Croda Is An Exemplary Capital Allocator

Croda is a British speciality chemicals company, known as the leader in skincare active ingredients for the personal-care market. Actives are a niche segment, but they have the highest value because they allow companies to make performance marketing claims for their products, such as antiwrinkle creams. Continuous innovation and entrenched customer relationships have driven margins in Croda’s personal-care business to high levels. Croda includes personal-care and fragrance and flavors in its consumer-care segment, which accounts for 45% of group EBIT. A key driver for the company is the percentage of sales from new, patented, or protected products. With NPP sales reaching record levels in personal care, we are hesitant to believe margins can continue to rise unabated. Nevertheless, we expect the consumer-care segment to remain highly profitable.