- Sales Growth & Profitability Full-year sales rose 7% to GBP 1.7B (constant currency), with adjusted operating profit up 8% to GBP 295M, driven by higher-margin Consumer Care (9% Q4 growth) and Life Sciences (8% Q4 growth) segments.
- Margin Expansion Target Adjusted operating margin expected to increase from 17.4% (2025) to >20% by 2028, supported by GBP 100M annualized savings from transformation programs and GBP 50M working capital reduction.
- Pharma & Innovation Momentum Pharma business to drive 4-7% annual organic sales growth in Life Sciences, leveraging biologics, lipids, and co-development partnerships, with Avanti’s lipid research enabling generic and premium product opportunities.
- Free Cash Flow & Capital Discipline Free cash flow of GBP 162M in 2025 (vs. GBP 162M target), with 2028 goals of >12% free cash flow conversion and net debt within 1-2x EBITDA, prioritizing dividend restoration over buybacks.
- Geographic & Market Shift 89% of sales in high-growth niches, with 82% of Consumer and 56% of Crop sales to regional/local customers, and 90% customer retention (5-year CAGR) due to direct selling and co-creation strategies.
Segmental Performance
The Consumer Care segment saw sales grow 9% in the fourth quarter, driven by strong demand for beauty and personal care products. Life Sciences sales were up 8%, with growth across all pharma platforms. Industrial Specialties sales declined 19%, but the company expects this segment to recover as it benefits from transformation initiatives.
Guidance and Outlook
Croda expects adjusted operating profit to be in line with current market expectations, with organic sales growth of 3% to 6% and a further increase in operating margin. The company has guided for sales growth in the first quarter to be similar to the same quarter in 2025. Analysts estimate revenue growth of 5.2% for the next year, which is slightly higher than the company's guidance.
Valuation
Croda's current valuation metrics suggest that the market has priced in a moderate growth outlook. The company's Price-to-Earnings (P/E) ratio is 31.56, and the Price-to-Sales (P/S) ratio is 2.65. The EV/EBITDA ratio is 14.05, indicating a relatively reasonable valuation. The Dividend Yield is 3.0%, which is attractive for income investors. With a Return on Invested Capital (ROIC) of 6.09% and a Return on Equity (ROE) of 6.22%, the company is generating decent returns on its investments.
Transformation Initiatives
Croda is undergoing a transformation program aimed at enhancing growth, driving stronger execution, and delivering cost efficiencies. The company expects total annualized savings of GBP 100 million and a working capital reduction of GBP 50 million by 2028. As Steve Foots mentioned, "We're confident in our ability to drive consistent growth and improve returns, with a strong foundation of core strengths, a well-invested business, and a clear plan for execution."