Today we will see a fairly unknown company in the biochemical sector. Although it may not be familiar to us, it is likely that at home we have some product manufactured with Croda-based products, since it is one of the suppliers of very large companies such as Unilever, Procter&Gamble, L’Oréal, Avon or Revlon. Croda is dedicated to the manufacture of specialty chemical products, mainly of oleaginous origin.


In 1925, entrepreneur George William Crowe and chemist Henry James Dawe created a company to extract a natural wax from sheep’s wool called “Lanolin” or “wool fat”. This wax was essential in the manufacture of a wide range of products, from cosmetics to waterproofing agents for textiles or products to treat leather. It is a colorless, odorless ointment very similar to vaseline. The company name was created by taking the first syllables of the founders’ surnames: Croda.

Lanolin was manufactured in Europe, but the United Kingdom did not have any factories of its own, so the two entrepreneurs decided to remedy this dependence of their country and set up English factories for this product. Mr. Dawe soon left the company when he found himself unable to create a satisfactory process for extracting lanolin, but Crowe did not give up and, by hiring other chemical engineers, finally succeeded in designing an optimal procedure to extract the precious lanolin.

However, this incurred many expenses for the newly created company, leaving it on the verge of bankruptcy. Expenses outweighed revenues until the late 1920s when it was discovered that lanolin had properties that retarded the appearance of rust on metals. This boosted the young company’s sales and made it prosper in the 1930s.

During World War II, the company focused on the war effort by creating various oil-based products for the British Army, such as camouflage paints, insecticides and oils for cleaning weapons, among others. At the end of the war, the company expanded to the USA to diversify geographically, returning to the production of its specialty, Lanolin, and two other oleaginous products: Hartolan and Polawax. These products began to be used on a massive scale by US companies, such as Procter&Gamble to manufacture cosmetics, personal care products and cleaning products.

This boom in the sector allowed Croda to expand internationally in the 1960s, opening branches in Germany and Japan, in addition to those it already had in the USA and the UK. It also undertook the purchase of smaller companies dedicated to the chemical sector, opening the company’s production range to other products such as adhesives and other chemical products for specific industries. In the field of cosmetics, it was also growing at an accelerated pace in hair care.

In the 1970s, Croda continued its international expansion to many countries and entered the household cleaning chemicals business. By the 1980s, Croda was already a major supplier to the world’s leading brands of cosmetics, personal care and cleaning products, while remaining an unknown name to the general public. The only publicity the company got, in the early 1990s, was when it discovered a substance that helped treat a rare hereditary disease, adrenoleukodystrophy, as a film was made about this product, called “Lorenzo’s Oil”.

However, the bulk of Croda’s customers were still companies, so it diversified its product portfolio to specialty industrial chemicals, such as foam for fire extinguishers or paints. But the company soon realized that by diversifying its product portfolio too much, it was losing profitability, as it was in direct competition with a host of companies larger than itself.

Therefore, in early 2000s, Croda decided to focus on its specialty, where it generated higher margins: oleochemicals. These chemicals were Croda’s signature business, and they were able to sell them to customers manufacturing everything from beauty products to food supplements to medicines. By then, Croda was already the world’s largest lanolin producer.

In the first decades of the 21st century, Croda has focused on making some strategic acquisitions. In 2004 it made significant investments in Sederma, a French producer of active ingredients for beauty and personal care products that Croda had acquired in 1997; and in 2008 it acquired Uniquema, a company specializing in oleo-chemicals for personal care products. In 2012, Croda acquired Stem Cell Technology, an Italian company dedicated to the development of biotechnology based on the cultivation of plant cells for hygiene and beauty products. In this way, it strengthened the company’s original segment.

At the same time, Croda expanded organically by opening branches around the world, and creating the New Enterprise Technologies division, to develop the other segment that the company set out to exploit: industrial specialty chemicals based on oil products. To this end, it acquired in 2013 a 65% stake in the Chinese

company Sichuan Sipo Chemical (£39M) to strengthen this division and operations in the Asian giant. In 2014, it also acquired the US company JD Horizons, also dedicated to the production of oilseed specialty chemicals.

To these acquisitions were added in 2015 the Dutch Incotec (£104M), a company dedicated to the development and improvement of natural seeds, and the Brazilian Inventiva, dedicated to the development of encapsulation and delivery technologies. The strategy of growing inorganically continued in 2017 with the acquisition of the Swedish biotech Enza and the Scottish Cutitronics; and in 2018 it continued with the acquisition of the Canadian biotech Nautilus, the British Plant Impact and the Danish biopharmaceutical Brenntag Biosector, specialized in the production of chemical components for vaccines. In 2019 Croda acquired the German company Rewitec, dedicated to the production of turbine maintenance products and automotive components.

In 2020, Croda made its largest acquisition to date: the Spanish Iberchem, a Murcian company specializing in flavors and fragrances for beauty products, with more than 50% of its sales located in Asia and Africa. This purchase was financed mainly through a new share issuing, which, although the transaction was valued at €820 million, did not involve a large cash outflow or a considerable increase in the company’s debt.

At the same time, in 2022, Croda sold a large part of its industrial business (Performance Technologies and Industrial Chemicals) to Cargill for €775 million.

In 2023 Croda has announced the acquisition of the South Korean company Solus Biotech, focused on the Asian market for beauty and personal care products. According to the company’s announcement, the acquisition will be worth around £232 million and will also involve the issuing of new shares.

We can clearly see that Croda is trying to reduce its weight in the industrial sector and increase it in the Personal Care and Life Sciences sectors, where it has better margins, as we will see later.



Today Croda is composed of the following divisions:

Personal Care: This division includes all products used for the manufacture of beauty and personal care products, such as surfactants or surfactants. The acquisition of biotechnology companies such as Enza, Incotec and Iberchem meant to strengthen this segment.

Life Sciences: This includes all products related to health care and crop protection. This includes oleaginous components for medicines, as well as those for the production of vaccines or crop enhancers.

Industrial Specialties: This segment combines the former Performance Technologies and Industrial Chemicals segments. In other words, all chemicals for the industrial sector, such as polymers, adhesives, protective substances for IT components, etc. In 2022, Croda sold 77% of this segment to Cargill.

Croda is fairly well diversified geographically, although with a very important weight in Europe. We also see how its product portfolio tends to concentrate sales in the Personal Care and Life Sciences segments.

As it’s a relatively small company, Croda has always been the subject of rumors about a hostile takeover bid. In 1982, the Scottish company Burmah Oil tried to acquire it without success. Its capitalization is around £8,000M, while other chemical companies such as the American DuPont Corporation or the German BASF have a capitalization between 4 and 5 times greater. As we shall see, Croda is a very well-managed company with a very controlled debt, and this is always the object of desire of these large companies, which could acquire it without too much effort.

However, Croda’s shareholders have always resisted these takeover attempts, trusting in the prosperity of the company independently. The largest shareholders in Croda are Blackrock and Massachusetts Financial Services, which own 6.62% and 4.99% of the capital respectively. Norges Bank (4.01%) and Royal Bank of Canada (3.65%) are also significant shareholders.

Let’s take a look at its Financial Statements to see whether or not this discreet British company suits our investment strategy.

1) FINANCIAL HEALTH: Balance Sheet

The Croda Balance looks quite equilibrated at first glance. Let’s look at it in detail.

Short-Term Assets and Liabilities

The composition of Croda’s short-term balance sheet is excellent. With a Liquidity Ratio of 2.32 and a Cash Ratio of 0.66 we can be reassured by the company’s liquidity. In addition, the Liquidity Ratio has always been at a value around 2 since 2010. This means that Croda usually has twice as many assets as liabilities in the short term, a prudent ratio for a company that, even if not being a Small Cap, is somewhat small.

Long-Term Assets and Liabilities

Croda’s Net Debt presents a value of 0.32 times EBITDA. This is a very low value, mainly due to the fact that the company has repaid a lot of debt after the divestment of 77% of its Industrial Specialties segment. Anyway, Croda’s Net Debt/EBITDA over the last decade has always been under control and around 1. This is particularly important for a small company. Also, although with such a small volume of debt it is not very relevant, it is worth noting that the average interest rate at which Croda finances itself is 2.55% and that its financial debt is well staggered over the next few years.

Goodwill represents 23% of Total Assets, and is the result of acquisitions of companies above their book value. The remaining Intangible Assets consist of software, customer portfolio and technological patents, which are depreciating at a good pace. Therefore, the value of Intangibles is somewhat high, but it is reassuring to see that it is fairly stable over time with respect to Total Assets.

The Financial Autonomy presents an excellent value of 67%. This is mainly due to the significant repayment of Debt in the last year, although in previous years it was also at good values, but closer to 40-50%.

If we do the usual exercise of disregarding the Goodwill shown in the Balance Sheet, we would still be left with an Equity of almost 44%: still excellent Financial Autonomy.

Retained Earnings are growing at a good pace, except for a few isolated years. Moreover, they do so at a very fast pace, so that gives us a good sign of financial strength: the company is able to reinvest in its business in addition to paying dividends.

Croda’s balance sheet is very good overall, although we should not forget that, as a relatively small company, we should be a little more strict.

2) PROFITABILITY: Income Statement 2022


Croda’s sales have a very good upward trend, growing by around 7% on average per year over the last 10 years. However, it should be noted that Croda still reflects this year’s sales of the Industrial Specialties segment, which will be substantially reduced next year. Without this effect, it is likely that average sales growth would be closer to 4-5%.

However, Croda has divested its industrial segment due to the fact that it is the lowest growth segment. Therefore, we can also expect future sales growth to accelerate as the Personal Care and Life Sciences segments operate in higher growth markets. They are also boosting their growth in Asia, where it appears that the Personal Care segment can grow substantially more than in other geographic regions.

It is important to point out that in its Annual Report, Croda indicates that no customer represents more than 5% of sales, which is quite reassuring, since we could have thought that large companies such as Procter&Gamble, Unilever or L’Oréal could weigh heavily on Croda’s income statement. However, although they do not specify the exact percentages of each customer, we can rest assured that Croda is not overly dependent on any of them.

It should also be noted that Croda is working to optimize its product portfolio so that many of its products are protected by patents. As with pharmaceutical companies, innovation in new products is protected by patents. Croda calls these products NPP (New & Protected Products), and intends to grow at least as fast as sales.


Croda has a fairly high and stable Net Margin of around 18%. This is an excellent margin, which indicates that it has important Competitive Advantages in the chemical products it produces. Moreover, this margin has been growing little by little during the last decade, confirming that Croda manages to optimize its product portfolio to keep the most profitable ones.

However, it is important to note that Croda does not have the same margins in all its divisions. Personal Care and Life Sciences have much higher operating margins than Industrial Specialties. Hence the significant divestment of a large part of this segment, in order to boost the company’s profitability. This is not the first time that Croda has returned to its original products, in which, due to its experience and scale, it has less competition and can achieve higher margins. Croda is the largest lanolin producer in the world, and in this field it is difficult to be overshadowed by competition. However, it is more difficult for Croda to compete in the production of industrial chemicals with chemical giants such as DuPont, BASF, Daw, Bayer, etc… That is why it has lower margins in the Industrial Specialties division.

It is worth noting that the company recently issued a profit warning that caused the share price to fall by almost 15%. It turns out that the company expects 2023 EBT to be between £370M and £400M, when in 2022 this had been almost adjusted £500M. According to the company, this more than 20% drop in EBT is because its customers are consuming products that they had over-stocked during the pandemic, as a precautionary measure against the uncertain evolution of inflation. If this is the case, although the drop in the share price would be justified (it is still around the expected P/E 24), we understand that it would be a one-off problem. Of course, Croda’s share price had been very high due to excessive expectations for its vaccine-related segment, and now the share price is back to more reasonable levels. We will see if in the H1 report, to be published by the company at the end of July, we can have more details.

Profitability Ratios

ROA: 11% (Net Income/Total Assets)

ROE: 16% (Net Income/Equity)

ROCE: 20% (EBIT/(Equity + Net Debt))

Croda’s Profitability Ratios are very good, and better than they appear at first glance.

ROA is very high (13%), and reassures us even more about the relatively high volume of Intangibles that we saw in the Balance Sheet, as it manages to monetize them very well.

Even with a very high Financial Autonomy, ROE and ROCE also show very good values. This is very commendable.

We see that Croda manages to be a very profitable company under all these parameters.

Sankey Chart

Earnings per Share (EPS)

Earnings per share have grown strongly since 2012, 8.3% on average per year, even slightly more than Sales. We see that the trend is impeccable. In the following chart, we reflect the adjusted data, without taking into account the extraordinary gains from divestments. Due to the profit warning issued by the company this year and the divestment of the Industrial Specialties segment, this trend is likely to be broken soon.


Dividend per Share (DPS)

Croda is a company that has a very responsible dividend distribution policy. It has been distributing them increasingly and uninterruptedly for more than 30 years, and has increased them at an average of 9% per year since 2012.

If we had purchased Croda shares in 2017 at £42, the Dividend Yield we would have in 2023 would be 3.4%.

If we had purchased shares in 2012 for £23, the Dividend Yield we would have in 2023 would be 6.3%.

Croda’s Initial Dividend Yield is moderate. However, it is quite increasing and the company has the habit of paying an extraordinary dividend when cash flow allows it. In their Annual Report they indicate that they aim to have a Net Debt of between 1 and 2 times EBTIDA, and state that when the company’s leverage falls below this value and there are no other investments planned, they will continue to pay out extraordinary dividends.

Payout (DPA/BPA)

Croda wants to keep its payout in a range between 40% and 50%. This range is very good, because it still leaves room for the company to reinvest part of the profits and grow organically and inorganically. We see that this Payout is only not met when the company has distributed extraordinary dividends, in 2016 and 2019. Since 2012, Croda’s Dividend per share has more than doubled. Excellent news for its shareholders.

Cash Flow

Free Cash Flow considering Maintenance CAPEX

The graph shows an Operating Cash Flow curve with an impeccable and very upward trend. Cash generated by operating activities has more than doubled between 2012 and 2022.


CAPEX also grows accordingly and in some years the Free Cash Flow seems to be insufficient to pay dividends. However, although these years (2014, 2015 and 2017) Croda distributes all of its Free Cash Flow in the form of Dividends, in many other years it has a more comfortable Free Cash Flow, which not only allows it to pay dividends, but also the large extraordinary dividends in 2016 and 2019.



However, if we add up all the Dividends paid in the last decade (£1,499M) and compare it with the Free Cash Flow generated in the same period (£1,592), we realize that Croda distributes almost all of its Free Cash Flow as dividends. Therefore, we cannot expect large dividend increases, unless Croda continues to increase its Free Cash Flow, either in the form of larger revenues or by reducing its Maintenance CAPEX.

Free Cash Flow considering Maintenance and Investment CAPEX

If we add investments to CAPEX, the graph becomes quite distorted.

On the one hand, the multiple years in which Free Cash Flow is not sufficient to pay dividends usually correspond when the company undertakes major acquisitions of companies: such as Incotec and Inventiva in 2015; or Cutitronics, Nautilus, Plant Impact and Brenntag Biosector in 2017 and 2018.

In 2020, we see a huge investment for the acquisition of Iberchem, although this was offset by a significant share issuing. In 2022, the Free Cash Flow soars due to the divestment of the Industrial Specialties segment.

In conclusion, we can say that Croda’s dividend is sustainable, but it is bound to follow the business trend. There is not much room for improvement unless business gets better.

Share Repurchases

Croda tends to keep its number of shares fairly stable. Between 2012 and 2015, the number of outstanding shares remained virtually unchanged. Between 2015 and 2019 it decreased slightly, and in 2020 it increased abruptly by 8% to finance the purchase of Iberchem. Since then it has remained stable, although they have already announced that it is possible that the number of shares will increase again to make some strategic acquisition, such as the South Korean company Solus Biotech.

We do not see this form of financing as a bad thing, especially when Croda shares are trading at demanding multiples. However, we will have to keep a close eye on the company’s per-share ratios to see whether these acquisitions will prove to be a good deal.


We found Croda to be a very interesting company for our strategy. Although it belongs to an industrial sector of basic products, Croda has clear Competitive Advantages due to its international extension and the fact that the market for oleaginous chemical products is a very spacialized niche for any other company, even a larger one, to be able to overshadow it. It is difficult for companies in the Personal Care and Pharmaceutical sectors to change supplier of their base products because of price. The osubstitution cost would be very high and could pose a huge risk to the flagship products of these companies.

The balance sheet composition is good. Although we would like to see a little less Goodwill, we have already seen that Croda makes a very good return on its assets, achieving a very high ROA. Otherwise, correct Balance Sheet composition in the short term, very low Debt, high Financial Autonomy and growing Retained Earnings.

The income statement shows that Croda is a very profitable company with very high margins, which are also increasing year after year by optimizing the product portfolio. We will see the effect of the divestment of the Industrial Specialties segment.

As for the Dividend, although it has a somewhat low Initial Yield, Croda has managed to increase it by 9% per year, at the same rate as its EPS growth. We foresee that in the future the company will increase it at the same rate as it manages to increase its EPS and Free Cash Flow. In any case, when the company has excess cash, it has a habit of paying extraordinary dividends, as it did in 2016 and 2019. This shows a lot of commitment to the shareholders.

Therefore, Croda fits perfectly into our strategy. Being a somewhat small company, we have to be more demanding than usual with its financial statements because its results could be more volatile. In addition, it has always been the subject of rumors about a hostile takeover bid by a larger company. But, even if this were to happen, depending on how it is done, it might not be bad news either. Also, as Croda tends to have a fairly demanding share price, it is advisable to wait for market opportunities to add it to our portfolio. Perhaps the recent profit warning could trigger one of these opportunities?

We hope you found the analysis interesting. Do not hesitate to leave your comments.

If you liked it, we would be very grateful if you could share it on Twitter and social networks.

If you want to consult Croda’s historical data, do not hesitate to consult the Report.

Best regards and see you in the next article!

Sources consulted:

Annual reports (2012-2022)

Croda completes divestment of Performance Technologies unit

Esta web utiliza cookies propias y de terceros para su correcto funcionamiento y para fines analíticos. Al hacer clic en el botón Aceptar, acepta el uso de estas tecnologías y el procesamiento de tus datos para estos propósitos. Ver