we expect to see a rebalancing of where we produce products to bring it closer to where we’re seeing customer growth, so particularly in Asia.

And then on the fixed costs, you’re right. So we’re coming to the end of our major CapEx investment program. That finishes at the end of Q1 twenty six, and thereafter, we’ll see a significant reduction in CapEx. It is bringing on, as we start up those facilities, around 10,000,000 of incremental fixed costs that we’ve talked about previously into the business. So that’s one element of inflation.

Beyond that, I I just point you to sort of normal normal inflation in in the cost base and particularly salary inflation. But the point here is that with the 100,000,000 of savings, the transformation program we’ve got, that overall, we will see that contributing to margin recovery as we get back to our ambition of of mid twenties operating margin.

Laura, Conference Coordinator: Amazing. Thank you. Thank you. And we’ll take our next question from Georgina Fraser of Goldman Sachs. Please go ahead.

Georgina Fraser, Analyst, Goldman Sachs: Hi. Thank you so much for taking my questions. Kind of follow ups to Katie’s questions. I just wanted to understand, you’ve highlighted a continuation of negative mix. Could you talk about what’s driving that given the strength in Beauty Actives?

And then you did even give some helpful comments about the trends that you’re seeing in margins. Do you mean that we should still expect margins to be up year on year in the second half even though we have that negative mix? And then final question, thinking a bit more about profitability levels or margins for next year. You’ve repeated quite a few times, so I think you want us to all get this message very, very clearly that next year is going to be another year of getting back to optimized utilization rates. So should we be thinking about 2026 as another year of volumes at the expense of mix before we get into positive mix territory into 2027?

And what does that mean for margin expectations next year?

Steve, Executive (likely CEO), Prado International: Yes, fine. Thanks, Julian. I mean let me take the negative mix effect in the quarter and then pass the statement for the others. I mean simple, it’s a majority of that is in the negative mix within the industrial specialties and the crop businesses for quarter You’ve got positive mix starting to come through, particularly with actives growing in consumer. But on the margin profitability on pasta, Steven?

Stephen, CFO, Prado International: Yes. So Georgina, as I say, q q three is exactly in line with with our expectations. You you will continue to see that mix effect into next year, and and and that’s just as we bring in those volumes that we talked about before where we saw significant drop off in volumes post post COVID, particularly relating to the sale of part of our industrials business. But that will that will cease as we get towards the end of next year.

Laura, Conference Coordinator: Thank you. Once you. And we’ll now move on to a follow-up question from Stefan Bray of Berenberg. Please go ahead.

Sebastian Brie, Analyst, Berenberg: Hello, good morning again. I had one follow-up on cash flow. The release doesn’t mention it, but H1, it seemed to be the source of some investor concern. Have the working capital balances improved in H2? And how is cash flow shaping up?

Stephen, CFO, Prado International: Sebastian, thanks for the follow-up. So again, working capital tracking as we would expect. Look, what said at the half, obviously, we we are investing in working capital to support the growth of the business. But I do see opportunities for us to be more efficient in the way that we manage working capital just as we will be more efficient in the way that we manage the cost base. So if you think about a supply chain optimization rationalization, there’s a cost element to that, but there’s also an inventory carrying level to that as we drive efficiency around the network.

So I’ve I’ve talked about an opportunity of of of several tens of millions. That won’t come out instantly because it does link to the transformation of the business, But I’d expect that improvement in working capital broadly to map the cost savings program. And the balance sheet is strong. We’re banging the middle of the range, and I expect that to continue. And with CapEx coming down, obviously, we will delever.

Sebastian Brie, Analyst, Berenberg: That’s helpful. Thank you.

Laura, Conference Coordinator: Thank you. That was our last question. I will now hand it back to Steve for closing remarks.

Steve, Executive (likely CEO), Prado International: Okay. Thanks very much, everybody, for your questions. I mean, three key points we wanted to get across today. We’ve got good sales growth continuing good quarter for that. Five point plan remains on track and full year guidance unchanged.

So thanks very much, and we’ll see you we’ll see you in February.

Laura, Conference Coordinator: Thank you. This concludes today’s call. Thank you for your participation. You may now disconnect.

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