Annual Report and Accounts 2021

www.croda.com

Purpose
At Croda our
Purpose is to use
Smart science toimprove lives™

Sustainability
We have made a bold
Commitment to be Climate,Land and People Positiveby 2030. By being the mostsustainable supplier ofinnovative ingredients, we will
provide solutions to some of theworld’s biggest challenges while
helping our customers achieve
their sustainability goals.

MissionOur mission is to be
the world’s mostsustainable supplier ofinnovative ingredients

Commitment
We are committed tobeing Climate, Land andPeople Positive by 2030
See Sustainability

P30

See Pursuing our
Commitment

P2

Innovation
Innovation is the lifeblood of
our business and our successis dependent on our ability todeliver innovative solutions tocustomers. Our approach toinnovation combines our own
internal R&D with customer
collaboration and open
innovation partnerships toaccelerate the developmentof new technologies anddisruptive solutions.

Strategy
We combine sustainability
with innovation todeliver growth
See Our strategy

P20

See Identifying
unmet needs

P4

Markets
We are focused on
Consumer Care andLife Sciences markets

GrowthOur ambition is to deliverconsistent top and bottom-line
growth. Through our transition
to high growth markets and byinvesting in sustainability andinnovation we are able toleverage the ‘Croda difference’to deliver attractive returns
for shareholders.

Values
Our shared values of‘Responsible’, ‘Innovative’and ‘Together’ ensure
our smart science
improves lives
See Delivering forour shareholders

P6

Introduction

Guided by our Purpose,sustainability together
with innovation will drive
our future growth.
2021 has been an excellent year for Croda.
We delivered a record financial performance,
made progress against our sustainability
commitments, and concluded our strategic
review, refocusing the business on fast growthmarkets of the future.

Highlights
Sales£1,889.6m

Contents
Strategic report
Sustainability: Pursuing our
Commitment

2

Innovation: Identifying unmet needs

4

Growth: Delivering for ourshareholders

6

Chair’s statement

8

Chief Executive’s review

10Market themes

14

Business model

16

Stakeholder engagement

18

Section 172(1) statement

18

Our strategy

20

Investment case22

Sector reviews

24

Sustainability

30

Non-financial information statement

38

Task Force on Climate-related
Financial Disclosures

40

Key Performance Indicators

44

Finance review

46

Risk management

50

Long-term viability statement

56

NPP % Group sales (constant currency)

36.6%

Directors’ report
Corporate governance58

Remuneration Report84

2020: 27.4%

Directors’ report

109

Sales growth(constant currency)

Scope 1 & 2 emissions intensity(TeCO2e/£m)Financial statements
Independent auditor’s report112+43.2%

193

Group consolidated statements

120Group accounting policies

125

Notes to the Group accounts

132

Company financial statements

162
164

2020: £1,390.3m

2020: +1.1%

2020: 264

IFRS profit before tax (PBT)

Safety (Total Recordable Injury Rate)*

Notes to the Company
financial statements£411.5m

0.73

Other information

2020: £269.5m

Adjusted PBT growth(constant currency)

2020: 0.58

* TRIR excludes COVID-19 cases and includes
acquisition impact. See page 44 for detail.

Related undertakings

168

Shareholder information

171

Five year record

173

Glossary

174+56.2%
2020: -4.8%

Ordinary dividend (proposed full year)+9.9%
2020: +1.1%

www.croda.com

Croda International Plc
Annual Report and Accounts 2021

1

Pursuing our Commitment

Phil Ruxton and Tracy Sheedy discuss
executing on our Commitment and how
our people and culture are playing a key role
Croda has a unique culture which combines ourTS heritage with a diverse and global footprint. Our

values are a manifestation of this; we encourage ourpeople to be ‘responsible’ and ‘innovative’ and towork ‘together’.

Phil Ruxton is Chief Sustainability Officer
Since launching our Commitment to be Climate,

PR Land and People Positive by 2030, positioning us
as the world’s most sustainable supplier of innovative
ingredients, we have been working hard on the plans androadmaps to make this a reality.
In line with this mission, we have committed to climate
science-based targets (SBTs), becoming only the third major
chemical company in the world to have an officially verified
plan to reduce carbon emissions in line with the 1.5˚Cscenario on our way to becoming net zero by 2050.
With immediate action required to mitigate the worst-casescenarios associated with climate change, leadership anddifferentiation are now all about execution. Our focus
is therefore on delivery, working in partnership withall stakeholders particularly suppliers and customers.
Our strategy is much more broad-based than climate
alone, as the United Nations Sustainable Development Goals(SDGs) demand. We are already land net zero, with our cropscience ingredients saving more land than is used to growour bio-based raw materials. We recognise that our strategy
will need to adapt in response to the latest science andneeds of planet and society. For example, we areinvestigating our impacts and dependencies on biodiversity
and the development of a science-based target for nature.
This year we have engaged all our stakeholders in reviewing
our material impacts. The insight gained has focused ourattention and encouraged us to continue our ambitious
journey to become Climate, Land and People Positiveby 2030.

We are responsible and ‘do what we say we will do’;delivering on our promises is something which is evident
in our financial and non-financial performance this year.
This year we have reached our target of ensuring all
employees earn a Living Wage globally and continue
to enjoy largely positive scores in our employee
engagement surveys.
As a leading innovator we encourage the broad range ofthinking made possible in a company that values diversity,
enhancing the solutions that we deliver for customers andthe communities that we serve. We are pleased to haveexceeded both the Board gender and ethnic diversity
ambitions of the Hampton-Alexander and Parker Reviews
for the start of 2022 and we also increased the proportionof leadership positions held by women to 36% this year.
At Croda, we share a clear sense of Purpose to use our
Smart science to improve livesTM that ensures everyone
pulls together to achieve our goals. Read more about ourculture and diversity and inclusion on page 36.

Tracy Sheedy is Group Human Resources Director
See Delivering value through our culture

P36

Combining science and sustainability at Alban Muller
Through our Sederma business we are the leading innovator in the skin care market and the number
one supplier of anti-ageing ingredients. We are also a leader in natural extracts sourced from plants,
under our Crodarom brand. This year we acquired Alban Muller, a privately owned company thatcombines science and natural extracts, broadening the natural ingredients offering in our Beauty
Actives business.
Alban Muller’s natural active and functional ingredients create a significant growth opportunity to meetchanging consumer requirements in a skin care market that is growing 9% per year. The acquisitionis also a good example of where we expect to continue to allocate capital in consumer markets.
Alban Muller product CytokalmineTM is a natural concentrate for sensitive skin with proven soothing
and antioxidant effects. This new product, launched in 2021, is 100% naturally derived from by-productsof pomegranate food production. The production of natural active ingredients using locally sourced
by-products is a good example of how Alban Muller delivers beauty ingredients that are moresustainable than alternative products.
Christiano Lubrano, Research & Development Director at Alban Muller, said: “The integration with
Croda presents the perfect opportunity to combine our scientific botanical knowledge with Croda’s
existing expertise to create new natural ingredients for customers; both more innovative and natural.”2

Croda International Plc
Annual Report and Accounts 2021

Strategic report

Fundamentals

Climate Positive:

La

ve

ve
s it i

Climate

Po

Po
sit
i

nd

We will continue to reduce
our carbon footprint andincrease our use of bio-based
raw materials, whilst thebenefits in use of ouringredients will enable morecarbon to be saved than weemit through our operations
and supply chain.

Smart scienceto improve livesTM

People Positive:
We will apply our innovation
to increase our positive impact
on society. We are improving
the lives of our own employees
and people around the world
by developing ingredients toimprove health and wellbeing
as well as encouraging andpromoting diversity.

Land Positive:
Our products will enable moreland to be saved than is used
to grow our bio-based raw
materials. Our innovation will
help customers to protect
biodiversity and to mitigate theimpact of climate change andland degradation, increasing
the availability of land suitablefor growing crops.

Fundamentals:
Pe ople Positive

Our social licence to operate
is built on trust and is thefoundation of everything
we do. We consider all
stakeholders in our
ecosystem and strive to
adopt best practices inenvironment, labour andhuman rights, safety, ethics
and sustainable procurement.

See Sustainability

P30

Croda International Plc
Annual Report and Accounts 2021

3

Identifying unmet needs

Nick Challoner provides insight
into how our dynamic innovation model
creates disruptive technologies
Driving innovation in thecrop care market
Agriculture is responsible for approximately 20% of carbon emissions
globally, so it is not surprising that the environmental impact of the
agricultural industry is becoming a high-profile issue. While theindustry has traditionally relied on chemical fertilisers and pesticides,
the potential of biologics in crop care is now better understood.
The role of predators to control insects in greenhouses is wellestablished but micro-organisms and naturally occurring compounds
also have potential as biostimulants and biopesticides.

Nick Challoner is Group Chief Scientific Officer
We are the leading innovator in the markets in which

NC we operate, growing by creating new market andtechnology niches with our novel product and service
offerings.
By selling direct to customers and collaborating with themat our innovation centres around the globe, which arelocated close to customers, we gain a detailed insight into
their current and future challenges, enabling us to identify
new opportunities for growth.
Our innovation ecosystem is unique with our R&D advances
increasingly driven by our partnerships. These partnerships
with leading scientists in universities and SMEs enable us toaccess specialist, world class expertise and facilities. We
now have more than 500 open innovation partners working
with us on over 100 active projects at any one time.
Our partners contribute to the high proportion of New andProtected Products (NPP) we sell as well as the continued
differentiation of our portfolio. Through our strategy, we are
becoming a more knowledge-intensive company, with recent
acquisitions contributing to the strong increase in NPP that
we have seen this year.

Through Croda’s acquisition of the Incotec Seed Enhancementbusiness in 2015 and the Plant Impact Biostimulants business in
2018, we are well placed to address some of the challenges in the
adoption of biologics. These include the survival of micro-organisms
before use, compatibility with application methods and variations
in environment.
We have developed new technology, which when applied to soybean
seeds results in stimulation of shoot and root growth, and increased
yields. We are now evaluating this biostimulant in different seedapplication technologies. In collaboration with Royal Holloway
University of London, we are also further developing seedenhancement as the optimal method of microbial application. We arealso using Artificial Intelligence (AI) to address the big data challenge of
optimising biologics for specific environments.
Carola Peters (pictured, right-hand page), a research scientist at our
Incotec Seed Enhancement business in the Netherlands, said: “Overtime a larger proportion of seeds will be treated before they are sownand crops will be sprayed less.”
See Sector review: Life Sciences

P26

Together with our partners, we are developing novel
ingredients that deliver better results for our customers with areduced impact on the planet. Each project aims to either
improve the sustainability of our products, raw materials andmanufacturing processes, or create new ingredients thatdeliver sustainability benefits in use to our customers andtheir consumers. Even better if they achieve both.
For example, we work with partners to help access the latest
thinking in biotechnology, drawing on recent advances in theability to harness the biological world. Biotechnology canhelp meet growing consumer demand for more sustainable
and personalised products, and so has the potential totransform chemical industries.
One challenge is that innovation often happens in pockets,
disconnected from the real-world impact. Croda’s crosssector expertise and ability to look across industries provides
us with a unique opportunity to connect disruptive innovationin areas such as biotech with tangible business benefits.
See Key Performance Indicators for NPP metric

P45

4

Croda International Plc
Annual Report and Accounts 2021

Over time a larger proportion of seeds
will be treated before they are sownand crops will be sprayed less.
Carola Peters,
Research Scientist, Incotec Seed Enhancement

Strategic report

We increased
innovation spend
in 2021 by over

50%

Open innovation partners and initiated projects
No of partners
600

579

No of projects initiated

531
498
500

455

372

400

324
300

88%
of new products
directly contributeto our priority SDGs

265

254

226

191

200

288

188
136

129
75

100

40
0

2010-2014

2015

2016

2017

2018

2019

2020

Croda International Plc
Annual Report and Accounts 2021

2021

5

Delivering for our shareholders

Anthony Fitzpatrick and Mark Robinson discuss
inorganic opportunities and organic investment
to deliver our strategy
We complement organic investment with innovation-

AF rich acquisitions capable of delivering higher, profitable
growth under Croda’s ownership. The strength of ourperformance in 2021 reflects this consistent strategy with theprior year acquisitions of Avanti and Iberchem making asignificant contribution.

Mark Robinson is President Global Operations
With a focus on flexible manufacturing processes,

MR Croda’s operations differ from most of our peers, ensuringthat our business remains profitable and cash generativeeven in the most challenging economic conditions. In the morefavourable environment we have seen this year, we havedelivered a record performance, benefitting from significant
investment in previous years, notably in sustainability.
The demands of this rapid recovery combined with the ongoingchallenges of managing through COVID-19 created added
challenges to our operational teams. To our employees, thankyou for stepping up to the challenges and making a significant
contribution to our results and delivering for our customers.
We are reinvesting for growth, particularly disciplined organic
investment in new capacity, product innovation and attractive
geographic markets such as Asia. We are focused on
consumer and life science markets which provide theopportunity to deliver stronger and more profitable growth.

Avanti has enabled us to play an important role in the roll outof COVID-19 drugs and vaccines, something that we are very
proud of. This platform opens up significant opportunities innext generation areas such as mRNA and gene therapy.
Iberchem’s focus on higher-growth emerging markets
will drive significant value in the coming years. Integration
is progressing well and we are on track to realise theexpected revenue synergies by 2025, further enhanced by
our add-on acquisition of Parfex, a premium fragrance
business. In 2021 we also acquired Alban Muller, boosting
our natural ingredients portfolio in Beauty Actives.
In May, we announced a strategic review of our Performance
Technologies and Industrial Chemicals (PTIC) businesses todetermine the best future ownership structure. The sale weannounced in December 2021 for the majority of PTIC
provides a strong new supportive owner for its future growthand is also a significant milestone in Croda’s transition to a
dedicated life science and consumer business.
We will continue to target exciting innovation-led acquisitions
to continue our journey as a knowledge-based business, witha selective focus on Life Sciences and at the top end ofConsumer Care.

At an operational level, this means building on our position
as a sustainability leader including executing against the
decarbonisation road maps we will have in place for all of our major
sites by the end of 2022. In addition, the top priority in Life Sciences
is to scale our world-leading delivery systems for patient health.
COVID-19 has demonstrated the benefits of local manufacturing,
and we have identified new projects to build operational flexibility
and resilience in key countries such as China.
See Business model

P16

Anthony Fitzpatrick is President Corporate
Development and Performance Technologies &Industrial Chemicals

Investing in mRNAAs the core of our lipid systems capability
within the Health Care business, Avanti is
primarily focused on developing innovative
lipid-based products of unparalleled purity toaddress specific medical challenges that are
not resolved by current technology.
The lipid systems and synthesis expertise webolstered with the Avanti acquisition has
contributed approximately US$200m of sales
in 2021, primarily for our principal vaccine
customers. With over 200 lipid-based
vaccines and drugs in clinical trials, and asimilar number in research, there is a huge
opportunity for us to move to the forefront of
the biologics delivery market.
We have reinforced our market leading
position through R&D investment and6

Croda International Plc
Annual Report and Accounts 2021

innovation augmented by £60m of capital
investment since we acquired Avanti inAugust 2020. This investment expands our
GMP manufacturing and quality assessment
facilities, increasing production capacity forexisting projects and also enhancing ourinnovation pipeline for new projects.
The scale of the opportunity in future mRNAand gene therapy applications is reflected in
the market size which has grown rapidly since
the onset of COVID-19. We are investing tomaintain and enhance our first moveradvantage. Justin Martin, Development
Scientist at Avanti (pictured, right-hand page),said: “Backed by our extensive history of
supplying high quality lipids for clinical researchand small-scale commercial applications, wewere able to meet the challenges associatedwith large-scale commercial manufacture ofnovel lipid components critical to theformulation of life-saving COVID-19 vaccines.
With the onset of widespread use of lipid
system technology in future therapeutics, I am
thrilled to see what the future holds for lipids inworldwide health care.”Strategic report

Underlying sales growth versus 2019(excluding lipid systems)
25

Underlying sales growth (%)

20

23.6%

17.3%

15

Investing for future growth
Annual organic capital
investment increased by
31% in 2021 to almost

10£1.2bn50Consumer
Care

Life
Sciences

invested in acquisitions
and capacity expansion
in the last two years

£160m

£70m

invested in 2021 to scale
up manufacturing capacity
for our three patient
health care platforms

Croda International Plc
Annual Report and Accounts 2021

7

Chair’s statement
Sustainability as a strategic priority
In line with our Purpose, we have made a bold
Commitment to be the world’s most sustainablesupplier of innovative ingredients. Our focus is
now on execution, working with our suppliersand customers to ensure we are Climate, Land
and People Positive by 2030. Only by working in
partnership can we achieve our goals, and we
recognise that the strength of our relationships
with others helps drive our success and our
positive impact on the world around us. During2021, our communities also benefited from ourlongstanding volunteering programme andeducational outreach. In addition we established
the Croda Foundation, which is already helping
over 50 million people by supporting vaccine
infrastructure projects globally, extending thepositive impact we are making.

A recordyear driven
by thecommitmentof our people

Croda hasalways had aunique culture,built on customer
intimacy andinnovation withan entrepreneurial
spirit.”Anita Frew
Chair

8

Croda International Plc
Annual Report and Accounts 2021

Anita Frew
Chair
After what has continued to be anotherchallenging year for businesses around theworld, I am pleased to report that Croda hasdelivered a record performance. This reflects
strong growth in our existing business,significant benefits from recent acquisitions
and our Health Care business performing
exceptionally well.
The Croda team has met the demands of a
rapid global recovery, combined with ongoingchallenges presented by COVID-19. Customer
demand and cost inflation have been at levels
we have not seen for a decade; at the sametime COVID-19 restrictions have remained inplace in many countries around the world. Thishas presented many challenges for our people,
carefully managing both employee wellbeing
and customer expectations.
As always, our clarity of Purpose has been ourguide, ensuring we deliver for our customers,
whilst always looking after our business
partners and one another. Our success is madepossible by our people, who have risen to thechallenges the year has presented. Their hard
work, dedication and customer focus havebeen exceptional, and I want to thank all of
our employees for their contribution to a
successful year.
A Purpose-driven company
Our strategy will continue to evolve but our
Purpose – Smart science to improve livesTM –will remain constant, guiding the choices wemake. Our Purpose is illustrated by thecontribution we are making to COVID-19
vaccination programmes around the world,
supporting over 150 COVID-19 projects inmore than 30 countries. This support has often
involved considerable commitment from ourpeople, not least from colleagues on our
graduate programme who put personal lives onhold to travel to Alabama and help produce
lipid systems that continue to play such a keyrole in the fight against the pandemic.

Sustainability has been a strategic priority for
Croda over more than a decade, influencing how
we develop our business and product portfolio
and our priorities for investment. Climatechange, biodiversity loss and rising inequality are
now changing consumer demands, making
sustainability as important to consumer choice
as performance. This is providing us with
opportunities to leverage our leadership positionin sustainability, to help our customers meetthese changing consumer needs.
Board members engage regularly with our
Sustainability Committee to track progress andwere represented at the Executive review of oursustainability strategy in October (see page 65).
When reviewing progress, I am particularly
struck by the level of our employees’
engagement around this topic and theownership across Croda which will ensure we
continue to achieve our goals.
A culture where we put people first
Croda has always had a unique culture, built
on customer intimacy and innovation with anentrepreneurial spirit. Promoting this ‘One
Croda’ culture is important to our long-term
success, as it enables us to operate adecentralised model where decisions are taken
as close to the customer as possible, ensuringthat we are more agile than our competitors,
whilst delivering the governance andconsistency we expect across Croda. Our
values, which we have worked hard toarticulate over the last two years, are to be‘responsible’, ‘innovative’ and to work
‘together’. We expect managers to put people
first, irrespective of whether they are colleagues
or partners, and all of our people to look after
one another.
In 2021 we implemented an eight-point plan tosupport the wellbeing of our employees facing
the combined challenges of COVID-19 and a
rapid recovery in demand. The wellbeing andengagement of all employees is a cornerstone of
our success, and I am delighted that we havebeen able to adopt the Living Wage in 2021 forall employees. Employee share ownership
remains at impressive levels, at over 80% in the
UK and 60% internationally. We haveaugmented this with a new ‘Free Share Plan’,under which employees who do not participate
in other bonus schemes were awarded ten
shares in 2021 and will continue to receive freeshares when those schemes pay out.

Putting lives on hold to meet the COVID-19 vaccine challenge
who put their lives on hold and travelled to
Alabama for five months. Many of theseseconded employees were graduates, with arotation added to our graduate programmes.
Our people worked tirelessly, exemplifying the
Croda values, to deliver for our customers.
The immediate impact of this work is obvious,
but beyond this the experience andknowledge gained will aid their development
as they progress in their careers.
Ashlea Taylor-Hughes, pictured, a Croda
research scientist from Cheshire, UK, who
postponed her wedding due to the COVID-19
pandemic and spent time on secondment in
Alabama, said: “It was scary to come out here
for five months but, just thinking of all the goodthat it would do, I was completely up for it.”

Promoting executive and workforce diversity
At the beginning of the 2021, we published a
Board diversity and inclusion (D&I) policy andcommunicated our commitment to greater
diversity within our business. We believe thatthe diversity of our people – in terms of ideas,skills, knowledge, experience, ethnicity, genderor any other characteristic – is very important
for the continuing long-term success of theCompany. We will report annually on the
progress we are making. See pages 37 and 61
for further details.

In September 2021, Julie Kim was appointed
as a Non-Executive Director (NED), bringing 25
years’ experience of health care markets acrossEurope, Asia and Latin America. Julie is
President Plasma-Derived Therapies atTakeda Pharmaceutical, a global, R&D driven
biopharmaceuticals company. In early 2022, wewelcomed Nawal Ouzren, CEO ofbiopharmaceutical company Sensorion, to theBoard as a NED, adding further health careexpertise through her first-hand experience of
biologics and novel gene therapies.

The Board recognises the importance ofdeveloping diversity in senior management
roles and oversees the objective of achieving
gender balance in all leadership roles by 2030
and the doubling of the number of women in
leadership positions. In this year’s submission
to the Alexander Hampton review, we werepleased to report that 36% of leadership
positions were held by women. We will also
develop a target aligned to increasing thenumber of ethnically diverse employees in
executive roles by the end of 2022 and inleadership positions by the end of 2024.

Both appointments add relevant experience as
we look to access higher growth markets inhealth care, and in regions beyond Europe andNorth America, such as Asia. They also bringeven greater diversity to the Board in terms ofgender, ethnicity, nationality and tenure.
Overall, I am pleased to have fulfilled ourcommitment to meeting the requirements of theParker Review on ethnic diversity and toachieving full gender balance on the Board.

Croda has not historically collected companywide information about employee ethnicity.
However, we understand the importance of
having sufficient data to make good decisions
about D&I and how this will enable us to track
our progress. This year we conducted our firstglobal diversity survey and are using the results
to develop an action plan to drive improvements.
The results are reported in the Culture section ofthis report on page 37, where you can readmore about our approach to D&I and the work of
our global steering committee. We expect to beable to implement routine monitoring anddisclosure of employee ethnicity from 2023 for
the UK and globally from 2024.
Evolved Board composition to reflect our
ambition
This commitment to diversity applies to themakeup of the Board, ensuring it is wellequipped to lead the business effectively,
embraces new ideas and makes good use ofdifferences in experiences, backgrounds andperspectives to satisfy all the different
stakeholders we have as a global organisation.

Strategic report

Through our contribution to various COVID-19
vaccination programmes we have been able
to play our part in helping the world emerge
from the COVID-19 crisis. Our contribution
required the rapid ramp-up of lipid production
capacity in Alabama and a project to expand
production volumes that would typically take
two years was completed in a matter ofmonths. While it was Avanti’s deep knowledgeof lipid drug delivery combined with Croda’s
expertise in operational scale-up that madethe project possible, it was our people who
made it happen. Our teams worked aroundthe clock running three shifts a day to produce
the required quantities of lipids. The project
involved diverting resources from around thebusiness to support lipid production, including
employees from Croda sites in the US and UK

I am confident that the diversity of thought andexperience we have around the boardroom table
will ensure we are able to provide effective
support and guidance as Croda continues tofocus on the fast-growth markets of the future.
Despite the challenges presented by COVID-19,
as a Board we have been able to continue ourprogramme of engagement with employees
across Croda, including virtual visits to Avanti and
Iberchem, the businesses that we acquired in2020. I would like to thank all Board members fortheir support and hard work throughout 2021.
Accelerated strategic progress in atransformational year
Our agile approach and resilient businessmodel have allowed us to look beyond theimmediate COVID-19 pandemic, with the Board
and Executive Committee working together on
our strategy driving sustainability and innovation
to deliver growth.
In December 2021, we announced the sale ofthe majority of our Performance Technologies
and Industrial Chemicals businesses to Cargill,
the largest private company in the United States.
This divestment, due to complete in Summer
2022, will progress Croda’s transition to apure-play Consumer Care and Life Sciencescompany, markets in which we can deliver on
our Purpose of using Smart science to improve
livesTM. As Steve Foots, our Group Chief
Executive, outlines further in his review on page10, this focus on Consumer Care and Life
Sciences will enable us to deliver consistentsales growth and an even stronger profit margin.
We committed to communicating openly withthe employees of our Performance
Technologies and Industrial Chemicals
businesses during the strategic review,recognising that it was a period of uncertainty.
Cargill is a company with a distinguished history
and I am confident that our employees can lookforward to a bright future under its ownership.
Committed to generating value for all
stakeholders
The divestment will allow us to focus ourresources on delivering sustainable solutions
and scaling our consumer, health and cropcare technologies. We have a clear capital
allocation policy, with a focus on organic
investment, given the exciting growth
opportunities we see in the future in thesemarkets. We will also provide regular returns toshareholders, invest in complementaryacquisitions and retain our balance sheet
strength. The Board is proposing a full year
dividend for 2021 of 100 pence per share,
representing growth of 10% over 2020, a year
in which we were one of the few companies tocontinue to increase the dividend as we
managed the impact of COVID-19.
2021 has been an excellent year for Croda inwhich we have delivered a record financial
performance and strong progress against our
non-financial targets. We are becoming a
dedicated Consumer Care and Life Sciencescompany where our leadership in sustainability
and innovation will deliver further profitable
growth. With our clear Purpose, strong culture
and committed workforce, we look forward to
the future with confidence.

Anita Frew
Chair
Croda International Plc
Annual Report and Accounts 2021

9

Chief Executive’s review
Care. Alongside this, we realised significant benefits
from recent acquisitions in Consumer Care and Life
Sciences, delivering £58m of additional adjusted
operating profit within the first year post-acquisition.
Our 2020 acquisition of Avanti has helped toestablish the lipid systems platform in Health Care,with approximately US$200m of sales in 2021,
primarily to our principal vaccine customers. We
deployed more capital and resources to scale ourconsumer, health and crop care technologies. We
increased innovation spend by over 50% on 2020
and the proportion of New and Protected Products(NPP) from 27% to 37% of total sales. We
increased annual organic capital investment by
31% to almost £160m; reflecting our successful‘buy and build’ approach. This has allowed us tounlock the potential of Avanti and Iberchem,
acquiring adjacent technology platforms and thenscaling them through organic investment.

Recordfinancialperformance– strategy
executed withagility

1
2

Record financial performance

Significant benefit from recent
acquisitions – £58m additional operating
profit and stronger growth platform

3

Strategic transition to pure-play
Consumer Care and Life Sciencescompany with accelerated investment

Steve Foots
Group Chief Executive
Creating a pure-play Consumer Care andLife Sciences company
2021 has been an outstanding year for Croda,with record financial results and excellent strategic
progress. This has been enabled through theaccelerated implementation of our strategic
priorities, increased investment in innovation andgrowth, and a broader global recovery in demand.
Our excellent strategic progress during the
COVID-19 pandemic has included progressing ourtransition to a pure-play Consumer Care and Life
Sciences company. Our 2020 acquisitions of Avantiand Iberchem, which created new growth platforms
in our target markets, have been followed by ourrecent agreement to divest the majority of our
Performance Technologies and Industrial
Chemicals businesses (‘PTIC’). This will release
more capital to reinvest in faster growth, higher
return markets, positioning us to deliver moreconsistent sales growth and an even stronger profit
margin.
This strategic progress is consistent with our
Purpose of using Smart science to improve livesTM.
The importance of our sustainability Commitment,
made in 2020, has come to the fore, with
consumers everywhere seeking more sustainableproducts and customers needing Croda to help
decarbonise their supply chains. Our part in helping
produce COVID-19 vaccines is a proud example ofour smart science in action. Our capabilities insustainability and innovation will drive our future
growth. Croda is becoming a more knowledge
intensive business, investing more incommercialising R&D, expanding emerging market
exposure and increasing the value captured fromour products. We are focused on the fast growthmarkets of the future, making bigger and bolder
bets to expand our leadership positions and drive
significant value creation.
The results of this strategic action can be seen in
2021’s performance. It was a record year for sales
and profit, with every part of the Group performing
well. The strength of the ‘existing’ Croda business
was clearly demonstrated, with underlying sales
growing by 26% and underlying growth in adjusted
operating profit of £116m over 2020. Consumer
Care led the way, with a strong recovery in Personal

10

Croda International Plc
Annual Report and Accounts 2021

To deliver these record results, our colleagues haverisen to the dual challenges of responding to a rapid
recovery in customer demand whilst managing
ongoing COVID-19 restrictions. Combined with
global disruption affecting many industries, supply
chain management has been challenging but,thanks to the efforts of our global team, we havemanaged to supply the increased demand whilst
limiting the impact on customer service. I am
proud that we have continued to support our
stakeholders and keep our colleagues safe, andI would like to thank everyone at Croda for
their commitment.

Record financial results
In 2021, reported sales grew by 36% to £1,889.6m(2020: £1,390.3m). Underlying sales were up 26%
and acquisitions added 17% (both at constantcurrency), while stronger Sterling saw an adverse
impact from currency translation of 7%. Notably,
underlying sales were 18% ahead of 2019(excluding sales of lipid systems introduced since2019, for better comparability), demonstrating
significant growth against pre-pandemic levels.
2021 also saw the most significant period of raw
material cost increases in over a decade, up by
17% in the underlying business. With full cost
recovery achieved through Croda’s powerfuloperating model, alongside a strengthening productmix, this helped drive underlying sales price/mix
17% higher year-on-year. Despite higher prices,most markets globally saw strong demand
recovery, and underlying sales volume rose 9%.
Strong demand and the faster growth of higher
value-add technology platforms across Life
Sciences and Consumer Care resulted in a record
profit margin for the Group. Return on sales rose
180 basis points to 24.8% (2020: 23.0%). In Life
Sciences, the highest growth was in the patient
health care platforms, which increasingly focus on
producing high value products. Personal Carereturned to good growth within the Consumer Caresector and a recovery in Performance Technologies
markets benefitted operating leverage. The
combination of sales growth, acquisition andimproved margin saw reported profit before tax (onan IFRS basis) increase by 53% to £411.5m(2020: £269.5m), while adjusted profit before tax
increased by 48% to a record full year result of£445.2m (2020: £300.6m) and was 38% higher
than 2019. With adjusted earnings per share 43%
higher, the Board has proposed a rise of 10% in thefull year ordinary dividend, completing a 30-yearrecord of consistently increasing the annual
ordinary dividend.
Cash generation in 2021 supported an increase inworking capital, reflecting the higher costs of raw
materials and a tactical increase in inventory toReported sales (2021)

See Finance review

P46

support customer service levels, and an increased
allocation of capital investment to the strategic
growth markets of Consumer Care and Life
Sciences, as part of the divestment of the majorityof PTIC. Health Care is a key investment focus forus, with over £70m invested to expand our threepatient health care platforms, including new
capacity for speciality excipients in therapeutic drugdelivery, further build out of the lipid systems
platform and expansion of the fast growing vaccine
adjuvant platform.
We also committed funding to create a new
combined fragrance and Beauty Active facility for
Consumer Care, to accelerate sales growth inChina, and a new proteins capability in Home Care.
In R&D, we invested £5m in expanding innovation
centres and in disruptive process technologies. We
supplemented this organic investment with theacquisition of adjacent technologies, acquiring two
businesses in Consumer Care which areaccelerating our transition to natural raw materials.
In March, we acquired natural Beauty Actives
specialist Alban Muller for €25m and in June wecompleted on Parfex for €45m, strengthening
Iberchem’s position in fine and natural fragrances.

Growth across all regions and sectors
All geographic regions delivered good sales andprofit growth. Consumer recovery was strongest in
North America, with Asia and Europe also seeing
double digit percentage growth in underlying
Consumer Care sales. Latin America saw excellent
Crop Care sales and all regional markets saw good
progress in Performance Technologies. Health Caresales grew across the globe, with Europe andNorth America benefitting from the lipid systems
platform.
A stronger Consumer Care business
2021 saw the creation of the Consumer Caresector, comprising Croda’s leading global positionin Personal Care, the recently acquired Iberchem
fragrances and flavours (F&F) business and Home
Care. Consumer Care delivered an excellent sales
performance in 2021, up 45% in reported terms,
with underlying sales 18% higher. This was
supplemented by 35% growth from acquisitions
and partly offset by adverse currency translation of
8%. Adjusted operating profit increased by 29%(and by 26% on an IFRS basis), with return on salesof 24.7% (2020: 27.8%); the latter reduction
reflected dilution from the acquisition of Iberchem,with F&F industry margins structurally lower thanthose of Personal Care. A strengthening productmix overall saw profit margin improve in the second
half year.

In Consumer Care, we are already recognised as
the leading innovator in ingredients for the personalcare and home care markets. Our acquisition of
Iberchem has given us a similar platform in F&F,
with innovation at the heart of its business, offering
customers on-trend fragrances, particularly for
emerging markets. We are delivering the firstcross-selling synergies from Croda’s global
presence, including the launch of Iberchem
fragrances into the large Brazil market, leveraging
Croda’s local operation. With lower vaccination
rates, emerging markets have seen softer demand
due to COVID-19, which has constrained sales inthe short term, but the F&F business still delivered
double digit percentage growth in 2021, including
the mid-year acquisition of Parfex.

Rapid expansion in Life Sciences
With an excellent 2021 performance, Life Sciences
now rivals Consumer Care in scale. Sales grew
46% in reported terms in 2021, with underlying
sales over 40% higher. This was supplemented byover 13% growth from acquisition in the first year ofownership and was partly offset by adverse
currency translation of 8%. Adjusted operating profit
increased by 67% (and by 79% on an IFRS basis),with return on sales reaching 36.4% (2020: 31.7%).
As noted at the half year, achieving this level ofgrowth and profit improvement in such a shortperiod placed significant demands on the business
and, as anticipated, the margin level moderated in
the second half of the year, as we invested inadditional people and brought new capacity
on-stream to future-proof this growth.
Life Sciences is leveraging in-house developed andacquired technologies, building further scale todeliver customers’ drug, vaccine and crop science
products. It is moving into faster growth, higher
value/lower volume niches. In 2021, the strongest
growth was seen in the Health Care business, with
reported sales up 80% year-on-year. This was
driven by our focus on patient health care platforms.
Whilst much of this growth was delivered by Avanti
and the scale-up of its exciting lipid systems
platform by Croda’s UK Health Care site, resulting
in around US$200m (£145m) of sales to
COVID-19 mRNA vaccines, speciality excipientsand vaccine adjuvants also grew by over 40%. With

continued investment in these platforms, double digit
percentage organic sales growth is expected tocontinue into the medium term.
Our Health Care business has had outstanding early
success with its involvement in COVID-19 vaccines,
but even more importantly, we have built afoundation for Croda in biopharma drug delivery.
Whilst the majority of lipid system sales in 2021 wereto our principal COVID-19 vaccine customers,
opportunities in other drug and vaccine customer
projects continue to develop. Across our threepatient health platforms, we secured 130 new
customers and 250 new programmes, two thirds ofwhich were for non-COVID applications, including
nucleic acid therapeutic drugs and vaccines (such asmRNA). We expect to see an ongoing expansion in
the range of applications for lipid systems in vaccines
and therapeutic drugs, as this exciting Health Caretechnology develops through clinical trials tocommercial customer product launches in themedium term.
Crop Protection delivered double-digit percentage
sales growth, reflecting strong demand across cropscience customers, particularly in the second half ofthe year. This included significant growth in sales to
non-tier one customers who now represent morethan 50% of revenue. By contrast, Seed
Enhancement growth was subdued, with slower
sales in Europe and China.

A new future for Performance Technologies
The recovery of Performance Technologies
strengthened during 2021, with sales growthreflecting a recovery in industrial end markets andsustainability-driven demand across our innovative
product applications. Sales grew 18% in reported
terms, with underlying sales 24% higher, partly offset
by adverse currency translation of 6%. Adjusted
operating profit increased by 32% (and by 38% on
an IFRS basis), with return on sales improving to
14.7% (2020: 13.1%), as higher sales volume
positively impacted operating leverage. Second half
margin was notably stronger than the prior year.
In December 2021, we agreed to sell the majority of
the PTIC businesses to Cargill Inc., for an enterprisevalue of €915m (approximately £778m). The businessto be divested accounted for 77% of PTIC’s 2021
reported sales and comprises five manufacturing
facilities, together with associated laboratory facilities
and sales operations. We are currently working on
the process to separate the two businesses, withcompletion expected in summer 2022. The
consideration includes the sale of 100% of Croda
Sipo in China, a joint venture which Croda currently
manages and in which it has a 65% shareholding. If
Croda’s 100% ownership of Sipo cannot be realised,
Sipo will be excluded from the PTIC sale, reducing
the consideration by €140m. The overall divestment
is subject to customary regulatory approvals but is
not subject to shareholder approval. Under Cargill’sownership, the divested business and its talented
workforce can look forward to a bright future.
Croda’s retained business within PTIC, which
accounted for 23% of 2021 sales, will form a new
Industrial Specialties sector. This will play a key role
supporting the Consumer Care and Life Sciences
sectors. The divestment is a key step in delivering
Croda’s transition to a pure-play Consumer Careand Life Sciences company.

We use a number of Alternative Performance Measures (APMs) to assist in presenting information in an easily analysable and comparable form. We use such measuresconsistently at the half year and full year and reconcile them as appropriate. Adjusted results are stated before exceptional items and amortisation of intangible assets
arising on acquisition, and tax thereon. Constant currency results reflect current year performance for existing business translated at the prior year’s average exchange
rates and include the impact of acquisitions. Underlying results reflect constant currency values adjusted to exclude the impact of acquisitions and disposals in the firstyear of ownership. All comparators are full year 2020 unless otherwise stated. Sector results for full year 2020 have been restated to reflect a 2021 change to the Group’sreporting structure.
Croda International Plc
Annual Report and Accounts 2021

11

Strategic report+36%

After a steady recovery in the second half of 2020
from the negative impact of COVID-19 on ‘goingout’ sales of actives and cosmetics, Personal Careperformance improved markedly in 2021. This was
led by a resurgence in consumer demand for ourinnovative, high value Beauty Actives products. In
previous years, Personal Care performance has
been held back by softer growth in our heritage
Beauty Care formulation ingredients, particularly inNorth America and Asia. Beauty Care enjoyed areturn to growth in 2021, benefitting from customer
restocking and innovative sustainability-driven
ingredients, including bio-based surfactants fromthe US plant, which was fully operational from theend of the first quarter. Improved demand
continued through the year, resulting in 2021
Personal Care underlying sales 15% above 2019pre-pandemic levels and a return on sales of 30%.
Growth continued in Home Care, reflecting
customer interest for sustainable products from our
US ECO plant and excellent demand for Croda’s
innovative fabric care offering.

Chief Executive’s review (continued)
Strategy: driving growth throughsustainability and innovation
As a result of the strategic moves that we havemade over the last 18 months, including theacquisitions of Avanti and Iberchem, and theagreement to divest the majority of our industrial
businesses, Croda is now becoming a pure-playbusiness, focused on life science and consumer
markets. These markets have reduced cyclicality,
are faster growth, deliver high margins, are capitaland carbon light, and leverage innovation, IP and
new technologies.
In focusing on these markets, Croda is combining
leadership in sustainability with market-leading
innovation to deliver profitable growth. Sustainability
trends are developing rapidly in these markets,driven by consumer demand for products which do
not harm the planet and meet growing trends forclean, bio-based solutions. In addition, ourcustomers have set their own sustainability goals
and need Croda, as part of their supply chains, todeliver products created through sustainable
ingredients, ethical sourcing, greater ingredienttransparency and lower-carbon manufacturing.
Regulatory change is also driving companies tomove to net zero and Croda has responded bydeveloping clear manufacturing decarbonisationplans during 2021.
Our innovation ecosystem sees R&D driven byincreased organic investment and highly productive
external innovation partnerships. We are increasing
the proportion of NPP that we sell and formulate
into customer products. This dynamic innovationengine enables us to both create new market
niches through our novel product offerings andwin business in existing markets by providing
sustainable alternatives to incumbent petrochemical
supply. Through innovation, we deliver our
strategic objective of consistent top and bottom
line growth, with profit growing ahead of sales,ahead of volume.

Delivering our sustainability Commitment
Croda was built on a heritage of using science toturn renewable raw materials into innovative
ingredients. Today, our Purpose is to use Smartscience to improve livesTM. We have made a bold
Commitment to be the world’s most sustainablesupplier of innovative ingredients. This is both theright thing to do and also what our customers andconsumers are seeking. Accelerating the transition
to sustainable ingredients makes clear commercial,
as well as ethical, sense. Our focus is now on

Croda iscombiningleadership insustainability withmarket-leading
innovation todeliver profitable
growth.”12

Croda International Plc
Annual Report and Accounts 2021

execution, working in partnership with our suppliersand customers to achieve our Commitment to be
Climate, Land and People Positive by 2030.
On our journey to becoming Climate Positive, in
2021 we became only the third chemical company
globally to have our 1.5°C target verified by the
Science Based Targets initiative (SBTi). This
commits us to delivering improvements in line withthe objective to limit global temperature rises to no
more than 1.5°C above pre-industrial levels, themost ambitious SBTi pathway. We are supporting
our site decarbonisation roadmaps throughinvestment within our existing capital budget and byconsidering opportunities to decarbonise with every
capital investment decision. The divestment of the
majority of PTIC will make Croda less carbon
intensive and we will re-baseline our Climate targets
to maintain the challenge we have set. PTIC hassignificant use of bio-based organic raw materials
and the divestment will reduce the Group’s
proportion of bio-based organic raw materials from
69% in 2021 (2020: 67%) to around 52%
post-divestment, but we will retain our bio-basedtarget of 75% by 2030.
In becoming Land Positive, the land saved using
our crop care technologies will exceed any increasein the land used to grow our raw materials by atleast double. We are also developing Nature
Positive targets ready for when the futurescience-based target for nature is published.
In our People Positive objective, we focus on using
our smart science to improve lives globally, support
our communities and improve the experience of thepeople we employ. 2021 saw the Health Carebusiness contribute to the development of 15 of
the 24 vaccines prioritised by the World HealthOrganisation, including new projects for HIV andEbola vaccines. To help our communities, in 2021
we established the Croda Foundation, providing£1m of annual funding. In addition, to reflect the
progress made in our Health Care business, wemade an extra funding award of £2m in 2021, to
improve vaccine and health infrastructure. The firstprojects funded will help deliver vaccinations toover 50 million people by supporting infrastructure
and training in India, Brazil and Uganda. Finally,in delivering our employee objectives, we arefocused on improving inclusion and diversity,achieving both the Board gender and ethnic
diversity targets of the Hampton-Alexander andParker Reviews by the start of 2022, whilst making
good progress in improving diversity and inclusion
within the business.
Supporting our Climate, Land and People Positive
strategy are our Fundamental objectives. We arecommitted to being a safe company for our
employees and communities. With the inclusion ofrecent acquisitions into Group metrics, the Total
Recordable Injury Rate (‘TRIR’) rose to 0.73,
excluding COVID-19 cases (2020 full year: 0.58).
83 of our 105 locations had no recordable injuries
during 2021 and we are working on the remainder
to deliver our targeted improvement to 0.3 by 2025,
which would place us towards the leading
performance in our industry. During the year we
also adopted an enhanced approach to process
safety aligned with SASB standards for our industry,targeting a 20% reduction in the incident rateby 2025.

Driving innovation
In line with repositioning as a more knowledgeintensive company, NPP as a percentage of sales
increased from 27% in 2020 to 28% in 2021

organically and 37% including lipid systems and the
Iberchem and Avanti acquisitions. This significant
step forward will support higher growth, improved
product mix and better margins. The divestment of
the majority of PTIC will further enhance ourknowledge intensity.
Our innovation strategy combines internal R&D withexternal technology investments and partnerships,
augmenting Croda’s innovation centres globallywith a network of over 500 academic and SME
partners, working on more than 100 innovation
projects. In 2021, we commenced a multi-million
pound project to introduce artificial intelligence anddata mining across our global R&D knowledge
base and improve collaboration within ourinnovation ecosystem.
Innovation is focused on sustainability and, inparticular, biotechnology, which will enhance thesustainability of our processes, contributing to theachievement of our target for bio-based raw
materials whilst developing disruptive technologies.
Our Beauty Actives business has augmented its
product synthesis with 50 biotech productlaunches. Our biotech expertise also leverages
previous technology acquisitions, such as Enza andNautilus, and 2021 saw investment in a new centre
for biotech process design and optimisation in the
UK. With innovation operating expenditure up over
50% in 2021, we are expanding the pipeline of newopportunities.

Sector strategies to deliver growth and evenstronger profit margins
With the divestment of the majority of PTIC, Croda
will be a Purpose-driven company focused on two
attractive sectors that will deliver consistent sales
growth and even stronger profit margin. Each of thetwo sectors comprises four businesses, all offeringsuperior sales growth, at least one and a half times
GDP. Each can deliver margins above 20% andreturn on invested capital (ROIC) of at least twice
our cost of capital. We will target an expanded
organic capital investment programme to accessfaster growth, supported by selective acquisitions ofadjacent technologies.
Consumer Care is already recognised as theleading innovator in ingredients and fragrances forthe personal care and home care markets. Our
future vision is to be the global leader in sustainable
solutions in these premium markets. This will beachieved by delivering sustainable ingredients,
supported by performance data and ingredienttransparency, and by being the leader in productformulation and application technologies.
Consumer Care is focused on high value niches in
the faster growing markets of skin care, hair care,solar protection, fabric and surface care, andfragrances. Our strategy is to Strengthen to Grow
Consumer Care, to deliver mid-single digit
percentage sales growth at strong margins. This will
be delivered by developing more sustainable
ingredients; leveraging our capability to deliver
formulation solutions; by driving innovation inpremium markets, with Croda providing a ‘one stop
shop’ to ‘Indie’ customers; and by expanding ourpresence in high growth regions, with increased
investment in China, expected to drive 70% of
Asian growth between 2021 and 2025.
Within Consumer Care’s four businesses, thisstrategy is being achieved by:• Scaling our market leadership in Beauty
Actives in peptides, botanicals andbiotechnology, expanding our geographic
footprint and leveraging selective acquisitions;Amplifying our positive impact by funding the Croda Foundation
This year we have taken a big step towards achieving our ambition of expanding the reachof our smart science to permanently improve more lives by funding the Croda Foundation.

The Foundation also distributed grants specifically focused on health infrastructure projects,
improving access to vaccines, and tackling vaccine hesitancy in India, Uganda and Brazil.
By funding the Croda Foundation, we are making a bigger impact on communities acrossthe world.
Rommel Moseley, Executive Director Croda Foundation, said: “The Foundation has been
established on Croda’s firm commitment to be People Positive by 2030. Our priority areas
approved by our trustees are to improve health and wellbeing, reduce hunger and poverty,
and protect and restore forest and ecosystems.”
To read more about the Croda Foundation see our 2021 Sustainability Report

P33• Strengthening Beauty Care, with sustainableeffect ingredients and a full service
formulation capability, supported byingredient data to underpin our customers’
product claims;• Unlocking the potential of F&F, by driving thebenefits of integration synergies throughexpanding Croda’s presence in emerging
markets and providing Iberchem with accessto Croda’s developed market presence, suchas the US and Brazil, while supporting
one-stop-shop formulations which combine
high performance Croda ingredients with
Iberchem’s on-trend fragrances anddeveloping more natural fragrances; and• Accelerating Home Care in sustainablecleaning, fabric care technologies andsensory benefits.

the next decade. Our strategy is to identify
and acquire new platforms, and grow them
organically with rapid, agile investment;• Continuing to grow in Consumer andVeterinary Health, through oral care, topicalapplication and animal health solutions;• Innovating in Crop Protection. We aredeveloping an industry-leading range of low
carbon, bio-based and biodegradable
delivery systems, alongside systems for next
generation biopesticide delivery and crop
nutrition, as the world reduces its
dependence on chemical solutions; and• Creating long-term partnerships in Seed
Enhancement. This includes providing seedcoatings and pellets that are free frommicro-plastics and developing technologies tostimulate plant growth.

Life Sciences is today well established as a leading
supplier of delivery systems to pharmaceutical andcrop science customers through high quality
ingredients and unique purification and synthesis
know-how. Our future vision is to become theglobal leader in biopharma drug delivery in HealthCare, alongside our leadership in sustainable
delivery systems for Crop Care. This will beachieved by delivering solutions and systems tocustomers; leveraging our leadership in synthesis,
formulation and application technology know-how;
expanding sustainable technology platforms;
and increasing our expertise in complex
formulation systems.

Deploying capital
Our transition to a pure-play Consumer Care andLife Sciences company will allow us to deploy
capital into the rich seam of growth opportunities inthese markets, whilst maintaining our discipline ofcareful capital allocation to projects which generate
superior returns on capital. This will allow us tocontinue to scale our consumer, health and cropcare technologies and deliver consistent sales
growth and an even stronger profit margin. Ourpriority is organic capital expenditure to takeadvantage of the significant growth opportunities
available in higher returning life science andconsumer markets. This will be supplemented by
selective acquisition of disruptive technologies inexisting and adjacent markets to accelerate
strategic delivery.

Our strategy is to Expand to Grow Life Sciences todeliver high single digit percentage sales growthwith a strong return on sales. Within the four Life
Sciences businesses, this strategy is being
achieved by:• Expanding our platforms in Patient Health.
Our established speciality excipient platform
provides high purity delivery systems fortherapeutic drug applications, such as
oncology, and is growing rapidly, providing
the excipients of choice for the newest
biologic drug innovations. To this we haveadded two new platforms – vaccine
adjuvants in 2018, providing the important
accelerator to a range of new global
vaccines; and lipid systems in 2020, thepreferred solution for the developing scienceof nucleic acid delivery (e.g. mRNA), which is
expected to revolutionise medical delivery in

We are unlocking the value of £1.2bn of investmentin the last two years in acquisitions and capacity
expansion. Our preferred approach is to ‘buy andbuild’, as exemplified by our investment in Life
Sciences since 2015, where we have secured newtechnology platforms and know-how throughmodest acquisition spends, such as Incotec seedenhancement, Biosector vaccine adjuvants andAvanti lipid systems, then built scale throughorganic investment.
In Life Sciences, drug delivery offers a significant
growth opportunity, much of which can now bedelivered through organic investment, although wewill continue to look for additional delivery
technologies to complement our three successful
platforms. In addition to over £70m invested in
2021, we have committed a similar amount in

future capital expenditure to reinforce our leading
position in drug and vaccine systems. This
investment programme will include expanding ourlipid systems capability in the US and UK.
In Consumer Care, our investment focuses on
expanding sustainable technologies, such as mild
surfactants and innovative proteins for clothes care,to meet developing customer demand. We will also
invest in increasing geographic coverage,
particularly in fast growth markets, such as Asia.
The sector will also benefit from investment inbiotechnology and decarbonisation. This willcontinue to be supplemented by careful acquisitionof adjacent technology bolt-ons, particularly thosewhich can accelerate our transition to greater use ofnatural raw materials, an important differentiator in
consumer markets.

Outlook
Growth is expected to continue in 2022 in linewith our medium-term expectations. This should
be supported by robust consumer demand,inflation cost recovery and the benefit of our recent
investments more than offsetting moderation incustomer restocking. Lipid systems sales are
expected to be at a similar level to 2021. With anincreasing proportion of sales coming from higher
value add solutions, profit margins in Consumer
Care and Life Sciences are expected toremain strong.
The combination of our differentiated businessmodel, healthy innovation pipeline and current
investment programme are expected to underpin
performance and continue to generate value for all
our stakeholders.

Steve Foots
Group Chief Executive
The Strategic Report was approved by the
Board on 28 February 2022 and signed on
its behalf by Steve Foots.

Croda International Plc
Annual Report and Accounts 2021

13

Strategic report

As part of its charitable remit, the independent Foundation issues grants for criticalprojects to support livelihoods and communities. Initial projects funded by the Foundation
are benefitting people in the US facing food insecurity, supporting vulnerable mothers in
Kenya, and unemployed, blind and partially sighted people in South Africa, who are being
trained as food tasters to enable them to participate in the local economy.

Market themes

The megatrends shaping our markets
Of the megatrends which will drive growth across Croda,
three common themes are sustainability, emerging markets
and digital.

Industry trends

Sustainability

Opportunity for Croda• Climate change, biodiversity loss and risinginequality are changing consumer demands,
making sustainability as big a driver of consumer
choice as performance.
• This is reflected in broader and stricter regulations,increasing barriers to entry.
• The chemicals industry is acknowledged to be‘hard to decarbonise’, with its reliance on
petrochemical raw materials and heat-intensive
operations.

• Leverage our leadership positions in renewable
raw materials and biotechnology, as well as ourasset-light operations and investment insustainability over many decades, to meetchanging consumer demands.
• Create new market niches through novel andsustainable product offerings.
• Win market share by providing sustainable
alternatives to ingredients manufactured byincumbent suppliers.

Emerging
markets• Growing consumption and an expanding middle
class in emerging markets is increasing demandfor consumer goods and health care.
• Three quarters of the world’s food is also
produced by developing countries, with crop landarea increasing quickly, putting more pressure on
resources.
• Market structures are still developing in many ofthese countries.

• Focus investment on faster growth markets
outside of North America and Europe, suchas China which is forecast to be the fastest
growing consumer market 2021-2025.
• Leverage our global footprint and direct sellingmodel to help smaller, regional customers get
to market quickly.
• Put a particular emphasis on governance,sustainability and business ethics indeveloping markets.

Digital• 60% of the world’s population is connected to theinternet and regularly use social media, disrupting
many industries.
• Digital is accelerating the speed at which new
trends are adopted and lowering the barriers toentry for our customers.
• Consumers want to know more about the
products they use and the companies theypurchase from.

• Leverage our position as a responsible,
purpose-driven company by being transparent
with the information that we share.
• Capitalise on the opportunities digital creates
to be a more sustainable, innovative andcustomer-driven company.
• Engage directly with people anywhere,
particularly new, digitally enabled customers.

See Our strategy

P20

14

Croda International Plc
Annual Report and Accounts 2021

Leveraging expertise in sunscreens for Asian markets

To meet the needs of consumers in different regions of the world we are adapting our formulations for different skin types, skin tones andconsumer preferences. For example, R&D teams across Asia worked collaboratively to optimise our sunscreen ingredients for consumers in the
Asian market. Detailed market evaluation identified demand for a sunscreen offering a high level of protection with a translucent-to-transparent
finish and no white smearing.
The sensory evaluation and data analysis undertaken provided insights that enabled our R&D teams to develop ingredients that have seen highlevels of interest from customers across Asian markets.
Dr. Jasmine Leong, Technology Development Manager, said: “Croda has its own group of sensory experts who can characterise cosmetics
products with precision and reproducibility. Our expertise within sun care has allowed us to understand the sensory behaviour and consumer
expectations, thereby helping the formulators in optimising the product.”

Consumer Care response• We have established Consumer
Care as a sustainability-driven
sector to meet consumer demands
for products that are ‘green’,‘clean’ and ‘conscious’.
• We are differentiated by scienceand sustainability, providing
ingredients that are the mosteffective and the most sustainable.

• We ‘think global’ and ‘act local’.
• We are enhancing our people,
technical, and manufacturing
capabilities in China and othercountries in North Asia.
• We are leveraging Iberchem’s
network of 3,000 customers, morethan 80% of whom are outside
Europe and North America.

Life Sciences response• We are the leading innovator for delivery
systems in Life Sciences, providing targeted
solutions that help customers meet theirsustainability challenges.
• We have added seed enhancement andbiostimulants to our crop care capabilities, inrecognition that in future, more seeds will betreated before they are sown and fewer
chemicals will be applied to growing crops.
• To improve the health and wellbeing of
consumers, we are expanding ourtechnology platforms, enabling the effective
delivery of vaccines and next-generation
therapeutics.

• We are growing our Crop Care business in
Latin America, Asia and the Middle East, andexpanding our reach to smaller customers
beyond the major crop science companies.
• Asia is a priority for our Health Care businesswith new product registrations in China
complemented by strengthened regulatory
support to accelerate approvals; Japan,
Korea and India are also a focus forinvestment.

• Our R&D teams are adopting digital knowledge management, enabling enhanced use ofdata science and faster innovation.
• Our operations teams are adopting AI; for example, our Seed Enhancement business has
used AI to improve the quality of high-value tomato seeds.
• Our sales and marketing teams are utilising digital communication tools, such as Live Chatand new websites specifically written for Chinese customers, to connect directly withcustomers in particular market segments, such as pharmaceutical researchers andindependent brands.

Sandra Breene,
President Regional
Delivery:
Our focus in 2021 has been to listen moreclosely to the voice of our customer; wedeveloped a comprehensive survey which has
been rolled out globally to understand the things
that are of most importance to our customers
and how we are performing against them.
Sustainability makes strong commercial sense
for our customers. As consumers become
more educated about the impact of their
behaviour on the wider environment, they arelooking to make choices in the products thatthey buy so that they can make a positive
contribution to living more sustainably.
Consumer requirements differ country-bycountry and whilst emerging markets arerecovering more slowly from COVID-19, they
are increasingly setting new trends. They
offer higher growth rates over the medium
term, particularly in Asia where China’s
personal care market is growing 9% a year.
We tailor our offering to those differing needsby listening to our customers wherever
they are.
Almost all customers have experienced huge
growth in digital sales during the COVID-19
pandemic, accelerating trends we werealready seeing in our markets. Digital is a huge
disruptor and our digital strategy focuses on
R&D and production as well as sales &marketing, helping us bring innovation tomarket faster and in a more targeted way.

Croda International Plc
Annual Report and Accounts 2021

15

Strategic report

There are over three million cases of skin cancer globally each year, responsible for tens of thousands of deaths. Our range of sunscreens meeta clear need and are an important pillar of our sustainability Commitment to be People Positive by 2030. Our capability is in mineral inorganic
sunscreen filters that are the natural choice, certified by regulators, and are coral safe – a key concern with organic sunscreens that currently
dominate the market and can be destructive to coral reefs in the oceans.

Business model

Our business model
Using smart science to create high performance
ingredients and technologies that improve lives.

1

2

Who we rely on

What we do

37%

Innovation partners

Our innovation model combines internal R&D withexternal technology investments and partnerships,
NPP as aproviding opportunities to collaborate with% of total sales
universities and SMEs. This innovation ecosystem(2020: 27%)
is unique, with R&D advances increasingly driven
by these partnerships. Our partners contribute to
the high proportion of NPP we sell and thecontinued differentiation of our portfolio. In return,new open innovation our shared knowledge helps them to advanceprojects initiatedscience, secure funding and make breakthroughsthat benefit society.

36

84%

Employees

We have a growing global employee base with
UK employee share more than a quarter of employees now located inscheme participation Asia serving faster-growth markets. Recent
acquisitions have increased the proportion of(2020: 85%)
people in science-based roles. Improving
workforce diversity is benefitting innovation by
expanding the range of thinking in our company.
Our model is decentralised, facilitating faster
Non-UK employee
decision-making delegated to colleagues who areshare scheme
close to customers. Our clear sense of Purpose
participationand sustainability Commitment, underpinned by(2020: 63%)high levels of employee share ownership, ensuresthat everyone pulls together to achieve our goals.
This is reflected in strong engagement and highemployee retention rates.
Voluntary employee
turnover(2020: 5%)

60%

8%

Suppliers
Suppliers
representing

65%

of our spend havebeen evaluated fortheir responsible
practices(2020: 50%)

16

Most of Croda’s organic raw materials arebio-based (originating primarily from palm
derivatives, corn, castor, rapeseed, coconut andsunflower oils), enabling us to provide alternatives
to fossil-based ingredients. Using natural
resources brings with it responsibility to ensure
there are no negative societal or environmental
impacts as well as ensuring security of supply. We
partner with suppliers to improve sustainability
practices in supply chains and commit to sharing
the benefits equitably.

Croda International Plc
Annual Report and Accounts 2021

We use smart science to create high performance
ingredients and technologies that improve lives. Ouringredients deliver vital functionality to customers at
low inclusion levels, giving us strong pricing power
and allowing us to prioritise profit growth, ahead ofsales, ahead of volume. We operate globally and arefocused on high-value niches in life science andconsumer markets.

CreateEngageLeveraging our position as theleading innovator in our selectedmarkets, we meet consumer
needs by continuously expanding
our portfolio of 6,000 sustainable
and innovative ingredients,
supported by claims validation,
quality testing, sustainability data
and regulatory insight.

By building direct relationships
with customers, rather than using
distributors, and collaboratingwith them at Croda innovation
centres around the world, we gaina detailed understanding of theirneeds helping us to identify
new opportunities.

Make

Sell

We use resources safely andresponsibly at our manufacturing
sites around the globe, runningflexible operations that have alower capital intensity than mostchemical sector peers.

We have a unique direct sellingmodel encompassing local sales,
technical resource andwarehousing, selling ingredients toaround 17,000 customers ranging
from multinational companies toregional and independent brands.

Priority SDGs

• Strong sense of Purpose• Collaborative, open innovation model• Flexible, capital-light operations• Direct-to-customer selling model rather thanusing distributors• Broad customer base, large and small• Compete on value rather than price• Focused on high-value niches• Top returning FTSE 350 company over the last 20 years

3

Who we create value for

See Stakeholder
engagement

P18

Employees

Communities

Society

We have 6,135 (2020: 5,684) employees globally,
all of whom received a Living Wage in 2021. We
increased the proportion of women in leadership roles to
36% in 2021, in line with our commitment to achieving fullgender balance in leadership positions.

Our employees donated 2,750 hours (2020: 2,559
hours) via our 1% Club, volunteering in their local
communities and delivering tailored support in
response to COVID-19. We are providing accessto our smart science through the Croda Foundation
which achieved charitable status and beganfunding programmes to improve more lives.

We use our smart science toimprove the lives of people all aroundthe world (see People Positive
below). In every country in which we
operate we pay all required taxes
and have a fair taxation policy.

Customers

Consumers

Customer demand

Consumer requirements

Our customers seek innovative and sustainable
ingredients to differentiate their products andmeet changing consumer requirements.

Climate change, biodiversity loss, widening
inequality, changing demographics, and innovations
in digital technologies are transforming consumer
demands. See our Market themes on page 14.

~6,000+100%

speciality ingredients~17,000

customers worldwide

Shareholders

increase in sustainableproducts launches since 2019

Croda is the top-returning
FTSE 350 company over thelast 20 years. We delivered arecord financial performancein 2021 and made significant
progress on our non-financial
performance as we execute
our sustainability strategy.

24%

Customer productConsumer benefit

Customers use our ingredients at low inclusion levels intheir products to deliver vital functionality, while helping
to meet their sustainability commitments, regulatory
requirements, and consumer needs.

Through our customers’ products, ouringredients improve consumers’ lives byaddressing their needs in sustainable ways.

effective annual return over
20 years

Delivering our Commitment
Climate Positive

Land Positive

People Positive

We are reducing our emissions in line with our verified
Science Based Target, aligned with limiting global warming
to the 1.5˚C scenario. The majority of our raw materials are
renewable rather than petrochemical-based, delivering
product carbon footprint reductions to our customers.

We are already land net zero with ourcrop and seed technologies saving moreland than is used to grow our bio-based
raw materials.

Our ingredients improve health and wellbeing, forexample in 2021 protecting 55 million people fromskin cancer, and contributing to vaccine
development projects targeting 15 of the WHO’s
24 priority diseases.

Croda International Plc
Annual Report and Accounts 2021

17

Strategic reportWhy• Agile, decentralised operating model; ‘One Croda’ culture
proportion of renewable raw materials
we are •• HighLong-standing leadership and investment in sustainability
sustainability strategy in place
different •• Long-term
Global footprint with local sales, R&D and warehousing

Stakeholder engagement

Our stakeholder ecosystem
We continue to benefit from working closely with our stakeholders.
The strength of our relationships helps drive our success and our
positive impact on the world around us.
Section 172(1) statement
The Board of Directors confirms that during the year under review, it has acted to promote the long-term success of the Company forthe benefit of shareholders, whilst having due regard to the matters set out in section 172(1)(a) to (f) of the Companies Act 2006, being:a. the likely consequences of any decision in the long-term; b. the interests of the Company’s employees; c. the need to foster theCompany’s business relationships with suppliers, customers and others; d. the impact of the Company’s operations on the community
and the environment; e. the desirability of the Company maintaining a reputation for high standards of business conduct; and f. the need toact fairly between members of the Company. The information on pages 16 to 19 in the Strategic report should be read in conjunction with
the information provided in the Corporate governance report on pages 68 to 71. The content on these pages constitutes our s.172
statement, as required under the Companies (Miscellaneous Reporting) Regulations 2018.
See how the Board engage with our stakeholders

P68

Engaging with our stakeholders
OurpeopleOur innovation
partners

Our
suppliers

Ourcustomers

We employ over 6,000 people
across 105 locations in 39
countries around the world. We
engage with them through pulse
surveys and listening groups aswell as regular team meetings.
In 2021 we implemented aneight-point plan to support the
wellbeing of our employees.
With the strategic review of ourindustrial businesses also
underway, a key priority has
been communicating openly
with our employees, recognisingthat the engagement andwellbeing of all employees is acornerstone of our success.

We engage with universities,
SMEs, research institutes andour customers through our workwith them on R&D projects. We
added another 48 partners toour open innovation network in
2021 and ran more than 100
active projects during the year.
Our R&D advances are
increasingly driven by innovation
partnerships and a growing
focus of these partnerships isbiotechnology, with access toexternal facilities and specialist
expertise complementing
continued investment internally.

Suppliers play a critical role inensuring we can deliver
innovative ingredients tocustomers. With the appointmentof a Head of Sustainable
Sourcing we are engaging with
suppliers so they understand our
expectations and align theirpractices with our values andstandards. We have also
partnered with EcoVadis as ourframework for sustainability
monitoring. As most of ourcarbon emissions are associatedwith our supply chain, we
conducted lifecycle assessments
for more than three quarters of
our raw materials, significantly
enhancing our understanding of
our scope 3 carbon emissions.

With customers ranging fromlarge multi-nationals to regional
and independent brands, we
engage with them via our direct
selling model and at local
innovation centres around theworld. In 2021 we enhanced thisengagement with personalised
digital communications, andlistened more closely to thevoice of the customer through acomprehensive global survey.
This engagement develops
unique customer intimacy andenables us to gain significant
insight into customer challenges,
helping to drive our innovation
pipeline.

Wellbeing activities

Innovation partners

Suppliers representing

Voice of the customer
programme

>100

579

65%

3,000

wellbeing activities were held in
2021

partners complement internal R&D
investments

See Delivering value throughour culture

P36

18

Croda International Plc
Annual Report and Accounts 2021

See Identifying unmet needs

P4of spend have been assessed by
EcoVadis for responsible practices

Read more on our supplierpartnerships in our 2021
Sustainability Report

P41

customer responses across
49 countries

See ’Customer insights’case study in our 2021
Sustainability Report

P39

Strategic report

Investor engagement on sustainability
Legal & General Investment Management (LGIM)
who actively participated in the event.

Over 8% of Croda’s shares are owned by
specialist ESG investors compared with anaverage of 2% for the chemicals sector,
reflecting our leadership position onsustainability.
We are pleased that the growth in ESG investors
has been accompanied by increased two-way
engagement with shareholders as they look tounderstand broader non-financial aspects ofour business.
In November, the Executive Committee
supported by our Plc Board undertook adetailed annual review of our sustainability
strategy. The review was also supported by

LGIM provided an overview of their investment
process which includes an assessment ofcompanies based on their purpose and impact
using the UN SDGs as the framework, so is wellaligned with Croda’s approach. They outlined
their requirements from companies and specificstrengths and areas of improvement for Croda.
Matthew Courtnell (pictured right) of Legal &General Investment Management, said: “Asinvestors we are keen to support and encouragecompanies on the ESG journey and are always
open to engagement on all areas of the business.”

Regulators andtrade associations

Non-governmentalorganisations (NGOs)

Our communities

Our shareholders

We engage and share expertisewith regulators and tradeassociations, contributing bestpractice, helping set minimum
industry standards, and ensuring
our own compliance. During2021 we participated in COP26
and contributed to due diligence
for impending legislation.
We also joined Together
for Sustainability, a chemicalindustry collaboration, throughwhich we are working to set
industry-wide standards for data
sharing to promote supply chaintransparency.

NGOs perform a valuable
function, engaging withbusinesses to encourage themto take responsibility for theirimpacts and guiding effective
disclosure. We value the insight
we gain from our engagementwith NGOs which helps us
maximise our positive impact
and drive the industry towards
more sustainable practices.
During 2021 we supported aresolution proposed by WWF
and other members of Action
for Sustainable Derivatives toenhance the robustness of thesustainable palm oil supply
chain that was successfully
endorsed by RSPO, the global
standards body.

Engaging with our local
communities to maintain positive
relationships and acting
responsibly, safely andsustainably are critical to our
success. Our employees areactive members of theircommunities. During 2021, ourcommunities benefitted from ourlong-standing volunteering
programme, educational
outreach and tailored support in
response to COVID-19. In
addition, the Croda Foundation
received Charity Commission
approval enabling it tocommence supporting projectsaligned with the UN SDGs.

We maintain open dialogue
with shareholders as theowners of our Company andmain source of long-term
funding. Digital communication
is facilitating more regularinvestor engagement withmeetings conducted with over
500 investors in 2021. We arealso engaging withshareholders on a broader
range of non-financial topics.
In 2021 we hosted a virtual
event to launch our
Sustainability Report, helping
investors understand ournon-financial performance.

Number of members ofTogether for Sustainability

Manufacturing sites
processing

Croda Foundation

Number of investors
met in 2021

33

99%

6

>500

members working together
to promote supply chaintransparency

See Driving growth through anembedded strategy

P34

of our palm oil derivatives are
RSPO supply chain certified

See Strategy in action

P32

initial projects supported through£3m of funding

Read more on our community
engagement in our 2021
Sustainability Reportacross virtual and physicalmeetings

See Investor engagement

P71

P33

Croda International Plc
Annual Report and Accounts 2021

19

Our strategy

Sustainability + Innovation = GrowthOver the last 18 months we have accelerated key elements ofour strategy to progress our transition to a dedicated Consumer Careand Life Sciences company. Across these markets, sustainability together with
innovation will drive our future growth. We are focused on implementation,
working in partnership with our customers and suppliers, to deliver on our
Purpose of using Smart science to improve livesTM.
Group strategic objective

KPIs
See Key Performance Indicators

P44

20

Our Purpose guides the strategic choices we makeSmart science to improve livesTM

Sustainability
Aligning our businesswith our Purpose andaccelerating ourcustomers’ transition tosustainable ingredients.

Innovation
The lifeblood of ourbusiness, we seek toincrease the proportionof NPP (New and Protected
Products) that we sell.

GrowthConsistent top andbottom-line growth, withprofit growing ahead ofsales, ahead of volume.

Croda International Plc
Annual Report and Accounts 2021

Risks
See Risk management

P53-55• Total Recordable Injury Rate
• Absolute scope 1 and 2 emissions
and intensity• Land area saved• Health and wellbeing• Climate, Land and People Positive
KPIs are used for executive
remuneration (see page 88)• Delivering sustainable solutions• Product quality• Loss of significant manufacturing site
• Ethics and compliance• NPP as % of Group sales• An NPP metric is used forexecutive remuneration (seepage 88)• Product and technology
innovation and protection• Digital technology innovation• Our people — culture, wellbeing,
talent development and retention• Sales growth (%)• Return on sales (%)• Adjusted basic earnings per
share (EPS)• Operating profit, earnings per
share growth as well as relative
Total Shareholder Return are
metrics used for executive
remuneration (see page 88)• Revenue generation• Management of business change• Our people — culture, wellbeing,
talent development and retention

Investing in natural fragrances

Parfex employs a dedicated team of perfumers working
on natural fragrances and has recently launched a newrenewable range. We are creating a new R&D facility
which will become the creation centre for natural,sustainable, biodegradable and fine fragrances
within Croda.

The new R&D centre will provide more than 2,000
square metres of laboratory and office space.
Sustainability and the customer experience were at theheart of the design of the new centre. The centre
incorporates a ‘green’ roof with fragrance vegetationand the space has been designed to enable
collaboration with our customers, perfumers and R&D
specialists. This investment in natural fragrances forpremium personal care and fine perfumery is a potential
differentiator in the fragrance markets.
Alexandre Levet, Sales Director at Parfex, said: “Thelaunch of our new renewable range of fragrances has
been well received by customers and the new,
cutting-edge R&D facility will spur the creation of newnatural fragrances and sustainable products.”

2021 progress and ongoing priorities
Croda
See Chief Executive’s review

P10

Consumer CareSee Sector review: Consumer Care

P24

Life Sciences
See Sector review: Life Sciences

P26

We are committed to being the world’s
most sustainable supplier of innovative
ingredients.

We are Strengthening to Grow Consumer
Care to deliver mid-single digit percentage
sales growth at strong margins.

We are Expanding to Grow Life Sciences
to deliver high single digit percentage
sales growth with a return on sales similar
to current levels.

• 1.5°C Science Based Target verified• Implementing decarbonisation roadmaps
for our sites; quantified capex required• Completed periodic reassessment of ourmaterial issues and climate related risks
and opportunities• Croda Foundation established topermanently improve more lives• Established Consumer Care as a newsustainability solutions provider inpremium markets• Acquired Alban Muller to accelerate ourtransition to more natural raw materials• Selling our ECO range of bio-based
products to replace petrochemicalbased surfactants in Home andPersonal Care products• Meeting the sustainability challenges of
Crop Care customers with low carbon,
bio-based and biodegradable delivery
systems• More than doubled number of World
Health Organisation (WHO) vaccine
projects we are working on, to support
vaccines for 15 of the WHO’s 24
priority diseases• Enhancing our own innovation centres andnetwork of open innovation partners• Established new centre for biotechnology
process design and optimisation• Investing in digital across all areas of ourbusiness model including AI and data
mining for knowledge management• Embracing biotechnology, as well as
chemistry, to develop more sustainable
ingredients• Strengthened our Plant Cell Culture
capability in Beauty Actives• Becoming more knowledge-intensive;
44% NPP as % total sales (2020: 38%)

• Developing next generation sustainable cropcare delivery systems based on biologics• Working on over 150 COVID-19 applications• Secured 130 new customers and 250 new
programmes, two thirds for non-COVID
applications• Becoming more knowledge-intensive;
48% NPP as % total sales (2020: 27%)

• Agreed divestment of the majority of ourindustrials business• Increasing our sales, innovation andselect manufacturing capabilities inNorth Asia

• Built our presence in the fragrances andflavours market following the Iberchem
acquisition in 2020; synergy andintegration plans on track• Acquired Parfex, leader in fine andnatural fragrances• Expanded our French-based botanicalingredients in China• Realised significant benefits from Avantiacquisition• Building a drug delivery business ofglobal scale to unlock future
opportunities in mRNA and genetherapy applications• Doubled capacity in three key patient
health care technologies

2022 strategic priorities

2022 strategic priorities

2022 strategic priorities• Further proactive M&A• Deliver fast growth in China• Scale biotechnology• Do the basics brilliantly• Expand full formulation service inpremium markets• Invest to build on strong sales in China• Deliver planned Iberchem revenue synergies• Grow sales of ECO to personal and homecare customers• Expand range of applications for patient
health technologies• Continue to scale-up operations• Invest in resource in higher growth regions• Accelerate development of biopesticidedelivery systems

Croda International Plc
Annual Report and Accounts 2021

21

Strategic report

In June 2021 we built on the foundation that Iberchem
has provided in the fragrances and flavours market withthe acquisition of Parfex, a fine fragrance businessbased in Grasse in the South of France. Grasse has
been the centre of the world’s perfume industry sincethe 18th century. It is blessed with abundant natural
fragrance sources, producing two thirds of the natural
raw materials used by the French perfume industry.

Investment caseA unique proposition withexciting growth potential

1. Focused on high growth niches• Progressing our transition to a pure-play Consumer Care and Life Sciences company• Improved organic sales growth• Sector leading margins
Underlying sales growth versus 2019(excluding lipid systems) (%)

Sector-leading return on sales(%)
Average competitor EBIT margins*

23.6%

25
20

40

17.3%

36.4%

30

24.7%

15

23.0%

20
10

15.3%
10

5
0

Consumer Care

See Chief Executive’s
review

P10

0Life Sciences

Consumer Care

Life Sciences

Consumer Care sector peers are Chr. Hansen, DSM, Givaudan, IFF and Symrise. Life Sciences sector peers are Kerry,
Lonza, Novozymes, WestPharma and Zoetis.
* Average competitor EBIT margins are adjusted operating profit (before interest and tax) divided by sales, as reported by
the company. Numbers are based on full year 2021 reported results.

2. A highly differentiated approach• Unrivalled customer intimacy through direct-to-customer selling model• Dynamic innovation engine with increasing sales from New and Protected Products• A sustainability leader enabling customers to meet consumer and regulatory requirements
Recognised for sustainability leadership

Increasing proportion of sales from NPP
36.6%

40%

30%

28.1%

27.4%

2019

2020

20%

10%

0%

See Business model

P16

22

Croda International Plc
Annual Report and Accounts 2021

2021

Jez Maiden, Group Finance Director:

3. Compelling financial characteristics
Capital allocation policy• Strong balance sheet• Capital light and highly cash generative operations• Clear capital allocation policy prioritising investment in sustainability and innovation for growth

1

Reinvest for organic
growth – 1.5x
depreciation2

3

Provide regular
returns toshareholders –40-50% of adjusted
EPS

4

Acquirecomplementary
and adjacenttechnologies

Maintain appropriatebalance sheet /return excess capital– 1-2x leveragetargetSee Finance review

P46

4. Delivering consistent shareholder returns• High returns on capital – 2-3x cost of capital• 30-year track record of dividend progression• Top quartile TSR performance over 5, 10 and 20-year time horizons
Top returning FTSE 350 company 2001-2021 (Total Shareholder Return)
Croda TSR Croda share price FTSE 350 TSR

20,00018,000Shareholder return*

16,00014,00012,00010,000
8,000
6,000
4,000
2,000
0

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Note: Chart covers 31 December 2001 to 31 December 2021.
* Rebased to Croda’s initial share price of 241p at 31 December 2001.

Croda International Plc
Annual Report and Accounts 2021

23

Strategic report

Croda is a unique business. Our Purpose-led culture, direct selling model, sustainability
leadership and collaborative approach to innovation all differentiate us from our peers. This hashelped drive excellent returns with Croda delivering top quartile shareholder returns over 5, 10
and 20-year time horizons. The agreement to sell the majority of our industrials businesses
progresses our transition to a pure-play Consumer Care and Life Sciences company withleading positions in high growth niches. In line with our capital allocation policy, we will focus ourresources on delivering sustainable solutions and scaling our consumer, crop and health caretechnologies. This will lead to consistent sales growth at even stronger profit margins, and higher
returns for our shareholders.

Sector review

Market sectors

Consumer Care

Beauty Actives

Building a stronger
Consumer CareDavid Shannon
President Consumer Care

Beauty Care

F&F

Home Care

Sector strategy
Strengthening to Grow
Consumer Care
Sustainability

2021 was a year of significant growth,even compared with pre-pandemic trading,particularly at the premium end of the market
which will continue to grow as a proportionof our sales.

portfolio and formulation expertise that
accelerates customers’ speed to market.
We are leveraging this business modelby providing total solutions tailored to
local needs.

This year we’ve added higher growthbusinesses to the Consumer Care portfolio.
The Home Care business has an impressive
growth profile based on sustainable
technology platforms. Iberchem, ourFragrances and Flavours (F&F) businessacquired in November 2020, also has an
admirable track record of growth augmented
by revenue synergies made possible byour ownership.

We are also leveraging our leadership
position in sustainability, built on our heritageof using renewable raw materials andsignificant investment over more than adecade. This sustainability leadership is
now bringing clear commercial benefits.

Within F&F and across Croda we are wellplaced to meet the requirements of regional
and independent customers, due to a broad(2020: £527.8m)

Adjusted
operating profit£188.5m(2020: £146.5m)

24

Croda International Plc
Annual Report and Accounts 2021

• Embracing biotechnology, as well as
chemistry, to develop more sustainable
ingredients• Strengthened our Plant Cell Culture
capability in Beauty Actives• Becoming more knowledge-intensive;
44% NPP as % total sales (2020: 38%)

GrowthConsumer Care comprises Croda’s leading
global position in Personal Care, F&F andHome Care. After a challenging period for the
top-line in 2019 and a COVID-impacted 2020,
the Personal Care business returned to goodsales growth in 2021, delivered with a strong
margin. This was led by our innovative, highvalue Beauty Actives business, supported by aresurgence in consumer demand in the heritage
Beauty Care division, with total Personal Careunderlying sales 15% above 2019’s prepandemic level and return on sales of 30%.
Alongside Personal Care, the Home Carebusiness saw excellent demand for its
innovative fabric care ingredients. Iberchem
has proven to be an excellent acquisition, with
innovation at the heart of its business, offering
customers in personal and household careapplications on-trend fragrances, particularly
for emerging markets.

Consumer Care delivered an excellent sales
performance, up 45% in reported terms to£763.0m (2020: £527.8m). Underlying sales
were 18% higher, supplemented by 35%
growth from acquisitions and partly offset byadverse currency translation of 8%. Within
underlying growth, price/mix was 13% higher,
reflecting growth in higher value products andrecovery of raw material price increases, withvolume 5% higher.

P20£763.0m

Innovation

In addition, our ingredients deliver provenefficacy underpinned by science andinnovation. We will deliver higher and moreconsistent growth as the leading sustainable
and science-driven solution provider
in consumer care markets.

See Our strategy

Sales• Established Consumer Care as a newsustainability solutions provider in premium
markets• Acquired Alban Muller to accelerate ourtransition to more natural raw materials• Selling our ECO range of bio-based
products to replace petrochemical-based
surfactants in Home and Personal Care
products• Built our presence in the fragrances andflavours market following the Iberchem
acquisition in 2020; synergy and integrationplans on track• Acquired Parfex, leader in fine and natural
fragrances• Expanded our French-based botanicalingredients in China

IFRS operating profit increased by 26% to£168.0m (2020: £133.0m). Adjusted operating
profit increased by 29% to £188.5m(2020: £146.5m). Return on sales declined to
24.7% (2020: 27.8%), reflecting the dilution
impact from F&F, which operates at structurally
lower margins than Personal Care.

Doubling the lifetime of clothes

Croda has developed a range of fabric care proteins that replacesilicones and double the lifetime of clothes. Our ingredients protect
individual fibres helping our customers meet consumer demand forrenewable ingredients, sensory benefits and ‘care for clothes’.

Yong Chuan Lew (pictured), Global Business Director for Home Careat Croda, said: “Croda continues to lead sustainable innovation
through our novel protein technology, delivering unique solutions to
help our clients to achieve their sustainability goals and meet
consumer demands. At the same time we are making a positive
contribution to the environment, demonstrating our Purpose of using
Smart science to improve livesTM.”

These proteins were critical to Unilever’s relaunch of their Comfort
fabric conditioner. We are backing this technology with £30m ofinvestment and expect sales of tens of millions pounds a year.
Most importantly, our fabric care technology is reducing the impactof this industry on the environment through lower carbon emissions,
reduced water use and a significant reduction in clothes disposedin landfill.

2021 business performance
After recovering in the second half of 2020 fromthe impacts of the first COVID-19 global
lockdown, demand from Personal Carecustomers strengthened during the first half
year, particularly in luxury and premium
markets. This was driven by resurgent
consumer demand, which continued throughthe balance of the year. Customers also
increased their short-term stockholding. This
growth benefitted our Beauty Actives business,the leading innovator in the global skin caremarket. Beauty Care also saw good growth in
its ingredients for sun care, cosmetics and haircare markets, alongside continued demand for‘at home’ use products. Innovation is focusedon natural ingredients and biotechnology tomeet growing consumer demand, with Beauty
Actives launching AmeyezingTM, abiodegradable product with its origins in wild
ginger that improves the appearance of dark
eye circles. Beauty Care and Home Careleveraged sustainability through the bio-based
ECO surfactants plant in the US, which enablesdelivery of sustainable ingredients that deliver
identical performance to petrochemical peers.
Iberchem and Parfex have proven to be
excellent acquisitions. The integration of
Iberchem, which has more than 80% of sales inemerging markets, is on track to deliver nearly€50m of annualised revenue synergies by2025, principally through leveraging the
combined global sales network. Integration has
focused on realising these revenue synergies
and helping to transition raw materials onto a
more sustainable basis. Ten target countries
have been identified for revenue synergies,
including the United States and countries in
Asia, leveraging Croda’s sales team presence.
In Brazil, a new Iberchem business and R&D
laboratory have been established at the Croda
site. Iberchem has launched new product linesthat are Ecocert-accredited as environmentallyfriendly and socially conscious, as well as
biodegradable. Overall F&F sales grew double
digit percentage, despite the impacts of COVID
being more pronounced in emerging markets,with their lower vaccination protection rates.

Strengthen to grow in Consumer Care
Consumer Care is focused on high value niches
in faster growing markets, where sustainability
and innovation are key differentiators. NPP as apercentage of sales grew to 44% (2020: 38%).
Our strategy is to Strengthen to Grow
Consumer Care to deliver mid-single digit
percentage growth (before raw material cost
recovery) at strong margins. We are achieving
this by embracing biotechnology, in addition tochemistry, to develop more sustainable
ingredients, by leveraging our world class
reputation for formulation expertise to becomea full solution provider in premium markets, andby expanding our presence in key technology
adjacencies and in high growth regions,particularly Asia.
Organic investment in Consumer Care isfocused on expanding sustainable
technologies, such as mild surfactants andinnovative proteins for clothes care, to meet
accelerating customer demand. The sector isbenefitting from investment in biotechnology
and decarbonisation, both of which help reduce‘scope 3’ carbon emissions in our customers’
supply chains. We supplemented organic
investment with the acquisition of two
businesses which accelerate our transition tomore natural raw materials, an importantdifferentiator in consumer markets. In March,
we acquired natural actives specialist Alban
Muller for €25m, expanding our portfolio of
natural ingredients in our global leading Beauty
Actives business. In June, we completed theacquisition of Parfex for €45m. This acquisition
increases Iberchem’s sustainable fragrance
offerings and reinforces Iberchem’s superior
growth profile with greater access to finefragrances.
The four Consumer Care businesses each havea clear growth strategy. Beauty Actives is theleader in premium skin active markets,
developing critical ingredients based on its
expertise in peptides, botanicals andbiotechnology. We have introduced our

successful French botanical ingredients to
China, where consumers have a long-standing
preference for plant-based beauty products.
We will continue to invest in China, building on
excellent sales in 2021, enabled by investment
in sales, innovation and leveraging tighter
regulation of active ingredient claims.
Growth in Beauty Care is being driven bysustainability, with technologies such asvegan-friendly hair care ingredients andbio-based surfactants displacing petrochemicalalternatives from competitors. We aredeveloping the highly differentiated parts of theportfolio, such as our inorganic UV filters forsun protection. We have invested in additional
capacity to deliver sulfate-free surfactants tomeet consumer demand for ‘clean beauty’
products.
In F&F, we are targeting to continue delivering
faster growth from emerging market exposure,supplemented by significant integration
synergies and servicing the needs of smaller
customers with a one-stop-shop approach,combining Croda’s critical ingredients with
Iberchem’s on-trend fragrances. We willcontinue to invest in Fragrances, with a new
creation centre for fine perfumery and natural
fragrances at Parfex in France, by using
bio-based solvents in production processes
and through an R&D programme to develop
next generation fragrances throughbiotechnology.
We are unlocking the growth potential of ourHome Care business in fabric care and hygiene
applications, with technologies that are highly
differentiated by their sustainability credentials.
The business delivered a 50% increase in salesof ECO surfactants to Home Care customers.
We also commissioned additional capacity todeliver Coltide Radiance to a multinationalcustomer for the relaunch of its fabricconditioner brand, together with protein
technologies to other customers to extend thelife of clothes.

Croda International Plc
Annual Report and Accounts 2021

25

Strategic report

The garment industry is responsible for 3% of global carbon
emissions. What’s more, over half the clothes we wear end up in
landfill. Extending fabric life can therefore deliver significant benefits
for the planet.

Sector review

Market sectors

Life Sciences

Patient Health

Consumer & Veterinary Health

Rapid expansion inLife Sciences
Daniele Piergentili
President Life Sciences

Crop Protection

Seed Enhancement

Sector strategy
Expand to Grow Life
Sciences
Sustainability• Meeting the sustainability challenges of Crop
Care customers with low carbon, bio-based
and biodegradable delivery systems• More than doubled number of World HealthOrganisation (WHO) vaccine projects we areworking on, to support vaccines for 15 of
the WHO’s 24 priority diseases

The Life Sciences team had a successful
year, in which we have truly lived Croda’s
Purpose to use Smart science to improve
livesTM and, at the same time, captured value
in the fast-growing markets we supported.
In Health Care, we have strengthened ourcapabilities in drug delivery technologies. Ourrole in the fast development and supply of
lipid systems for the mRNA vaccines is an
example of our innovation and flexibility inaction. We also stepped up our research intonovel vaccine adjuvants, and continue towork closely with our partners to target next
generation vaccines, many for target
diseases which do not have effective
immunisation programmes today.
In Crop Care, the majority of our investment
has been focused on building technology

Sales£572.3m(2020: £392.5m)

Adjusted
operating profit£208.5m(2020: £124.5m)

platforms with an improved biodegradability
and carbon footprint – a clear commitment
to our partners’ sustainability roadmaps. An
example is our microplastic-free range ofseed coatings which have seen uptake
across both field crop and vegetableapplications this year.
The move we are making in Health Care from
ingredients for consumer applications todelivery systems for biologics, and thecommitment in Crop Care to develop delivery
systems with a drastically improved
sustainability profile are at the core of ourdesire to be ‘future ready’.

Croda International Plc
Annual Report and Accounts 2021

• Developing next generation sustainable cropcare delivery systems based on biologics• Working on over 150 COVID-19 applications• Secured 130 new customers and 250 new
programmes, two thirds for non-COVID
applications• Becoming more knowledge-intensive;
48% NPP as % total sales (2020: 27%)

Growth• Realised significant benefits from Avantiacquisition• Building a drug delivery business of global
scale to unlock future opportunities in mRNAand gene therapy applications• Doubled capacity in three key patient healthcare technologies

See Our strategy

P20Life Sciences delivered significant sales, profit
and margin growth in 2021. It is leveraging
in-house developed and acquired technologies,
building scale for the delivery of customers’
drug, vaccine and crop science products. It ismoving into faster growth, higher value/lower
volume niches. The highest growth in 2021 wasseen in Health Care, with reported sales up 80%
year-on-year, driven by our focus on patient
health platforms. Crop Protection delivered
double digit percentage growth, reflecting strong
demand from crop science customers. By
contrast, the overall performance of Seed
Enhancement was subdued.
Sales grew 46% in reported terms to £572.3m(2020: £392.5m). Underlying sales were over
40% higher, supplemented by over 13%
growth from acquisition and partly offset byadverse currency translation of 8%. Within
underlying growth, price/mix was 35% higher,
reflecting growth in higher value products, withvolume 5% higher.
IFRS operating profit increased by 79% to£201.0m (2020: £112.3m). Adjusted operating
profit increased by 67% to £208.5m(2020: £124.5m). Return on sales increased to36.4% (2020: 31.7%). As noted at the half year,

26

Innovationachieving this level of growth and profit
improvement in such a short period has placed
significant demands on the business and, as
anticipated, the margin level moderated in thesecond half of the year as we invested inadditional people and brought new capacity on
stream to future-proof this growth, in addition
to a mix impact from increased Crop Protection
sales in the period.
2021 business performance
Health Care benefitted from the first full year ofownership of Avanti. This has exceeded
expectations since its acquisition in August2020 with its sales more than doubling over its
full year 2020 performance. It has grown sales
for clinical research delivery systems with its
pharmaceutical R&D customer base. In
addition, its in-house production of lipid
systems components for COVID-19 vaccine
applications has been supported by sales from
Croda’s UK lipid facility, which worked with
Avanti in 2020 to support the world’s first
COVID vaccines. Croda’s total lipid systems
sales in 2021 were approximately US$200m,
primarily to our principal vaccine customers,
accompanied by a rapidly building future sales
pipeline of other nucleic acid applications.

Within Crop Care, Crop Protection deliveredrobust sales growth as a result of strong
demand, inflation recovery and continued
diversification of its customer base. Seed
Enhancement delivered a good performance in
Latin America driven by continued good sales
growth for field crops, but demand wasconstrained for vegetables.
Expand to grow in Life Sciences
We have established Life Sciences as a highvalue solution provider to pharmaceutical andcrop customers. Our strategy is to Expand to
Grow Life Sciences to deliver high single digit
percentage organic sales growth with a returnon sales well above 30%. We are deploying
more capital into Life Sciences to develop
sustainable solutions in our crop carebusinesses and to build a broad-based drugdelivery business of global scale. We are also
strengthening innovation, through technology
acquisition and organic development. In 2021,
NPP as a percentage of Life Sciences sales
was 48% (2020: 27%), driven by the Avantiacquisition and the growing proportion of sales
from higher value add technologies.
Within Life Sciences, the four businesses –Patient Health, Consumer and Veterinary
Health, Crop Protection, and Seed
Enhancement – each have a clear growthstrategy. Patient Health offers the mostsignificant global opportunity for growth, muchof which can be delivered through organic
investment. We are leveraging our uniquepurification and synthesis know-how by
investing in people resource, R&D andoperational scale up to become a leader inbiopharma drug delivery across nucleic acids,
proteins and vaccine adjuvancy. This builds on
our significant progress to date, including
meaningful sales of novel technologies, such as
non-aluminium vaccine adjuvants and lipids for
non-COVID-19 nucleic acid applications.
In 2021, we invested over £70m to scale up
manufacturing capacity for our three patient
health care platforms, reinforcing our leading
positions in drug and vaccine delivery systems.
Through recent investment, we have doubled
our capacity for vaccine adjuvants at our GMP
facility in Denmark, for speciality excipients at
our US site and for lipid systems capacity in the
Avanti, US and Croda, UK facilities. In addition,

we have committed a similar amount in further
investment in these platforms. Whilst we are
currently serving strong demand for emergency
COVID-19 applications, this new capacity will
increasingly unlock future opportunities in newmRNA and gene editing applications.
Across our three patient health technologies,
we secured 130 new customers and 250 new
programmes, two thirds of which were for
non-COVID applications. We started working on
90 new COVID-19 projects, bringing the total tomore than 150 in over 30 countries. 160 new
non-COVID programmes included delivery of
speciality excipients for oncology andimmunosuppressant applications, support to thedevelopment of HIV and Ebola vaccinesprioritised by the World Health Organisation, andthe development of lipid systems for new mRNA
vaccines such as influenza. We expect to see an
ongoing expansion in the range of lipid systems
for vaccines and therapeutic drugs, moving to abroader portfolio of customers and applicationsin the medium term.

Strategic report

Health Care’s established patient health care
platforms in speciality excipients and vaccine
adjuvants also enjoyed strong growth in 2021,
with underlying sales up over 40%. Alongside
COVID-driven demand for therapeutic drugs
and vaccines, this reflected strong demand forspeciality excipients in biologic drugs, and for
adjuvants for new vaccines and global
expansion of existing protection, particularly inthe developing world.

Supporting WHO
priority vaccine
development
around the world
As part of our People Positive strategy, weare committed to using our smart scienceto promote healthy lives. By the end of2024, we want our technology to be partof 10 phase three clinical trials across atleast a quarter of the priority pipelinevaccines listed by the World HealthOrganisation.

In Consumer and Veterinary Health, we arecontinuing to grow in oral care, topicalapplication and animal health solutions.
Our Crop Protection business is expanding its
leading position in formulation ingredients toprovide sustainable delivery systems for ourcrop customers. It is established as a key
innovation partner to the major crop science
companies and is increasing sales to mediumsized and smaller customers who now accountfor more than 50% of revenue. Crop Protection
already provides low carbon, bio-based andbiodegradable delivery systems, and isdeveloping systems for next generation
biopesticides and biostimulants that use
microbials and RNA. Similarly, sustainability
trends are driving Seed Enhancement, where
we have secured our first commercial
customers for seed coatings that are free frommicro-plastics. It is also developing seedenhancement technologies that stimulate
plant growth.

We are currently working on more than 150
COVID-19 projects in over 30 countries,
the majority of which utilise our vaccine
adjuvant technologies acquired with
Biosector in 2018, as well as our expertisein speciality excipients and lipid systems.
We worked with countries around the world
to support their vaccination programmes as
vaccine development and production
globalised. For example, our team inIndonesia worked with authorities tofast-track import of Croda ingredients aswell as providing technical support toproduce vaccines locally in response to
escalating cases.
Laura Ciccardi, Sales Manager in HealthCare at Croda, said: “We are incredibly
proud to be supporting the developmentof sovereign vaccine programmes aroundthe world, helping to improve the supply
and accessibility of COVID-19 treatments
in both developed and developing
nations.”
Looking beyond COVID-19 we areinvesting in next generation adjuvant
technologies to become more involved
with the fight against 24 other WHO-listed
diseases such as malaria, HIV andtuberculosis. We are also increasing thecollaboration across our patient healthportfolio, recognising the benefits of Avantiand Biosector working together.

Croda International Plc
Annual Report and Accounts 2021

27

Sector review

Market sectors

Performance Technologies

Smart Materials

Energy Technologies

Materials continued to benefit from good sales
Sales grew by 18% in reported terms to
Performancefor packaging, circular plastic and other£439.5m (2020: £373.6m). Underlying sales
polymer applications, delivering a 22% increase
Technologies continued were 24% higher, partly offset by adverse
in underlying sales over 2020 and well ahead of
currency translation of 6%. Within underlying
to strengthen during
pre-pandemic levels. The progressive recovery
growth, price/mix was 11% higher, reflecting
in industrial and automotive markets saw
recoveryofrawmaterial
cost
increases
and2021 against a backdrop
greater contribution from higher value products, Energy Technologies grow underlying sales byof rapid recovery in
26%, to recover to pre-pandemic levels. Overallwith volume 13% higher as sales recovered
NPP sales grew in absolute terms and were
post-pandemic.
industrial and technology
broadly stable as a proportion of total
IFRS operating profit increased by 38% toPerformance Technologies sales, at 18%
markets.
£62.7m (2020: £45.3m). Adjusted operating
Performance Technologies continued tostrengthen throughout 2021. Sales growthreflected increased demand across automotive,
packaging and industrial end markets. Margin
also improved through improved product mix
and the benefit of increased volume on operating
leverage within the sector. Smart Materials
delivered strong sales across its broad range ofapplication markets, including markets which
benefitted during COVID lockdowns, such as
packaging. 2021 also saw a rapid recovery in
Energy Technologies markets. Significant raw
material cost inflation was fully recovered
through selling prices.

profit increased by 32% to £64.5m(2020: £48.9m). Return on sales increased to
14.7% (2020: 13.1%). Second half margin
performance was notably stronger than prioryear, reflecting the benefit of operating leverageand growth in higher value-add niche markets.
Against the backdrop of a rapid recovery inindustrial and technology markets, as well as
rising raw material costs, demand grew strongly
across both businesses, accentuated bycustomer inventory build in the first half year.
Croda’s demand outpaced the broader market
recovery, due to greater exposure to higher
growth niche markets and next-generation
applications, such as electric vehicles. Smart

Industrial Chemicals
Industrial Chemicals
activities have continued
to support the overall
efficiency of Croda’s
three principal sectors.
Industrial Chemicals has continued to support
the overall performance of Croda’s threeprincipal sectors. After a period of lower sales
reflecting re-engineering of a number of
products and processes to reduce the volume
of by-products produced, which have then28

Croda International Plc
Annual Report and Accounts 2021

traditionally been sold by this sector, theproduct portfolio was stable and sales grewwith the upsurge in global industrial demand,
together with robust pricing management.
Sales grew by 19% in reported terms to£114.8m (2020: £96.4m). Underlying sales
were 25% higher, partly offset by adverse
currency translation of 6%. Within underlying
growth, price/mix was 15% higher, reflecting
higher commodity prices, with volume 10%
higher. IFRS operating profit increased to£6.5m (2020: £0.6m loss). Adjusted operating
profit increased to £7.1m (2020: £0.3m loss).
Return on sales increased to 6.2% reflecting
the benefit of operating leverage, improved
product mix and higher commodity prices.

(2020: 19%).

Sales£439.5m(2020: £373.6m)

Adjusted
operating profit£64.5m(2020: £48.9m)

Market sectors

Industrial Chemicals

Sales£114.8m(2020: £96.4m)

Adjusted
operating profit£7.1m(2020: £-0.3m)

Strategic report

Divestment of the majority of Performance Technologies andIndustrial Chemicals (PTIC)In December 2021, we agreed to sell the majority of the PTIC businesses
to Cargill Inc., for an enterprise value of €915m (approximately £778m).
The business to be divested accounted for 77% of PTIC’s 2021 reported
sales and comprises five manufacturing facilities, together withassociated laboratory facilities and sales operations. We are currently
working on the process to separate the two businesses with completion
expected in summer 2022. The consideration includes the sale of 100%of Croda Sipo in China, a joint venture which Croda currently manages
and in which it has a 65% shareholding. If Croda’s 100% ownership of
Sipo cannot be realised, Sipo will be excluded from the PTIC sale,
reducing the consideration by €140m. The overall disposal is subject tocustomary regulatory approvals but is not subject to shareholder
approval. Under Cargill’s ownership, the divested business and its
talented workforce can look forward to a bright future.

With completion of the divestment expected in summer 2022, thistransaction had no impact on the Group’s reported results for 2021,
except for costs incurred reported as an exceptional item. In these2021 results, PTIC revenue totalled £554m (2020: £470m) andadjusted operating profit was £72m (2020: £49m).
Taking account of the value to be retained by Croda under a future
supply agreement for products to be manufactured at Croda sites
and supplied to the acquirer, together with dis-synergy costs
remaining with Croda which were previously allocated to the divested
business, the estimated impact of the divestment on Croda’sreported 2021 results, had it occurred at the start of 2021, would
have been to reduce revenue by £361m (2020: £298m) and adjusted
operating profit by £59m (2020: £36m).

Creation of Industrial
Specialities
With the agreement to divest the majority of PTIC reached in December
2021, the 23% of PTIC sales which will be retained within Croda will
become the new Industrial Specialties sector. It will play a key role
supporting Consumer Care and Life Sciences. It will support global siteutilisation and profitability as part of Croda’s integrated model in thoseareas of the business which are deeply embedded in Croda’s regional
operations, technologies and IP. Post-closing of the majority PTIC
divestment, Industrial Specialties will also generate revenue and profit
from a new long-term supply agreement, whereby Croda will supply
certain products from its retained manufacturing sites to the acquirer.

Post-closing, the Industrial Specialties sector will focus on supplying
ingredients for its existing markets including coatings, emulsion
technologies, water treatment and in fibres and fabrics. It will also
leverage Croda’s retained technology capabilities in markets such as
display technologies and electronics, and a smart formulation
capability in low-emission coatings. It will continue to manage tolling
agreements and co-stream product sales from our sites which arise
from Consumer Care and Life Sciences production processes.

Croda International Plc
Annual Report and Accounts 2021

29

Sustainability

Sustainability strategy – our Commitment
We are committed to being the most sustainable supplier of innovative ingredients.
We will create, make and sell solutions to tackle some of the biggest challenges
the world is facing. By 2030 we will be Climate, Land and People Positive.
We also have important KPIs outside of these three categories, which
we believe are crucial to the success of our business. We havecollectively called these our Fundamentals. We consider these targets torepresent the required social licence to operate in 2030 for a
multinational company such as Croda.

Our Commitment
In 2020 we launched our Commitment to be Climate, Land and People
Positive by 2030, externally benchmarking our targets with the support of
the Cambridge Institute of Sustainability Leadership to ensure our ambitionsalign with expectations of a sustainability leader in our industry. Ours is a
restorative strategy, designed to ensure that planet and society are better asa result of our activities, and that we are not just ‘doing less bad’.

The Sustainable Development Goals (SDGs), organised by the United
Nations, underpin our Commitment. We have identified 23 SDG targets
out of the 169, across nine goals, that are drivers of our strategy – thosewhere we must reduce our negative impact and those where we canmake the biggest positive contribution. These were then grouped aroundthe themes of climate, nature and society, hence our Commitment to be
Climate, Land and People Positive.

L

Po

e
sitiv

Climatee
iv

2021 materiality assessment
We conducted a full materiality assessment during 2021, concluding thefourth materiality assessment triennial cycle that started in 2012. Thiswas our most comprehensive to date, with more data sources, directcontact with stakeholders and detailed analysis than ever before. Given
the accelerating nature of the global sustainability agenda it was vital to‘take the temperature’ of stakeholder expectations in 2021. A full reporton the materiality assessment can be found in the accompanying
Sustainability Report 2021 (page 14); the outcome of the assessment
reconfirmed we are focusing on the right topics for most stakeholders,
while we saw nature/biodiversity and global health preparedness
increasing in importance since our last assessment in 2018.

d
an

Po
sit

Fundamentals

Smart scienceto improve livesTM

Pe o

As we deliver on our Commitment to be Climate, Land and People
Positive by 2030 we anticipate satisfying an increasing number of our
stakeholders’ sustainability demands. In doing so we anticipate generating
significant value for our customers’ brands as they meet the needs ofconsumers, who in return will reward suppliers, like Croda, who help themachieve their own ambitious sustainability targets.

ple Positive

See our 2021 Sustainability Report for more detailP14-15C Climate Positive
L Land Positive
P People Positive
F Fundamentals
Material areas that
range across axes

Opportunity for Croda
to provide a solution

This grid provides asummary of the key
issues identified
through our materiality
assessment and how
they relate to Croda.

Risk to Croda,
therefore a challenge

2021 materiality
framework

Croda’s impact on the world

The world’s impact on Croda

C Climate action

L Circular economy

L Environmental stewardship

C Global change

F Health, safety and wellbeingP

P

Growingbusinessfor good

Diversityand inclusion

C L

C

L

P Product innovation

F Responsible business
F Knowledge management
P Community education and engagement
P Growing business for good

Croda International Plc
Annual Report and Accounts 2021

F

Product
stewardship

P F Our people

P Diversity and inclusion

30

preparedness

F Process safety

L
Biodiversity

F Supplier partnership
F Customer intimacy

2021 Performance
Strategic report“I would like to recognise and thank everyone for the huge
efforts made in delivering the 2021 progress towards the
positive impacts on the planet and society to which we aspire.”
Phil Ruxton, Chief Sustainability Officer

Climate Positive

27%

reduction in scope 1 and
2 GHG emissions intensity
since 2020

1.5°C
Science-Based Target
validated

951,000

tonnes CO2e avoided through the useof ingredients attached to verified
case studies

69%

of our organic origin
raw materials were
bio-based in 2021

Land Positive

33,734hectares of land saved over2019 baseline: our range ofbiostimulants, adjuvants andseed coatings continue to savemore land than is used to growall of our bio-based
raw materials

Validated
Through extensive field trials
with a major customer inBrazil, we measured anddemonstrated the landsaving benefit of our
adjuvant technologies

Biodiversity
We recognise the benefits Croda
technologies can bring in protecting
biodiversity and nature, and havestarted a programme to measure
our impacts in partnershipwith CISL

60%

of our land area saved
is in Asia and Latin
America, where there isgreatest demand for foodproductivity and thehighest threat ofdeforestation

People Positive

55

million people protectedannually through theuse of Croda sun
protection ingredients

Supported
the global scale up of COVID-19
vaccine delivery and rapidly
executed significant investments
at manufacturing sites in the
UK and USA

Six

projects approved forfunding by Croda
Foundation’s Boardof Trustees

36%
leadershiproles held by
women

Fundamentals
NETWORKAll employees temporary
and permanent were paid aliving wage at the end of2021, according to Fair
Wage Network criteria

94%

17%

reduction in process
safety incident rates
compared to 2020

Awarded Business of
the Year at the World
Sustainability Awardsof palm derivative
volumes purchased
have supply chaintransparency achieved
to refineryWe are committed to providing full transparency on progress against our milestones, KPIs and 2030 targets, as well as the wide
variety of other ESG data points requested by stakeholders. Please see our ‘non-financial data performance summary’ on croda.com
to download our non-financial datapack.

Croda International Plc
Annual Report and Accounts 2021

31

Sustainability (continued)

Strategy in action – our targets
A review of our sustainability strategy by the
Executive Committee in 2021 resulted inre-committing to the highest level of ambition
across all our 2030 targets, despite a changing
business portfolio.

Climate Positive
Scope 3 emissions analysis and externalverification
In 2021 we established a clearer view of our
supply chain emissions, conducting a thoroughanalysis of our scope 3 emissions, which isexternally verified by Avieco.
The audit reduced our 2018 scope 3 baseline
by approximately 104,500 tonnes CO2e (7%) as
our emissions were previously overestimated.
This was primarily due to the accuracy of
estimations and emission factors for our‘Capital goods’ scope 3 category. Purchased
goods is our largest category, accounting for
83% of our upstream scope 3 emissions, withthe majority of this being raw materials.

Technical Guidance for Calculating scope 3
emissions. We use a hybrid approach to
calculate our scope 3 emissions, using thefollowing methods:
Process-based method – using actual
consumption data on a given activity and theassociated carbon conversion factor to
calculate the emissions. Emissions factors
have been sourced from:• Croda’s Life Cycle (LCA) Analysis tools
for raw materials• A Life Cycle Analysis database (Ecoinvent)• Life Cycle Analysis studies published byother reputable sources• Published conversion factor sets forreporting on organisational GHGs
(DEFRA/IEA)

Extended Environmental Input-Output
Life cycle assessment studies for key raw(EEIO) model method – using spend data,materials have developed our knowledge ofemissions are calculated using EEIO models toemissions within our supply chains and we arequantify the emissions associated with a sector
now able to represent the reduction in carbonof the economy in a given geographyfootprint associated with purchasing palm certified
To calculate our applicable scope 3 emissions,by the Roundtable on Sustainable Palm Oil
extensive EEIO modelling was carried out. This(RSPO). Around 40% of our scope 3 emissions
method combines macro-economic data andassociated with raw materials are covered bysupply chain specific studies such as this. We also industry-level carbon emissions data to estimate
have volume-based, industry-recognised life-cycle the carbon associated with financial activity in aassessment (LCA) figures attached to a further
35% of our raw material greenhouse gas
2021 scope 3 emissions by category
emissions, leaving only 25% based on spend
2021
scope
2021
scope3 3emissions
emissionsby
bycategory
category
calculations. As our customers look to their
suppliers to help them achieve their sustainability
targets, understanding our scope 3 emissions andbeing able to identify opportunities to reduce ourown emissions supports our customers as theyseek more sustainable ingredients.
Our 2021 scope 3 emissions are 14.8% higher
than our baseline year of 2018. This is largely due
to greater investment and increased emissions
associated with raw material purchases, due toincreased production volumes. Business travel
reduced by 75% due to the pandemic. This
increased granularity allows us to identify carbon
hotspots in our supply chain, and work with
suppliers to drive emissions reductions.
Our scope 3 emissions are calculated using
methodologies consistent with the WRI’s
Greenhouse Gas Protocol: Corporate Value
Chain (scope 3) Accounting and ReportingStandard as well as the WRI’s GHG Protocol

32

Croda International Plc
Annual Report and Accounts 2021

given sector and geography. This approachprovides us with the tools to carry out acomplete assessment as well as identify carbon
hotspots across the value chain, ensuring we
focus our attention where it matters most.
Where actual consumption data is available theprocess-based method is applied, as this is amore accurate estimation of our scope 3
emissions. The process-based method includes
LCAs from a range of sources, and publishedconversion factors as described above.
Driving operational decarbonisation
An internal shadow carbon price of £50 per
metric tonne CO2e was applied to all major
capital investment proposals during 2021.
However, we realise that initiatives aimed at
reducing emissions at manufacturing sites
alone will not be enough to achieve our 1.5°C
science-based target. We are also developing
low carbon alternatives to existing ingredients.
To support this, we have developed amethodology to calculate scope 1 and 2
emissions at a product level. By including thesales of all products, we can now track ourscope 1 and 2 carbon footprint at the sector
level, driving ownership and focusing ourmanagement teams on creating the alternative
low carbon solutions our customers require.
For the first time in 2021, major sectors presented
their carbon budget to the Executive Committee
alongside their financial budget. They presented
their forecasted carbon emissions for 2022, as
well as actions to ensure emissions remain withinbudget and are aligned to achieving our
Science-Based Target (SBT). In 2022 we will add
scope 3 emissions associated with raw materials
into these calculations, further improving sector
visibility of their carbon footprint.

Purchasedandgoods
and- services- 83%
Purchased
services
83%
Purchasedgoods
goods andservices- 83%
Rawmaterials
–
73%
Raw
– 73%
Rawmaterials
materials– 73%
PFR/tolling/semi-finished– 5%
PFR/tolling/semi-finished– 5%
PFR/tolling/semi-finished– 5%
Packaging– 2%
Packaging
Packaging– 2% – 2%
Other – 3%
Other –Other
3% – 3%
Capital goods– 6%
CapitalCapital
goods goods– 6% – 6%
Fuel and energy-related – 3%
Fueland energy-related
Fuel andenergy-related– 3% – 3%
Upstream transportation and distribution – 6%
Upstreamtransportationand distribution
Upstreamtransportationand distribution– 6% – 6%
Road – 3%
Road –Road
3% – 3%
Sea – 2%Sea– 2%
Sea – 2%Air– 1%
Airgenerated– 1%
Air – 1%
Waste
in operations – <1%
Waste Waste
generated
in operations– <1% – <1%
in operations
Businesstravel generated– <1%Businesstravel –travel<1%
Employeecommutingand–home
Business<1%working – <1%

Employeecommutingand home– <1% – <1%
Employeecommutingandworking
home working

2021 scope 3 emissions: 1,141,056 teCO2e(2018 baseline: 994,235 teCO2e)

Validating our land saving assumptions
Our Land Positive targets focus on land use andcrop science innovation. To enable us to identify
areas where we can have the maximum impact
on land use, we need to know our current land
impact. In 2021 we collaborated with one of ourmajor agriculture customers to validate theassumptions used to calculate our land saving
data for our adjuvant technologies, demonstratingthat our assumptions are justified and, in fact,
conservative.
2021 also saw us make significant steps towards
how we will achieve our crop science innovation
target, opening our Product Validation Centre
located in Holambra near São Paulo, Brazil. This
state-of-the-art facility includes laboratories andgreenhouses and is focused on validating andsubstantiating claims and results from ourformulation, microbiology and seed treatment
laboratories. Managed by a specialist team that
includes agronomists, chemists and biologists
from Crop Protection and our Seed Enhancementbusiness, Incotec, the centre has the highest levelof technical expertise, generating realistic androbust data for customers.

People Positive

This specialist team, now all under one roof,
enhances our ability to develop innovative new
solutions and explore the use of digitalisation andnew technologies to create more sustainable
ingredients.

Collaboration to develop alternative vaccine
adjuvants
In 2021 we established a strategic collaboration
with the Danish Government’s life science
research institute, Statens Serum Institute (SSI).
This will enable accelerated trials of alternatives to
traditional aluminium-based adjuvants, providing
new opportunities for the development ofvaccines for diseases where effective vaccines
do not currently exist, as well as more effective
vaccines for a range of diseases.
The collaboration encompasses manufacturing
and commercialisation of two novel adjuvants,
both of which are in clinical development. Studies
show that both adjuvants induce strong immune
responses, with one inducing both antibody andT-cell response and the other, which is already inuse within cancer immunotherapy trials, facilitatingproduction of CD8+ T cells.
This agreement, along with the significant
investment at manufacturing sites in the USA and
UK made in 2021, will increase our capability andcapacity to support World Health Organisation(WHO) pipeline vaccine development in the future.
This takes us one step closer to achieving ourambition of supporting the successful
development and commercialisation of at least
25% of WHO listed priority pipeline vaccines.
See page 27 for more on our investments in
Health Care.

Croda International Plc
Annual Report and Accounts 2021

33

Strategic report

Land Positive

Sustainability (continued)

Driving growth through an embedded
strategy
Impact beyond our direct operations
Our impact on the SDG targets is far greater
through our supply chain and our customers
than just through our own operations (seebusiness model page 16).

Sustainable Development Goals
It is estimated that there is US$12 trillion
incremental economic value to be gained if theworld meets all 169 targets associated with theUnited Nations Sustainable Development Goals(SDGs), delivered through technology innovation,
new markets and new business models.1

To meet the sustainability expectations of
our customers we need to measure, manage
and reduce the negative footprints of our raw
materials before they even reach our gates.
For example the carbon, water and land
footprints embedded in our raw materials are
typically many times larger than the footprint
associated with our own activities.
We are starting work with partners in our
supply chains to identify programmes thatwill do more than reduce negative footprints
and will restore and improve communities
and ecosystems.

Aligning the whole organisation to deliveron our Commitment
Through our decentralised approach todecision-making and can-do attitude, we
can mobilise the whole of Croda in oursustainability journey, enabling us torespond to local variations in requirementsfrom stakeholders and adjust our approachas the sustainability agenda evolves.
Our Purpose and our Commitment are also
proving to be vital recruitment andmotivational tools for existing and future
employees, enabling us to engage with thebest possible candidates and support
further development of our staff.
We are taking several approaches to support
this and ensure we align all our activities. We
have included Climate, Land and People
Positive factors in our long-term incentive
scheme for the most senior leaders; we havecreated regional Sustainability Champions
Networks to engage those passionate
individuals around the organisation who cancontribute to local execution and share bestpractice; and by the end of 2022 we will havedoubled the resources across theorganisation focused on sustainability,
beyond the central Group Sustainability team.

$12 trillion

By innovating thoughtfully, sourcing
sustainably, minimising the footprint of ourown operations and leveraging our excellent
decentralised customer intimacy, we willplay our part in helping our customers andtheir markets deliver on the SDG targets.

Creating value as we help our customers
achieve their sustainability ambitions
Consumer-facing companies responding tosocietal demands and increasing regulationin every market and region we serve haveguided much of our work in prioritising thegrowing sustainability agenda to develop
our Commitment.

At the heart of our approach tomeeting our Commitment is innovation,
which has been the lifeblood of our
success for many decades.

Economic value of SDGs

to be gained if the world meetsall 169 SDG targets1

Our customers are diverting resources
towards partnerships with those suppliers
who help them meet their purpose andlonger-term sustainability targets. Through ourintimate relationships with customers large
and small across the world we are helping
them achieve these non-financial targets and,in so doing, we are creating the opportunity
for further value growth.

1. ‘Better Business, Better World’ report, Business
Sustainable Development Commission, Jan 201734

Croda International Plc
Annual Report and Accounts 2021

Innovating the right solutions for the planetand society in the right way
At the heart of our approach to meeting our
Commitment is innovation, which has been
the lifeblood of our success for many
decades. Our business model has relied on
creating new market niches with novel
product offerings to drive growth. Thisapproach remains relevant today, in the UN
Decade of Action on the SDGs, with ourinnovation priorities focused on helping ourcustomers and end markets deliver on the
SDG targets, with 88% of new products
directly contributing to our priority SDGs.
Our innovation model is a decentralised one,with our R&D advances increasingly driven by
our partnerships, often managed locally by
one of our innovation centres around theworld, close to customers and partners. This
ensures we can respond to local variations inapproach to contributing to the SDGs, andaccess novel processes, raw materials andexpertise through our partners.

Assessing the risks and opportunities
Risks and opportunities associated withdelivering the various aspects of thesustainability agenda are captured using ourglobal integrated risk management framework(page 50). In general, we identify moresustainability related opportunities than risks
to the Croda business model.
In 2021 we adopted TCFD guidance to report
our climate related risks and opportunities(pages 40 to 43).

Our Commitment

23 SDG
targets
underpin our strategy

Strategic report

Measuring our growth against the SDGs
Having previously identified the SDG targets that directly connect with our Commitment (see Sustainability Report 2020 page 11),
this year we have mapped out how those SDG targets can be impacted through the use of our products in the markets in which we
operate, considering our product offering into those markets and the primary supply chains and operations that provide them.
We plan to continue this assessment in the coming years to develop a means of assessing our revenues and profitability by SDG
target. The table below presents a summary of the SDG targets our activities impact, broken down by sector and business unit:
Consumer Care

Value chain

SDGS

Life Sciences

BeautyCare

BeautyActivesHome
Care

Fragrances& Flavours

Seed
Enhancement

Crop
Protection

8.5

8.5

8.5

8.5

12.2

12.2

12.2

12.6

12.2

12.2

12.7

12.7

12.7

12.7

12.7

12.7

13.2
15.2
15.5
3.9

PTIC
HealthCareEnergyTechnologies

12.7

12.7

13.2
15.5

3.9

15.2

15.2

15.2

15.5

15.5

15.5

3.9

3.9

3.9

3.9

Smart
Materials

Industrial
Chemicals

12.2

12.2

12.7

12.7

13.2

13.2

15.2

15.2

15.5

15.5

3.9

3.9

3.9

6.3

6.3

6.3

13.2
15.2

3.9

4.3

Operations

5.5

5.5
6.3

6.4

6.4

7.2

6.4

7.2

6.3

6.3
6.4

7.2

7.2

7.2

7.2

7.2

7.2

Products & Services

8.8
9.4

9.4

9.4

9.4

9.4

9.4

9.4

9.4

9.4

9.4

12.5

12.5

12.5

12.5

12.5

12.5

12.5

12.5

12.5

12.5

2.3

2.3

2.4

2.4
3.3

3.4

3.4

7.3

14.1

14.1

7.3

7.3

7.3

7.3

7.3

7.3

7.3

13.2

13.2

13.2

13.2

13.2

13.2

13.2

14.1

14.1

14.1

15.3

15.3

14.1

Croda International Plc
Annual Report and Accounts 2021

35

Sustainability (continued)

Delivering value through our culture
Culture creating value and driving
performance
Our people strategy is focused on delivering our
Purpose, further strengthening our culture andcreating inclusive and engaging environments
for all. We believe that embedding our values
throughout the organisation will enable us toattract and retain the best talent, unlock ourpeople’s full potential and deliver highperformance and engagement within our teams.
During 2021, a new set of 14 competenciesaligned with our values of ‘Responsible’,‘Innovative’ and ‘Together’, were introduced.
Each competency describes how the values are
exhibited and can be developed throughspecific behaviours within our work. A crosssection of Croda employees from across theglobe assisted in the shaping of thecompetencies and will continue to be involved in
the implementation and ongoing review. Thishas been a positive and exciting step forward inour journey as for the first time we have a
description of the attitudes, skills andbehaviours valued within Croda, that are shapedby our values and underpinned by our culture.

ValuesEmbedding new competencies, that support our values, has been a priority within our learning and development teams and an integral part ofour leadership development. This year, we have introduced a number of new programmes and activities which are aligned directly with our
new competencies.
Responsible – Authentic leadershiptraining
Authenticity is part of our new competency
framework and encourages self-awarenessand working in a way that is aligned with
inner values. We invited a number of ourteams across the organisation to take partin an Authentic Leadership Development
programme. The programme explains theimportance of understanding purpose,
acting with integrity and building
relationships which are founded on trust.
It uses psychometric evaluation and isfacilitated by external consultants.

Innovative – Phoenix Rising
We introduced a new concept programme to
our leadership development with a difference,called Phoenix Rising. It is routed in inclusive
behaviours and attendees come from multiple
levels and functions across the organisation, toconnect through experiences and discussions.
It is an opportunity to coach, mentor andreverse mentor each other, through different
perspectives. This programme facilitates theintegration of our Purpose, values andbehaviours of our people through leadershipand the programme is facilitated byexternal consultants.

Together – Leading with empathy
To develop our understanding of the role
empathy plays, particularly in uncertain times,
our Executive Committee and senior leaders
attended webinars on the importance ofleading with empathy. The webinars usedneuroscience to explain the important role
empathy has in creating inclusive, innovativeand psychologically safe working
environments. We have opened up our new
development planning tool to all employees,
at all levels. To make development planningeasy and accessible, we have included newcompetency-based playlists.

Responsible

Innovative

Together• Authenticity• Cross cultural sensitivity• Inclusivity• Living the values• Curiosity• Strategic perspective• Adaptability• Delivery• Working together• Empathy• Care and compassion• Managing conflict

Competencies

Foundation competencies• Self-led learning• Technical/functional expertise

Talent development
Our learning and development programmes have been reviewed with the aim of modernising and aligning to our values and competencies. We havebegun redesigning our internal offering with a plan to launch these programmes during 2022.
A number of leadership behaviours aligned to our values were identified which will form part of selection and nomination to leadership development
opportunities going forward.

How we manage and measure culture
Our approach to monitoring culture is through direct engagement with our people:
Area
Reason to use
Example of use
Pulse
surveys

Used to give the perspective of ourpeople, helping leadership teams tounderstand employee sentiment onareas of interest or concern.

In 2021, we deployed a survey concerning the strategic review of the PTIC businesses. We asked aseries of questions, including a specific question related to our values; “I believe Croda is committed
to carrying out the review process in line with our values, keeping everyone informed of progress”.
74% of responses agreed or strongly agreed, with 22% giving a neutral response.

Listeninggroups

A feedback channel used globallyand regionally to enable employees
to share their positive and negative
experiences on given topics.

We regularly hold listening groups or offer feedback sessions, such as town hall meetings. In 2021,
members of the Board including the Chair, Anita Frew, hosted several sessions with participants fromall around Croda to discuss strategic priorities, pressures and to get input and ideas.

Purposeful
outputs

Rewarding and sharing examples The first annual ‘Purpose in Action Awards’ was held in summer 2021, with over 150 award entriesof where employees have truly
from all our regions. The awards were established to recognise teams and individuals that had
lived our values.
delivered actions that contribute towards either our Commitment or our values. Each entry
demonstrates how we are truly living our Purpose and that Croda’s culture is actively driving change.

36

Croda International Plc
Annual Report and Accounts 2021

Driving innovation through D&I

This was done through pulse surveys, reviewing
employee data and benchmarking against
external sources. Raising awareness,particularly at senior levels, focused on
deepening knowledge about the experiences ofdifferent groups of people; the programme
included external speakers, internal podcastswith our employees, and delivering unconscious
bias training. A strategic objective achieved in
2021 was the delivery of a Global Diversity
Representation Survey*. Carried out across all

regions where data collection was legallyallowed, it is a first for Croda and is an
important step in understanding the broad
representation in our organisation.
The survey consisted of brief questions asking
employees to volunteer information about theirrace / ethnicity, sexuality, gender identity, anddisability. Due to legal restrictions on collectionof data, not all locations were able to participate
including sites in the Netherlands, Finland andDenmark. 70% of eligible employees responded
to the survey, including 97% of senior leaders.
A summary of the results can be found below.

Global Diversity Representation Survey results*
Group average

Senior leader average

Identify as female

41% of responses

39% of responses

Identify as male

53% of responses

60% of responses

Identify as intersex, transgender, non-binary or other gender identity

Less than 1% of responses

Less than 1% of responses

Identify as a minority race or ethnic group in the country they are located,based on local social, government or cultural understanding

12.8% of responses

9.8% of responses

Identify as a person with a disability

3.5% of responses

1.8% of responses

Identify as lesbian, gay, bisexual, queer or a sexuality other than heterosexual

3.8% of responses

1.8% of responses

We have published this data internally and willcontinue with further surveys periodically tohelp us track our progress. As the survey
closed in late 2021, we are currently reviewing
next steps and appropriate actions. In addition,and linked to reward and recognition for 2022,
we have a specific gender balance target in our
long-term incentive Performance Share Plan.
We will continue to promote and appoint on

merit, but we will work to ensure that we havebalanced shortlists and create an environment
where female employees can flourish, andbelieve this incentive will help us to achieve this.
As part of our approach to understanding local
inclusion and diversity needs, our regional
teams have set up new D&I sub-committees tocomplement the Global D&I Committee. These
teams are focused on driving awareness andshaping decisions at a local level. Over the lastyear, each sub-committee has begun reviewing
areas of local need, creating plans and working
with local leadership teams to create change.
* The survey ran from June to October 2021 as avoluntary survey with data collected anonymously
at point of collection.

Key people metrics
Average headcount for 2021:

6,037
Permanent employees
Temporary employees
Full time employees
Part time employees
Age category

17-25
26-35
36-45
46-55
56-65
65+

Year end gender breakdown of our workforce^% of workforceAllemployees

96.6%
3.4%
94.9%
5.1%

Board
of Directors*% ofworkforce

6.3%
29.6%
28.2%
23.2%
12.2%
0.5%

Male – 63%

Male – 64%

Male – 50%

Female – 37%

Female – 36%

Female – 50%

Employee turnover by quarter, 2021

2.4%

3.0

All employees
are paid a
Living Wage.

Seniormanagement

2.5
2.0
1.5

2.7%
1.8%

1.2%

1.0
0.5
0.0

Q1 21

Q2 21

Q3 21

Q4 21

* As at 28 February 2022. Post-year end appointment means we have now achieved full gender balance on the
Board of Directors. See page 61 for detail.
^ Reported figures specifically from HR systems only factor male and female binary, we are aware that <1% of
employee headcount is likely to not identify as male or female.

This chart shows our voluntary employee
turnover rate by quarter for 2021. As this chart
is for our global business it includes regions
such as Asia and the USA that traditionallyexperience higher employee turnover than
Europe. In Q2 and Q3 this year we experienced
higher turnover rates, in line with many otherorganisations around the world. Fortunately,
we are already seeing our turnover starting to
reduce to more typical levels. We continue tomonitor turnover and conduct exit interviews
with leavers, the results of which are sharedwidely in the organisation to inform our people
policies and practice.

Croda International Plc
Annual Report and Accounts 2021

37

Strategic report

All of our new competencies encompass
inclusive behaviours with one dedicated toinclusivity. We believe that every employee
should feel able to come to work, give theirbest and feel valued for the work they do. To
drive progress we created a D&I Roadmap. The
roadmap has a number of areas including data
gathering, improving awareness, developing
our brand, measurement and setting of KPIs,
and alignment to reward and recognition. Data
gathering was focused on understanding

representation within Croda and how ourorganisation feels.

Sustainability (continued)

Transparency and disclosure
Since 2007 we have reported using the Global
Reporting Initiative (GRI) framework, following
GRI guidance on identifying and reporting
against indicators material to our business.

conducting an analysis of our public disclosuresand internal data capture versus the entire
SASB framework and have started work toclose the gaps.

With the rapidly increasing demands fortransparency and disclosure from many
stakeholders, investors and analysts inparticular, we have committed to increase ourreporting alignment with the Sustainability
Accounting Standards Board (SASB)
framework. In 2021 we have utilised the SASB
process safety indicators as the basis formeasuring and reporting our Process Safety
progress, one of our Fundamental KPIs (seeSustainability Report, page 37). We are also

While we anticipate further alignment with
SASB in 2022, we are also monitoring thetransformational development in global
sustainability standard setting. In June 2021
SASB and the International Integrated
Reporting Council (iiRC) announced they would
merge to form the Value Reporting Foundation(VRF) and, at COP26 in November, the IFRSFoundation announced the launch of theInternational Sustainability Standards Board(ISSB) to run alongside the International

Accounting Standards Board (IASB). ISSB has
already reached agreement with VRF and othersustainability reporting standard setters to pool
resources and expertise to develop unified
global sustainability standards for reporting anddisclosure. We will work with our stakeholders
and the standards boards to identify how wewill maintain disclosure compliance.
We support the aims of the Task Force on
Climate-related Disclosure and are adopting
their reporting recommendations to aid both
our understanding of climate change on ourbusiness, and of our business on climatechange (see pages 40 to 43).

Non-financial information statement
The table below sets out where more information can be found in our Annual Report (AR) and Sustainability Report (SR) that relates tonon-financial matters, as required under the Non-Financial Reporting Directive.
Reportingrequirement
Environmental
matters

Employeematters

Some of our relevant policies

Read more about
our impact and metrics

Annual Report
page

Sustainability
Report pageGroup SHE policy1

Process Safety

P31 & 54

P34 & 37

Supplier Code of Conduct2

Environmental Stewardship

P34 & 37

Product Stewardship

P35 & 40

Principal risks
Major safety or
environmental
incident (P54)
Delivering
sustainable
solutions (P53)

Sustainable Sourcing and SupplierPartnership

P42

P35 & 41

Climate Positive

P32

P20 to 25

Land Positive

P33

P26 to 29

Delivering value through our culture

P36

Our people (P54)

Code of Conduct

Key people metrics

P37

Group Policy on Training andDevelopment2

Workforce engagement

P90

Ethics andcompliance (P55)

People Positive

P33

International Human Rights policy2

Living Wage

P92

Group policy on Discrimination2

Fair income

Code of Ethics22

Equal Opportunities policy2

P30 to 33

Group SHE policy1
Respect forhuman rights

Our people (P54)
P35 & 38

Code of Conduct2
Social matters

Code of Conduct2

Driving innovation through D&I

P9, 12, 37, 77 and 92

Our people (P54)Group Policy for Managing Diversity

2

Transgender policy2
Anti-bribery and Code of Conduct2
corruption issues
Countering bribery2

Responsible business

P34 & 38

Ethical compliance

P83

Business model

P16

Ethics andcompliance (P55)

Croda Modern Slavery Statement2
Whistleblowing Policy2
Competition Law Policy1
Croda Fraud Policy1
Ethics Procedures Manual1
Business model

Our Purpose2
Our Commitment2

1. Available to employees via the Company intranet (Connect), not published externally.
2. Available to employees via the Company intranet (Connect) and published on www.croda.com.

38

Croda International Plc
Annual Report and Accounts 2021

All key risks on P53
to 55 link to ourbusiness modelTackling the climate emergency

As a signatory to the UN Global Compact
Business Ambition for 1.5°C and member ofthe Race to Zero campaign, we aredemonstrating leadership on climate action in
an industry that is recognised as hard to
decarbonise. In July 2021, this leadership
continued as we became only the third major
chemical company globally to have a 1.5°C
Science-Based Target validated and declare
our ambition to be net zero* by 2050.

Emissions target: By the end of 2029 we will
have reduced our operational (scope 1 and 2)
emissions by 46.2% from a 2018 baseline. With
the majority of our emissions within our supply
chain, we also had our scope 3 target
approved by the SBTi, to reduce our absolute
upstream scope 3 emissions by 13.5% over thesame time frame. The focus here is to engage
and work with suppliers to reduce emissions
associated with sourcing raw materials (seepage 32) alongside transportation anddistribution of products to our customers. By
taking actions to achieve these targets within
our operations and supply chain we can
support our customers and enable them tomeet their own supply chain SBT emission
reduction targets.

achieve 75% of our organic raw materials by
weight to be bio-based. These absorb carbon
as they grow, and using them allows us tominimise our impact on the environment by
designing lower-footprint products. In 2021 wecontinued to show progress, achieving 69%(2020: 67%) bio-based organic raw materials.
Carbon cover target: Climate Positive, for us,
means more than achieving net zero emissions
by 2050. Through our carbon cover target we
aim to help customers and consumers save or
avoid four times the emissions associated with
our entire value chain (scope 1, 2 and 3). In
2021 we helped customers avoid 951,000
tonnes CO2e (2020: 838,000 MT CO2e).
For more, see our 2021 Sustainability Report.

P20-23

Sustainable innovation target: In addition,
we also have a sustainable innovation target to* Net zero means eliminating almost all scope 1 and 2 emissions and significantly reducing our upstream scope 3
emissions, with any residual supply chain emissions permanently offset through fully validated and approved schemes.

Greenhouse gas scope 1 and 2 emissions and intensity charts

Scope 1 / tonnes CO2e

Scope 1 and 2 emissions intensity

250

200

54
39

150

155

142

28
150

22
161

100

GHG emissions intensity (TeCO2e/£m)

Scope 2 / tonnes CO2e
350

316

300

275

264

250

193

200
150
100

50
50
0

2018

2019

2020

0

2021

2018

2019

2020

2021

1. Our GHG inventory has been completed in accordance with the Greenhouse Gas Protocol, Corporate Accounting
and Reporting Standard (Revised Edition). Scope 1 emissions are calculated using Defra Government emission
conversion factors for greenhouse gas company reporting. Scope 2 emissions are market-based.
2. Value added is defined as operating profit before depreciation and employee costs at reported currency.

Emissions and energy usage
Scope 1/tonnes CO2e
Scope 2/tonnes CO2e
Total scope 1 and 2 / tonnes CO2e
Scope 1 energy use / kWh
Scope 2 energy use / kWh
Total Energy use / kWh

GHG emissions intensity(TeCO2e/£m)

GHG emissions1

Scope 1 and 2 emissions (‘000 tonnes CO2e)

Since 2018, our baseline year, our total scope 1 and
2 greenhouse gas (GHG) emissions have reduced by
12.7%. Within this, scope 1 emissions increased by
4%, whilst we have seen a 60% reduction in scope 2
emissions. This has been driven by a switch torenewable electricity across our manufacturing sites. In
2021 we engaged with Accenture to help us withrenewable electricity sourcing options for our
manufacturing sites in Asia, where availability of green
electricity is more challenging. Renewable Energy
Certificates (RECs) purchased at Thane in India andSingapore have led to a significant reduction inemissions this year.
Scope 1 and 2 GHG emissions from our UK operations
were 34,559 TeCO2e in 2021 (2020: 35,692 TeCO2e)
representing approximately 19% of our global GHG
emissions.
Our chosen measure of GHG emission intensity divides
our GHG emissions (market-based scope 2 emissions)by value added2, a measure of our business activity.
Since 2018, our GHG emissions intensity has
improved by 39%, illustrating how we are decoupling
growth from our environmental impact.
Our scope 1, 2 and 3 GHG emissions are verified by
Avieco. Their formal independent verification statement
is available at: www.croda.com/carbonverification
Energy consumption and efficiency improvements
In 2021 we consumed 1,178,117,781 kWh(2020: 1,125,612,495 kWh) of energy across our global
operations. This included 219,130,734 kWh(2020: 222,759,173 kWh) consumed by UK operations.
As part of our strategy to improve the efficiency ofenergy consumption, 36 projects were implemented
globally, realising 39,514,274 kWh of annualised
efficiency improvements, equivalent to 9,063
TeCO2e avoided emissions.

2021

2020

UK

Rest of world

Total

UK

Rest of worldTotal

34,321
238
34,559185,948,678
33,182,056
219,130,734

126,514
21,390147,904
753,882,423
205,104,623
958,987,047

160,835
21,628
182,463
939,831,101
238,286,679
1,178,117,781

35,279413
35,692
189,846,081
32,913,091
222,759,173

114,342
27,430141,772
708,638,453
194,214,869
902,853,322

149,621
27,843
177,464
898,484,534
227,127,960
1,125,612,495

Croda International Plc
Annual Report and Accounts 2021

39

Strategic report

The urgent need for society to tackle the climate
emergency was highlighted during 2021. The
United Nations Conference on Climate Change(COP26) showed that governments andbusinesses must both play their part in movingfrom ambition to action if we are to limit global
temperature rises to no more than 1.5ºC above
pre-industrial levels and prevent the mostcatastrophic effects of climate change.

Sustainability (continued)

Task Force on Climate-related Financial
Disclosures (TCFD)
Croda has long recognised the scale of the climate emergency andconsiders this to offer both opportunities and risks to our future growth.
We consider actions to mitigate these risks as a core part of delivering
our strategic Commitment to be Climate, Land and People positive(page 30). As a ‘Race to Zero’ partner and a signatory to the UN Global
Compact’s Business Ambition for 1.5˚C we committed to set an
ambitious 1.5˚C 2030 Science Based Target (SBT) and become net zeroa.

Governance

Describe the Board’s
oversight of climaterelated risks andopportunities.

b.
Describemanagement’s rolein assessing andmanaging climaterelated risks andopportunities.

a.
Describe the climate
related risks andopportunities theorganisation has
identified over the
short, medium,and long-term.

Strategyb.
Describe the impact
of climate related risks
and opportunities on
the organisation’s
businesses, strategy,
and financial planning.

c.
Describe the resilienceof the organisation’s
strategy, taking into
consideration different
climate related
scenarios, including a
2°C or lower scenario.

40

by 2050. In July 2021 we became the third major chemical company inthe world to have these SBT commitments verified. We continue tointegrate our climate related disclosures throughout our Annual Reportand our Sustainability Report. The Sustainability Report provides anopportunity to explain our approach in more detail and to provide casestudies to illustrate our progress.

Compliance

Next steps and timeframes

The Board oversees the setting and delivery of the strategy and is accountable for all risks,
including climate related risks. In 2021 the Board completed a strategic deep dive of thesustainability strategy including opportunities and risks (page 65). The Board considers all
principal risks, including climate related risks, in its annual review (page 66). The Board
receives a quarterly update of progress against sustainability targets from the Executive
Committee, including an update on key risks and opportunities against which specific actions
have been identified (page 64). In 2021 a member of the Board attended the Executive
sustainability strategy review (of which climate is a key pillar).

The Board's agenda for2022 includes a full review
of sustainability progressand externally provided
sustainability education,
both including climate
related risks andopportunities.

Assessment, management and monitoring of climate related risks is governed through the
Sustainability Committee, which meets quarterly and which is chaired by the Chief
Sustainability Officer, Phil Ruxton. This is a formal sub-committee to the Executive Committee(page 73), with delegated authority to oversee the development, measurement and delivery of
our sustainability KPIs across the four pillars of our strategy: Climate, Land, People andFundamentals (page 30). The Committee is also responsible for Group communications andrecommendations to further develop our strategy. It comprises members of the Executive
Committee and senior leaders from across Croda, with each member responsible for deliveryof specific 2030 targets across the Climate, Land, People and Fundamentals pillars. In 2021,
our CEO led the Executive Committee in a review of our sustainability strategy supported andinformed by the investor community (case study on page 19) and we held our second carbon
summit for senior leadership.

The Sustainability
Committee will continue tomonitor and report on thedelivery of the programmethroughout 2022.

Through our global risk management process, we have identified 41 climate related
opportunities and risks covering the short, medium and longer term, covering bothtransitional and physical causes as defined by the TCFD. They relate both to Croda's impact
on the environment and how our products help our customers to manage their own climate
impact, and to the impact of environmental change on Croda including increased raw material
costs, carbon pricing, emerging regulation and the effects on our people and working
environment. We describe four of these risks in more detail on page 43 and we will consider
how to disclose our risks and opportunities in additional detail in future Annual Reports. Oursustainability materiality framework table, described on page 30, summarises risks andopportunities identified from our 2021 materiality assessment and there is further detail on
pages 14 to 15 of our Sustainability Report.

We will consider how todisclose our risks andopportunities in more detailin our 2022 Annual Report.

Climate related opportunities form one of the three pillars of our sustainability strategy, tobecome Climate Positive by 2030 (page 30). As a core part of our business strategy equation,
sustainability + innovation = growth, the impact of not delivering our climate related pillar issignificant and hence we recognise this in our principal risks on page 53. We assess theimpact of our risks, and the benefits of our opportunities using the six point grading scale
defined in our risk framework (page 52). In agreement with our core banking group, theinterest rate on our principal committed banking facilities is reduced if we reduce our carbon
use every year by a specified amount. If this is achieved then we will reinvest this saving insustainability projects (case study on page 36 2019 Annual Report). During 2021 wecompleted detailed analysis of the impact of four climate related risks against three futureclimate scenarios and the results are shown on page 43. We summarise our GHG
commitments and plans to reduce emissions on page 39 and provide further detail on page
20 to 23 of our 2021 Sustainability Report.

A further four climate
related risks will be subject
to full scenario assessment
in 2022. Althoughinterdependencies between
risks are identified, further
work will be focused in thisarea in 2022 to makethese interdependencies
more transparent.

During 2021 we undertook (with support from a third party) detailed scenario analysis of four(10%) of our climate related risks/opportunities (two transitional and two physical), to
determine the degree of resilience in our strategy. Financial impact was assessed using thesame base financial model used for both going concern and viability statement assessments.
Three climate change scenarios were considered: Orderly (+1.5°C), Disorderly (+2°C) and Hot
House (+3°C) across six five-year time horizons to 2050. Our scenario process and the resultsfrom our 2021 assessment are summarised in more detail on page 42 and 43.

We will continue to assess
the resilience of our climate
strategy through further
scenario analysis in 2022.

Croda International Plc
Annual Report and Accounts 2021

For 2022, our PSP includes
sustainability metrics which
relate to reductions inemissions (page 96);
directly linked to our
Climate Positivecommitment.

a.

Risk management

Describe theorganisation’s processes
for identifying andassessing climate
related risks.

b.
Describe theorganisation’s processes
for managing climaterelated risks.

c.
Describe how processes
for identifying, assessing,and managing climaterelated risks areintegrated into theorganisation’s overallrisk management.

Metrics & targetsa.
Disclose the metrics
used by the organisation
to assess climate relatedrisks and opportunities inline with its strategy andrisk management
process.

b.
Disclose Scope 1, Scope
2 and, if appropriate,
Scope 3 greenhouse gas(GHG) emissions and therelated risks.

c.
Describe the targets usedby the organisation to
manage climate relatedrisks and opportunities
and performance against
targets.

(Implementing the Recommendations of the Task Force on Climaterelated Financial Disclosures (2021 TCFD Annex)) there are somerecommendations that we continue to consider how to more completely
explain. Our work will continue throughout 2022 with the intention ofproviding fuller disclosure in our 2022 Annual Report as required by the
Listing Rules.

Compliance

Next steps and timeframes

The process for assessing and identifying climate related risks is fully embedded as part ofour global risk management process which is described on pages 50 to 52. When new andemerging risks or opportunities are identified they are assigned a business owner and areprioritised using our 6x6 risk assessment scale to determine their potential impact andlikelihood. We identify climate related risks across all categories of our risk management
framework: Strategic, People and Culture, Process, External Environment (which includes
external regulatory) and Financial, and include security of raw material supply, supply chain,
existing/emerging regulation and people. Risks and opportunities are grouped as either
having transitional or physical causes as defined by the TCFD. When considering principal
risks we pull all sustainability risks together within our 'Delivering sustainable solutions' risk
(page 53) which was added as a standalone principal risk in 2019, recognising its
significance to both ourselves and our customers.

The identification of
emerging risks andopportunities and theassessment of our current
risks will continue throughour global risk management
process (page 52).

In line with our model of decentralising the management of risks and opportunities to thefirst line, to be close to the point of action ownership, day-to-day management of climate
related risks and opportunities is delivered by named owners globally. Our small central
Group Sustainability and Sustainable Sourcing functions provide expertise and manage
third-party relationships. In 2021 we founded regional sustainability champions to catalyse
activity and share best practice at local level. Climate related risks and opportunities, andtheir mitigating controls and actions are captured in our global risk management system,
the Digital Hive which provides transparency of risks and reporting (page 50). Delivery of
our climate pillar is led by a named senior leader and progress is reported at the quarterly
Sustainability Committee.

We will continue to support
risk owners in managing
risk with the support of theregional sustainability
champions.

The process for assessing and identifying both current and emerging climate related risks
and opportunities is the same as for all our risks and uses our global risk framework which
is described on pages 50 to 52 of this report. In 2021 we conducted our fourth materiality
assessment (page 30) to take the temperature of stakeholder expectations and assesssustainability risks and opportunities for Croda, including those relating to climate.

Following the completionof our 2021 materiality
assessment, emerging risks
and opportunities identified
will be added to the Digital
Hive where they do notalready exist.

The metrics which we use to assess climate related risks and opportunities are describedin more detail on page 31 of this report, with further detail in our 2021 Sustainability Report(page 20). A full ESG data pack has been developed and is downloadable from croda.com.
We include the emissions metric in our key performance indicators on page 44. In 2021 weinvested in market leading technology to collate and automate internal reporting of ourmetrics and trained employees having data entry and valuation responsibilities. We describe
our internal carbon pricing on page 32.

In 2022 we will roll out
customisable metricdashboards to management,
undertake an internal audit
review of non-financial KPI
processes and procedures(page 81), and include
emissions metrics as part ofour PSP (page 96).

Scope 1, 2 greenhouse gas emissions and our calculation methodology are disclosed on
page 39. In 2021 we established a clearer view of our supply chain emissions, undertaking
a thorough analysis of our scope 3 GHG emissions, which was externally verified by Avieco(page 32). Life cycle assesment studies for key raw materials were also updated in 2021
(page 32). For more detail on our scope 3 methodology see our Sustainability Report
page 22).

Based on our 2021 scope 3
carbon assessment, we willcontinue to work to
decarbonise our supply
chains.

As part of our sustainability strategy review in 2020, new climate related objectives andtargets were set for 2030, which are laid out in more detail on page 20 of our Sustainability
Report. Three key targets are identified (page 39): reducing emissions (including scope 1, 2
and 3 greenhouse gas emissions), sustainable innovation and carbon cover, each of which
has clearly identified targets and milestones defined.

Croda International Plc
Annual Report and Accounts 2021

41

Strategic report

In the TCFD table below we have summarised material climate related
financial disclosures consistent with the four recommendations and theeleven recommended disclosures proposed by TCFD. Further detail ofthese can be found throughout our Annual Report and Sustainability
Report as referenced. As we continue to align our approach to the
updated TCFD additional guidance which was released in October 2021

Sustainability (continued)

2021 climate scenario analysis (CSA) modelling
Scenario analysis helps us to understand the potential impact of climate change on our future business, to inform our strategy and futurebusiness planning.
Methodology
The CSA was conducted using a standard methodology in line with the TCFD’s guidance. Climate scenarios defined by the Network for Greening
the Financial Systems (NGFS) were used to model the potential climate related risks and opportunities that Croda may be exposed to. Selectedclimate related risks and opportunities identified through our risk assessment process were modelled against the following three scenario categories:• Net Zero 2050: Orderly (+1.5°C) – early, ambitious action to a net zero CO2 emissions economy;• Divergent Net Zero: Disorderly (+2°C) – action that is late, disruptive, sudden and / or unanticipated;• Current Policies: Hot house world (+3°C) – limited action leads to a hot house world with significant global warming and, as a result, strongly
increased exposure to physical risks.
We considered the impact over six, five year time periods to 2050, which extends significantly beyond our strategic planning horizon but is inline with our commitment to be net zero by 2050. For each transitional risk we also considered the impact under the assumption that Croda
continues to operate as today (business as usual) and secondly that currently planned mitigating actions to meet Science Based Targets are
successfully implemented.
Scenario data from the NGFS and Orbitas Finance, in conjunction with Croda’s financial and process data, were used to forecast and quantify thepotential levels of climate related financial risk in line with Croda’s risk matrix.
Conclusions
Our analysis shows that although the scenarios present financial risks to Croda, these could be managed by currently planned mitigating actions
meaning that we would not have to materially change our business model. Of the risks assessed the potential cost impact of carbon taxation acrossthe two transitional risks is the most notable, which will mitigated by implementing our planned emissions reduction programme, described in moredetail on page 39.

The transition to 100% RSPO-certified palm derivatives – mitigating transitional and physicalclimate-related risks
Our sustainable sourcing activities andfuture strategy will play a large part in
mitigating both physical and transitional
climate-related risks associated with ourraw materials. Since 2012 we havesupported the transition to RSPOcertified sustainable palm, with 85%
of our purchased palm derivatives
RSPO-certified by the end of 2021.
RSPO-certified palm oil cultivation leads
to increased yields due to more efficientfarming practices, increasing availability ofpalm and palm kernel oil without further
deforestation. Being a leading voice inindustry and working with coalitions such
as ASD to drive further industry transition
to RSPO helps to mitigate the risks
associated with increased pricing due tolack of availability.
A peer reviewed LCA study1 has
demonstrated the measurable carbon
footprint reduction associated withswitching to RSPO-certified palm
derivatives.

This is contributing to progress against
our science-based target as well as
mitigating the risk and impact of any
potential carbon taxation associated with
our product carbon footprints, for both
ourselves and our customers.
1. Schmidt J and De Rosa M (2019).
Comparative LCA of RSPO-certified andnon-certified palm oil – Executive Summary.
2.-0 LCA consultants: https://lca-net.com/
clubs/palm-oil/Since 2018, our transition to RSPO certified
ingredients has led to a 23,949 tonnesCO2e
reduction in our scope 3 purchased goods
and services category.

42

Croda International Plc
Annual Report and Accounts 2021

Risk

Modelling assumptions

Summary of findings

Carbon pricing on
direct emissions

Rising carbon taxes may impact profits through increased
direct costs (tax on direct emissions from operations). Key
markets may develop and implement regional policies suchas the EU carbon border tax to prevent carbon leakage.
Using Croda revenue and emissions projections, thepotential cost impact of increased carbon prices associatedwith Croda direct emissions was calculated. The cost
was modelled across the future climate related scenarios
using carbon price models at a global level from the
NGFS database.

In the Current Policies scenario, the additional cost of carbon
taxes increase is limited, resulting in a minor level of financial
risk to the business out to 2045, when the risk level
increases to low. In both the Net Zero 2050 and theDivergent Net Zero scenarios the additional costs due tohigher levels of carbon taxation are forecast to expose Croda
to high levels of financial risk beyond 2030 assuming abusiness-as-usual emissions trajectory, which is mitigatedto moderate levels when following the planned emissions
reduction trajectory in line with Croda’s current Science
Based Targets.

Cost of natural gas

Future costs of natural gas may impact profits throughincreased direct costs. Future natural gas prices differ infuture climate scenarios but all result in an increase in unit
price, likely driven by carbon taxation. Using Croda revenue
and natural gas usage projections this scenario assessed
the possible cost to Croda of increased natural gas prices,which has been modelled across the future climate related
scenarios using natural gas price models at a global levelfrom the NGFS database.

In a business-as-usual energy usage trajectory the Current
Policies scenario saw the lowest levels of financial risk,
beginning with a moderate level and reaching high risk levels
by 2040. In both the Net Zero 2050 and the Divergent Net
Zero scenarios the additional costs due to natural gas priceincreases are expected to expose Croda to high levels offinancial risk from 2030 onwards. This is mitigated by
implementing Croda’s current decarbonisation strategy
resulting in reduced usage of natural gas.

Modelling assumptions

Summary of findings

Physical risks
Risk

Natural raw material Potential changes in mean global temperatures are likely topricing
affect the location, yield and type of crops grown aroundthe world, with resulting impact on raw material availability
and cost. In 2020 palm oil derivatives formed a significant
volume of our raw materials and this trend is expected tocontinue. As such, the future change in the price of palm
derivatives will likely have a direct effect on the cost of saleof palm-based products. The potential changes in the costof sales that Croda may be exposed to has been modelledusing the future percentage increase of palm oil prices(Orbitas – Climate Transition Risk Analyst Brief: IndonesianPalm Oil) against the total volumes and price of palm
derivatives purchased by Croda in 2021.

The cost of palm is forecast to expose Croda to varying
levels of risk across two different climate related scenarios
for which clear models are available. In the Current Policies
scenario, the cost of palm oil increase is limited, resulting in alow level of financial risk to the business out to 2035 at which
point the cost of palm is forecast to drop below the 2020
baseline cost resulting in a cost saving opportunity for thebusiness, driven by continual efficiency improvement infarming technologies (partially supported by Croda
innovation) driving prices down. In a Net Zero 2050 scenario
a predicted increase in the cost of palm oil (driven byincreasing demand for palm oil as an alternative to fossil
based oils for fuel) is expected to drive moderate and highlevels of financial risk by 2045. Our focus on high value
niches and differentiated products with uniquecharacteristics helps to mitigate this risk by enabling us
to pass on raw material cost increases to our customers.

Labour productivity

In all three future climate scenarios there are only minor
or low levels of financial risk to the business for all time
periods considered.

As global mean temperature increases, heat stress within
the work force is also forecasted to increase. Heat stresscan impact labour productivity due to the reduced capacityof the human body to perform physical labour. To maintain
forecast levels of production across the business, Croda
may have to hire more staff, increasing our overall staff
costs. Staff costs were modelled using Croda staff costs,
production volumes and expected annual growth rate inconjunction with NGFS labour productivity due to heatstress data.

Croda International Plc
Annual Report and Accounts 2021

43

Strategic report

Transitional risks

Key Performance Indicators

Measuring our progress
Our strategy is to combine sustainability andinnovation to deliver growth. We measure ourprogress against each of these priorities
through a range of KPIs.

R

Target:By 2030, we will have achieved our Science Based Target, reducing emissions in linewith limiting global warming to no more than 1.5°C above pre-industrial levels.
Performance:
Since 2018 our scope 1 & 2 emissions have reduced by 12.7%, in line with the absoluteemissions reduction pathway required to achieve our verified Science Based Target. Thishas been driven by a 60% reduction in scope 2 emissions following a switch to renewableelectricity at our manufacturing sites. Since 2018 our emissions intensity has improved by
39% and we are successfully disconnecting growth from emissions. For more detail see
Sustainability on page 39.

Land area saved (hectares)

R

Sustainability

Definition:
Land area saved through the application of our crop protection and seed enhancement
technologies, using 2019 as our baseline year.
Target:Throughout this decade, the land saved through the application of our technologies will
exceed any increase in land used to grow our raw materials by at least a factor of two,and by 2030 we will save a minimum 200,000 hectares per year more than in 2019.

Scope 1 / tonnes CO2e

Scope 2 / tonnes CO2e
Scope 1 and 2 emissions intensity
250,000

350

200,000

300
250

150,000

200

100,000

150
100

50,000
0

50
2018

2019

2020

Definition:
The number of pipeline vaccines that we are contributing to that combat theWorld Health Organisation's (WHO) 24 priority diseases.
Target:By the end of 2024, our technology will be contributing to at least 10 clinical phase III
trials across at least 25% of the WHO-listed pipeline vaccines.

0Land area saved (hectares)®

Land area saved

33,73433,734hectares of land saved
over the 2019 baseline

16,455

Performance:
In 2021 the use of our agricultural ingredients and new technologies saved 33,734
hectares of land compared to our 2019 baseline. This puts us on track to achieve our2030 target that the land we save outpaces the land we use as our business grows by
a factor of at least two. Read more in our Sustainability section on page 33.

Health and wellbeing**

2021

Emissions intensity (tonnes CO2e / £m)

Definition:
Our operational emissions (associated with burning fuels onsite and purchased electricity),
both in absolute terms and as emissions intensity. Our chosen measure of emissions
intensity divides our GHG emissions (market-based scope 2 emissions) by value added,
a measure of our business activity*.

Scope 1 and 2 emissions (tonnes CO2e)

Scope 1 & 2 emissions and intensity*

Scope 1 & 2 emissions and scope
intensity

2020

2021

15/24

Our smart science is contributing
to vaccine projects combatting
15 of the WHO’s 24 priority diseases

Performance:
We have continued to increase engagement with teams researching WHO-listed pipeline vaccines
and are now supporting 79 projects (2020: 32) contributing to tackling 15 of the 24 priority diseases.
Total recordable injury rate

Total Recordable Injury Rate^
Definition:
The number of incidents per 200,000 hours worked where a person has sustained
an injury, including all lost time, restricted work and medical treatment cases.
Target:Achieve TRIR of 0.3 by the end of 2024, with an interim target of 0.6 for 2022.
Performance:
The headline TRIR increased from 0.58 to 0.73^ in 2021. Injury rates at the sites of recently
acquired businesses are, on average, higher than established Croda sites and while they
are reducing as integration progresses, their inclusion has driven an increase in the overall
Group TRIR. There was also a small increase driven by existing Croda sites as a return tomore normal working patterns has seen increased recordable injuries. To read about our
performance and safety initiatives see page 36 of our 2021 Sustainability Report.

Employee

Contractor

Combined

2018

2019

1.0
0.8
0.6
0.4
0.2
0.0

2017

2020

2021

* See page 39 for our definition of value added and further detail on our emissions intensity.
** Our People Positive strategy encompasses various targets and cannot be represented by a single KPI. In 2022 we plan to implement an employee
engagement KPI for reporting. We have also introduced a specific gender balance target to our Remuneration Policy for 2022.
^
Both the 2021 and 2020 TRIR include businesses acquired but exclude workplace related COVID-19 cases.

44

Croda International Plc
Annual Report and Accounts 2021

Key:
R

Remuneration:

Innovation

New and Protected Products (NPP) sales %R

Definition:
Proportion of sales from NPP (in constant currency). NPP products are sales
protected by virtue of being either newly launched, protected by intellectual property
or by unique quality characteristics.

Strategic report

KPIs that form part of our Remuneration Policy. See page 88.

Data TBC

NPP sales %

36.6%
27.6%

28.2%

28.1%

27.4%

2017

2018

2019

2020

Target:
NPP sales to grow ahead of sales growth.
Performance:
NPP sales increased from 27.4% in 2020 to 28.0% on an organic basis, or to 36.6%,
including the impact of the Iberchem and Avanti acquisitions. This reflects strong
sales of lipid systems and a high NPP percentage at Iberchem where a large
proportion of sales are of new products due to ongoing innovation within thatbusiness model. Read more about innovation in Identifying unmet needs on page 4.

2021

Core Business sales growth43.2%

Sales growth (%)
Definition:
Total sales growth measured at constant currency.
Target:Mid-single digit % growth in Consumer Care. High-single digit % growth in Life
Sciences. Excluding raw material price recovery.

4.6%

Performance:
Sales growth in 2021 was 43.2%, driven by an excellent performance across all
sectors including 52.9% growth in Consumer Care and 53.5% growth in Life
Sciences. Acquisitions contributed 16.9% to sales growth, but excluding acquisitions
underlying sales growth was 26.3%.

GrowthReturn on sales (ROS) (%)

2017

Definition:
Adjusted operating profit as a percentage of sales.

40

Target:Improve ROS in Consumer Care. ROS similar to current levels in Life Sciences.

30

Performance:
Group ROS increased by 180 basis points to 24.8%. Consumer Care ROS was
24.7% (2020: 27.8%) reflecting the dilution effect from F&F, which operates at
structurally lower margins than Personal Care. Life Sciences ROS was 36.4%(2020: 31.7%) reflecting strong growth in higher-value patient health technologies.

1.1%
-2.6%

50

R

2.9%

2018

2019

2020

2021

CC 24.7%

LS 36.4%

PT 14.7%

Group total 24.8%

2017

2018

2019

2020

2021

14.6%

14.2%

2020

2021

20
10
0

Return on invested capital

Return on invested capital (ROIC) (%)
Definition:
Adjusted operating profit after tax divided by the average adjusted invested capital.
Adjusted invested capital represents net assets adjusted for net debt, earlier goodwill
written off to reserves and accumulated amortisation of acquired intangible assets.

21.2%

19.2%

Target:ROIC of two to three times cost of capital.
Performance:
The post-tax return on invested capital (‘ROIC’) was broadly flat at 14.2%(2020: 14.6%). Despite a significant increase in average invested capital due to theannualisation of 2020 acquisition activity, the growth in adjusted operating profit netof tax resulting from these investments, together with underlying growth, broadly
offset this. ROIC continues to be more than twice the Group’s cost of capital.

2017

2018

17.0%

2019

Adjusted basic earnings per share (EPS)

Adjusted basic earnings per share (EPS)R

Definition:
Adjusted profit after tax divided by the average number of shares in issue.
Target:At least mid-single digit % EPS growth per annum.
Performance:
Adjusted earnings per share increased by 42.5% to 250.0p. This growth was driven
by excellent profit growth and a marginally lower tax rate of 21.2% (2020: 24.1%)
offset by an increased number of shares in issue following the equity placing in 2020.

250.0p179.0p190.2p185.0p175.5p

2017

2018

2019

2020

2021

To read more about our financial performance see Finance review

P46

Croda International Plc
Annual Report and Accounts 2021

45

Finance review

We expect to continue with thecurrent accelerated capital
reinvestment and acquisition
programmes over the next three
years, given the strong demandenvironment and range of growth
and technology opportunities inConsumer Care and Life Sciences.

Record profit
and margindelivered

Jez Maiden
Group Finance Director
Adverse impact from currency translation
The average Sterling exchange rates against the Group’s key currencies strengthened during2021 to US$1.375 (2020: US$1.285) and €1.164 (2020: €1.125). As a result, currency translation
reduced reported currency sales by £101.6m and adjusted operating profit by £24.8m.
Transactional currency impact is correlated with translation, given that the UK is a meaningful
centre of production for the Group, with the strength of Sterling having an adverse impact
on margins.
Strong sales from organic growth and acquisition
Sales grew by 35.9% to £1,889.6m (2020: £1,390.3m), comprising underlying growth of 26.3%
and a first-year acquisition benefit of 16.9%, partly offset by adverse currency translation of 7.3%.
Volume was 8.9% higher than prior year and sales price/mix rose by 17.4%, reflecting successful
recovery of raw material cost increases, together with a better product mix.
Full year ended 31 December

Sales
performancewas excellent
across all sectors,
augmented by raw
material cost
recovery.”

2021
£m

Price/mix

Currency

Change2020
Restated
£m

763.0
572.3

12.8%
34.9%

5.2%
5.5%

34.9%
13.1%

(8.3)%(7.7)%

44.6%
45.8%

527.8
392.5

439.5
114.8
1,889.6

11.0%
14.6%
17.4%

12.5%
10.3%
8.9%

–
–
16.9%

(5.9)%(5.8)%(7.3)%

17.6%
19.1%
35.9%

373.6
96.4
1,390.3

Sales

Consumer Care
Life Sciences
Performance
Technologies
Industrial Chemicals
Group

Volume Acquisition

Sales performance was excellent across all sectors, augmented by raw material cost recovery.
Consumer Care sales increased by 44.6%, supported by a return to strong volume growth. Life
Sciences sales increased by 45.8%, with growth across all markets and sales of approximately
US$200m from the lipid systems platform primarily to our principal vaccine customers. With
volume growth in industrial end markets, Performance Technologies sales increased by 17.6%,
whilst a recovery in commodity prices saw Industrial Chemicals sales 19.1% higher. Overall,year-on-year growth was slightly lower in the second half year, due to a softer first half comparator
when COVID-19 had its biggest impact in 2020.
2021 sales growth

First
half
%

Second
half
%

Full
year
%

Consumer Care
Life Sciences
Performance Technologies
Industrial Chemicals
Group

46.2
61.5
14.7
12.6
38.8

43.1
32.5
20.8
25.3
33.2

44.6
45.8
17.6
19.1
35.9

Note: Sector results for full year 2020 have been restated to reflect a change to the Group’s reporting structure.

46

Croda International Plc
Annual Report and Accounts 2021

% change
2021 vs.
2019

Underlying sales growth (excluding lipid systems)

17.3
23.6
15.9
8.0
17.7

Consumer Care
Life Sciences
Performance Technologies
Industrial Chemicals
Group

Record profit and margin delivered
2021 saw the most significant upward movement in raw material prices for over a decade, with our average basket of raw materials in the underlying
business up 17% across the year. Croda’s operating model is to recover such increases as they occur and this has been delivered overall, despite asmall lag in recovery in F&F, where the business model differs from Croda’s traditional model. Alongside a strengthening product mix as we grew inhigher value niches, this resulted in an improvement of 17% in sales price/mix.
2021 also saw significant volume recovery globally, up 9% in underlying terms, as consumer demand returned as COVID impacts eased andcustomers restocked. Combined with global supply chain disruption affecting many industries, including a shortage of freight containers and delays
accessing ports, together with new UK/European trading procedures post-Brexit and higher COVID-related absenteeism, maintaining customer
service came under some stress and we increased tactical inventory volume to alleviate delays and protect customer supply. With volume growthmoderating towards the end of the year, service levels improved. Our Brexit preparation plans were implemented smoothly and successfully.
2021 included a significantly higher remuneration incentive charge than the prior year, reflecting bonus and share-based payment costs due to theenhanced profit and share price performance; this reduced year-on-year margin by two percentage points. Despite these headwinds, Croda
achieved a record profit and return on sales in 2021.
2021
IFRS Adjustments
£m
£m

Sales
Cost of sales
Gross profit
Operating costs
Operating profit
Net interest charge
Profit before tax
Tax
Profit after tax

1,889.6(950.7)938.9(500.7)438.2(26.7)
411.5(88.7)
322.8–––(30.4)(30.4)(3.3)(33.7)
5.7(28.0)

2020
Adjusted
£m

IFRS
£m

Adjustments£mAdjusted£m

1,889.6(950.7)938.9(470.3)468.6(23.4)
445.2(94.4)
350.8

1,390.3(758.2)632.1(342.1)290.0(20.5)
269.5(67.9)
201.6–––(29.6)(29.6)(1.5)(31.1)
4.5(26.6)

1,390.3(758.2)632.1(312.5)319.6(19.0)
300.6(72.4)
228.2

IFRS operating profit increased by 51.1% to £438.2m (2020: £290.0m).
The charge for adjusting items before tax was £33.7m (2020: £31.1m). In common with many companies, Croda identifies adjusting items asamortisation of intangible assets arising on acquisition, together with exceptional items, which require separate disclosure by virtue of their size or
incidence. The charge for amortisation of intangible assets before tax increased to £34.3m (2020: £13.6m), reflecting the impact of recent
acquisitions. The net credit on exceptional items before tax was £0.6m (2020 charge: £17.5m), comprising a gain on pensions of £11.2m (arisingfrom transfer of the Dutch scheme to a collective defined contribution arrangement); a gain on contingent consideration of £6.2m related to previous
acquisitions; a charge for business acquisition and disposal costs of £13.5m, principally relating to the sale of the majority of PTIC; and a charge forthe unwind of the discount on contingent consideration of £3.3m. Excluding these adjusting items, adjusted operating profit increased by 46.6% to£468.6m (2020: £319.6m), reflecting higher sales and margin. Return on sales improved to 24.8% (2020: 23.0%).
With the adjusted net interest charge increasing to £23.4m (2020: £19.0m), including the write-off of a loan to a technology investment, adjusted
profit before tax increased by 48.1% to £445.2m (2020: £300.6m). IFRS profit before tax increased by 52.7% to £411.5m (2020: £269.5m).
The effective tax rate on adjusted profit reduced to 21.2% (2020: 24.1%). This benefitted from a one-off settlement of a previous uncertain tax
position; we expect the future tax rate to be around 25%. The impact of the divestment of the majority of PTIC on the future tax rate is expected to
be immaterial. There were no other significant adjustments between the Group’s expected and reported tax charge based on its accounting profit.
With an increase in shares in issue following the equity placing to acquire Iberchem in late 2020, IFRS basic earnings per share (EPS) were 230.0p(2020: 155.1p) and adjusted basic EPS increased by 42.5% to 250.0p (2020: 175.5p).
Profit performance was strong across all sectors, led by Life Sciences where adjusted operating profit was up 67.5%, reflecting sales growth and an
improvement in product mix towards higher value add niches. Consumer Care adjusted operating profit rose 28.7%, strengthening in the second
half year with continued growth and mix improvement in its Personal Care business. Performance Technologies benefitted from the recovery indemand, with higher volume positively impacting operating leverage, resulting in adjusted operating profit 31.9% higher. Industrial Chemicals enjoyedsignificantly better profit due to improved commodity pricing.

Croda International Plc
Annual Report and Accounts 2021

47

Strategic report

Underlying sales were 17.7% ahead of 2019 (excluding sales of lipid systems introduced since 2019, to provide a better basis of comparison),demonstrating significant growth against pre-pandemic levels. Consumer Care, Life Sciences and Performance Technologies were all up doubledigit percentage on 2019.

Finance review (continued)
2021

Operating profit
Consumer Care
Life Sciences
Performance Technologies
Industrial Chemicals
Group

IFRS Adjustments
£m
£m

168.0
201.0
62.7
6.5
438.2

(20.5)
(7.5)
(1.8)
(0.6)
(30.4)

2020 restated
Adjusted
£m

IFRS
£m

Adjustments£mAdjusted
£m

188.5
208.5
64.5
7.1
468.6

133.0
112.3
45.3
(0.6)
290.0

(13.5)(12.2)(3.6)(0.3)(29.6)

146.5
124.5
48.9
(0.3)
319.6

Underlying growth across the sectors added £116.0m to adjusted operating profit, acquisitions within the first year of ownership contributed £57.8m
and currency represented a £24.8m headwind.
Full year ended 31 December

Adjusted profit
Consumer Care
Life Sciences
Performance Technologies
Industrial Chemicals
Operating profit
Net interest
Profit before tax

2021
£m

188.5
208.5
64.5
7.1
468.6
(23.4)
445.2

Underlying
growth£m

Acquisition
impact£m

Currency
impact£m

2020
restated£m

Change

27.8
62.5
17.9
7.8
116.0

26.0
31.8
–
–
57.8

(11.8)(10.3)(2.3)(0.4)(24.8)

146.5
124.5
48.9
(0.3)
319.6
(19.0)
300.6

28.7%
67.5%
31.9%
–
46.6%
23.2%
48.1%

Impact of the divestment of the majority of PTIC
On 22 December 2021, the Group announced an agreement to divest the majority of the PTIC business and is currently working with the acquirer on
the process to separate the acquired activities from the Group. With completion of the divestment expected in summer 2022, this transaction had no
impact on the Group’s reported results for 2021, except for costs incurred reported as an exceptional item. In these 2021 results, PTIC revenue totalled£554m (2020: £470m) and adjusted operating profit was £72m (2020: £49m). Taking account of the value to be retained by Croda under future supply
agreements for products to be manufactured at Croda sites and supplied to the acquirer, together with dis-synergy costs remaining with Croda whichwere previously allocated to the divested business, the estimated impact of the divestment on Croda’s reported 2021 results, had it occurred at thestart of 2021, would have been to reduce revenue by £361m (2020: £298m) and adjusted operating profit by £59m (2020: £36m).
Lower free cash flow reflecting higher investment and demand growth
Free cash flow reduced to £153.6m (2020: £176.9m) as a result of higher working capital and increased capital investment. Working capital rose byjust over £100m due to increased raw material costs and selling prices, higher sales volumes and tactical increases in inventory to mitigate global
distribution challenges. The impact of higher pricing and sales volume (at constant working days cover) accounted for approximately £69m of theincrease with the balance reflecting tactical increases.
Full year ended 31 December

Cash flow
Adjusted operating profit
Depreciation and amortisation
EBITDA
Working capital
Net capital expenditure
Payment of lease liabilities
Non-cash pension expense
Interest & tax
Free cash flow
Dividends
Issue of new equity
Acquisitions
Other cash movements
Net cash flow
Net movement in borrowings
Net movement in cash and cash equivalents
Capital investment increased to £158.5m (2020: £121.0m), reflecting thestart of a programme to reinvest proceeds from the divestment of the
majority of PTIC to unlock growth opportunities in Consumer Care andLife Sciences. This is creating new technology platforms and expanding
existing capacity to drive superior future growth. This organic expansion
is supported by selected inorganic acquisition opportunities, with 2021
seeing £58.8m invested in new platforms, with Parfex in fine fragrancesand Alban Muller in natural Beauty Actives. Together, this organic andinorganic investment reflects elements 1 and 3 of the Group’s capital
allocation policy, to:48

Croda International Plc
Annual Report and Accounts 2021

2021
£m

2020
£m

468.6
79.0
547.6
(102.5)(158.5)(14.4)
11.2(129.8)153.6(132.5)–(58.8)
19.0(18.7)

319.6
68.2
387.8
(2.3)
(121.0)(7.6)
7.7(87.7)
176.9(115.9)615.5(869.7)(26.6)(219.8)

37.6
18.9

237.3
17.5

1. Reinvest for growth – invest in organic capital expenditure to drive
shareholder value creation through new capacity, product innovationand expansion in attractive geographic markets to drive sales andprofit growth;
2. Provide regular returns to shareholders – pay a regular dividend
to shareholders, representing 40 to 50% of adjusted earnings over thebusiness cycle. The full year dividend has been raised by 10% to100.0p (2020: 91.0p), being 40% of adjusted earnings;
3. Acquire disruptive technologies – to supplement organic growth,target a number of exciting technology acquisitions in existing andadjacent markets, strengthening Consumer Care and expanding Life
Sciences; andWe expect to continue with the current accelerated capital reinvestment
and acquisition programmes over the next three years, given the strong
demand environment and range of growth and technology opportunities
in Consumer Care and Life Sciences.
The post-tax ROIC was broadly flat at 14.2% (2020: 14.6%). Despite asignificant increase in average invested capital due to the annualisationof 2020 acquisition activity, the growth in adjusted operating profit net oftax resulting from these investments, together with underlying growth,broadly offset this. ROIC continues to be more than twice the Group’s
cost of capital.
Closing net debt was £823.2m (31 December 2020: £800.5m). The
Group has a strong balance sheet with its material debt maturities fallingdue between 2023 and 2030, and the primary bank revolving credit
Alternative Performance Measures (APMs)
We use a number of APMs to assist in presenting information in thisstatement in an easily analysable and comparable form. We use suchmeasures consistently at the half year and full year, and reconcile
them as appropriate. Whilst the Board believes the APMs usedprovide a meaningful basis upon which to analyse the Group’s
financial performance and position, which is helpful to the reader, it
notes that APMs have certain limitations, including the exclusion ofsignificant recurring items, and may not be directly comparable withsimilarly titled measures presented by other companies.
The measures used in this statement include:• Constant currency results: these reflect current year
performance for existing business translated at the prior year's
average exchange rates and include the impact of acquisitions.
Constant currency results are the primary measure used bymanagement to monitor the performance of overseas business
units, since they remove the impact of currency translation into
Sterling, the Group’s reporting currency, over which those overseas
units have no control. Constant currency results are similarly usefulto shareholders in understanding the performance of the Groupexcluding the impact of movements in currency translation overwhich the Group has no control. Constant currency results arereconciled to reported results in the Finance Review. The APMs
are calculated as follows:• For constant currency profit, translation is performed using theentity reporting currency;• For constant currency sales, local currency sales are translated
into the most relevant functional currency of the destination
country of sale (for example, sales in Latin America are primarily
made in US Dollars, which is therefore used as the functional
currency). Sales in functional currency are then translated
into Sterling using the prior year’s average rates for thecorresponding period;• Underlying results: these reflect constant currency values
adjusted to exclude acquisitions and disposals in the first year of
impact. They are used by management to measure theperformance of each sector before the benefit of acquisitions or the
impact of divestments are included, in order to assess the organic
performance of the sector, thereby providing a consistent basis onwhich to make year-on-year comparison. They are seen as similarly
useful to shareholders in assessing the performance of thebusiness. Underlying results are reconciled to reported results in the
Finance review;• Adjusted results: these are stated before exceptional items andamortisation of intangible assets arising on acquisition, and tax
thereon. The Board believes that the adjusted presentation (and thefacility extended during the year to 2026. As at 31 December 2021,
the Group had committed funding in place of £1,225.8m, undrawn
committed facilities of £334.4m and £112.8m in cash.
As part of the annual review of going concern, the Group conducts a
series of scenario tests for different economic environments. In 2021,
Group sales and profit performed well ahead of the base case scenario
evaluated in February 2021, whilst cash generation was broadly similar.
Retirement benefits
The post-tax asset on retirement benefit plans at 31 December 2021,
measured on an accounting valuation basis under IAS 19, improved to£5.8m (31 December 2020: £25.3m liability), primarily due to higher
discount rates and the transfer of the Dutch scheme to a collective
defined contribution arrangement. This new arrangement is accounted
for as a defined contribution scheme as the Group pays a fixed rate ofcontributions and members are paid pensions with variable increases.
The triennial actuarial valuation of the largest pension plan, the UK Croda
Pension Scheme, was performed as at 30 September 2020 andindicated that the scheme was 101% funded on a technical provisions
basis. Consequently, no deficit recovery plan is required. The Group has
discussed with the Trustee the impact on the scheme of the planned
divestment of the majority of PTIC and no changes to funding are
anticipated as a result.
columnar format adopted for the Group income statement) assists
shareholders by providing a meaningful basis upon which to analyse
business performance and make year-on-year comparisons. The
same measures are used by management for planning, budgeting
and reporting purposes and for the internal assessment of operating
performance across the Group. The adjusted presentation isadopted on a consistent basis for each half year and full year results;• Return on sales: this is adjusted operating profit divided by sales,
at reported currency. Management uses the measure to assess the
profitability of each sector and the Group, as part of its drive to growprofit by more than sales value, in turn by more than sales volume,
as set out in the Chief Executive’s review;• Return on invested capital (ROIC): this is adjusted operating
profit after tax divided by the average adjusted invested capital.
Adjusted invested capital represents net assets adjusted for net
debt, earlier goodwill written off to reserves and accumulated
amortisation of acquired intangible assets. The Board believes that
ROIC is a key measure of efficient capital allocation, in line with its
policy set out in the Finance Review, with its aim being to maintain a
ROIC of two to three times the cost of capital over the cycle, andthat it is useful to shareholders in assessing the superior returns
delivered by the Group and the impact of deploying more capital togrow future returns faster;• Net debt: comprises cash and cash equivalents (including bankoverdrafts), current and non-current borrowings and lease liabilities.
Management uses this measure to monitor debt funding levels andcompliance with the Group’s funding covenants which also use thismeasure. It believes that net debt is a helpful additional measure forshareholders in assessing the risk to equity holders and the capacity
to invest more capital in the business;• Leverage ratio: this is the ratio of net debt to Earnings Before
Interest, Tax, Depreciation and Amortisation (EBITDA) adjusted toinclude EBITDA from acquisitions or disposals in the last 12 month
period. EBITDA is adjusted operating profit plus depreciation andamortisation. The Board monitors the leverage ratio against theGroup’s debt funding covenants and overall appetite for funding risk,
in approving capital expenditure and acquisitions. It believes that the
APM is a helpful additional measure for shareholders in assessing
the risk to equity holders and the capacity to invest more capital in
the business;• Free cash flow: comprises EBITDA less movements in working
capital, net capital expenditure, payment of lease liabilities, non-cash
pension expense, and interest and tax payments. The Board uses
free cash flow to monitor the Group’s overall cash generation
capability, to assess the ability of the Company to pay dividends andto finance future expansion, and, as such, it believes this is useful toshareholders in their assessment of the Group’s performance.
Croda International Plc
Annual Report and Accounts 2021

49

Strategic report

4. Maintain an appropriate balance sheet and return excess
capital – maintain an appropriate balance sheet to meet future
investment and trading requirements, targeting a leverage ratio of 1 to
2x over the medium-term cycle. We consider returning excess capitalto shareholders when leverage falls below our target range andsufficient capital is available to meet our investment opportunities.
At 31 December 2021, the leverage ratio was 1.4x (31 December
2020: 1.8x) and is expected to fall below 1x on completion of thedisposal of the majority of PTIC.

Risk management

Managing risk
Our risk framework enables the business to protect and create
value, helping us to identify opportunities and minimise threats
to the delivery of our strategic and operational objectives.
Risk strategy and governance
Our Board owns and oversees our risk
management programme, with overall
responsibility for ensuring that our risks arealigned with our goals and strategic objectives.
The Audit Committee assists the Board inmonitoring the effectiveness of our risk
management and internal control policies,
procedures and systems (page 81).
Risk monitoring and reporting
Global visibility of all risks is delivered throughour global risk reporting dashboard, updated
daily from our risk and control system (theDigital Hive) which provides a platform tounderstand and manage risks and enables risk
comparison across regions, operations andsectors. Using our global risk management
framework (page 52), similar risks are
considered together by generic risk area,
sub-categories and categories, giving theBoard and management visibility of theaggregated risks on a Group-wide basis. Eachof our strategic and operational risks is owned
by an Executive member.
Risk appetite
Risk appetite statements are defined for eachsubcategory of risks and each generic risk has
a defined risk appetite, visible to all risk owners,
which is owned and reviewed by an Executive
member. Risk appetite statements are reviewed
annually by the Executive and the Board (page66) in order to guide the actions managementtake in executing our strategy.
Key risk indicators
We set targets to help monitor performance inmitigating our risks. These targets also support
decision making by providing management withinformation about Executive expectations andare monitored and reviewed by the risk related
steering groups (page 52).

Risk culture
We use our global risk management framework(page 52) to drive an integrated and owned
approach to risk management through theculture of the entire organisation.
Risk oversight
The Board carried out a robust assessment ofemerging and principal risks facing the Group
at its meeting in July (page 66), including thosethat would threaten its business model, future
performance, solvency or liquidity. It also
received quarterly assurance updates from the
Chair of the Risk Management Committee.
Risk management
Responsibility for risk management isembedded throughout our organisation. Our
first line of defence, our employees, have a
responsibility to manage day-to-day risk intheir own areas guided by Group policies,
procedures and control frameworks. Local
management, and ultimately the Executive,
ensure that risks are managed, maintained,
reviewed and actioned according tothese frameworks.
The second line of defence is provided bymanagement team review of each risk register,
culminating in review by the Risk Management
Committee (page 52), which meets quarterly tochallenge and monitor current risks and receive
presentations from key risk owners. Insight on
external trends and on internal emerging risks(from review of the bottom-up risk registers) is
provided by the risk team and discussed by
the Committee.
The third line of defence is assurance over theeffectiveness of mitigating controls, which isprovided through internal audits in addition toreports from external assurance providers.
These reports are reviewed by three Executive
Committees (page 52) and are monitored andchallenged by the Audit Committee (page 81)
and the Board.
We have a Global Crisis Management plan inplace to manage significant risk events, ownedby the Executive, which is tested at least
annually based on key risk scenarios.

50

Croda International Plc
Annual Report and Accounts 2021

Our principal risks
Our risk heat map (page 52) identifies principal
pre-mitigation risks and reflects a summary of
local risks identified in the risk framework. They
are those that we consider most impact ourbusiness model (page 16) and the delivery of
our long-term strategic objectives (page 20).
They are explained in further detail in the tableon pages 53 to 55. These risks also form thebasis of scenario testing for the assessment oflong-term viability of the Company on page 56.
Changes to our gross risk environment
in 2021
Movements on the risk heat map on page 52
reflect changes to the long-term risk
environment that we are facing and how theserisks have changed in the year. In 2021 wehave added one new principal risk, whilst threerisks have moved out of the principal list.
Business system security risks have increased
during 2021 as a result of increasing cyberthreats globally, whilst other principal risks haveremained at the same level as 2020.
All risks continue to be monitored by the Risk
Management Committee for significant change
and if the impact or likelihood increases will beidentified as principal risks in future.
New principal risks in 2021
In the light of significant business change
programmes being driven by our strategy (page20) we have added a standalone principal risk
relating to Management of Business Change
which is described in detail, together with our
mitigation approach, on page 54.

Strategic report

Risks moving out of principal risks in 2021
Management’s view is that the three risks
which are no longer considered to be principal
are all effectively managed. They are also
slower velocity risks, giving us time to takemitigating actions to address any increased
levels of risk. These risks are:• Supplier and raw material security: The last
two years have seen a period of significant
disruption to global trade (see case study
below). Throughout this period our
procurement teams have worked with
suppliers to ensure that raw materials
continue to be available and production has

remained uninterrupted. Our ability to securesupply in such a challenging period enables
us to reduce the impact of supplier and raw
material security which results in the risk
falling outside our definition of a principal risk.
• Product stewardship and chemical regulatorycompliance: We consider this to be a risk
with well established operational process, a
dedicated specialist team and no recent
issues. In 2021 we increased the size of theteam to address complexity in this area andto support further integration across thebusiness. This enabled us to reduce thelikelihood of the risk, which results in this risk
falling outside our definition of a principal risk.

• Ineffective management of pension fund: In
2021 we worked with the UK scheme trustee
to further reduce the likelihood of investment
and funding risks. Given the Group’s balance
sheet strength, the impact of any significant
increased funding requirements impacting
Croda’s balance sheet is assessed as
reduced since 2020. The combination of
reduced risk impact and likelihood results in
the risk falling outside our definition of aprincipal risk.

Supply chain management
The continued short-term impact of COVID-19 and Brexit has seen disruption of our supply chain in 2021. This has the potential toimpact both our raw material supply and the availability of freight to deliver finished product to our customers. We monitor delivery
metrics closely through our Safety, Health, Environment and Quality (SHEQ) steering committee and at our monthly regional leadershipteam meetings. Supply chain management has been challenging, but thanks to the excellent work of our teams in customer service,
shipping and sales we have supplied greater volumes to our customers than in previous years, demonstrating the resilience of our
supply chain. In addition, our flexible production sites have implemented rapid debottlenecking and amended plant scheduling toaccommodate changes to material availability and increased demand. The main short-term challenges we had to address in 2021
have been as follows:• Brexit import and export paperwork for particular raw materials, leading to a backlog of material being held in port
• Shortage of hauliers, particularly in the UK, Spain and USA• Shortage of deep sea containers, particularly for shipping from East to West, with a consequent increase in prices ofthese containers• COVID-19 related absenteeism impacting Croda and third-party logistics provider teams

Risk appetite
Our risk appetite is the level of risk that Croda is willing to accept in the pursuit of a specific objective or strategy. We have defined ourrisk appetite in a number of areas in order to manage and monitor our risk exposure. Assessing risks against our risk appetite also
provides the opportunity to identify areas where we may not be taking enough risk. Our risk appetite statements are compiled basedon our Company values, strategy, and capacity to absorb risk in certain areas. We have risk appetite statements in place for each of
our risk sub-categories, each being owned by a member of the Executive. On an annual basis the risk appetites are reviewed by the
Executive and the Board (page 66) and updated to ensure they remain relevant. We use our risk appetites as a starting point to review
and challenge the level of risk that we are taking for each of our key risks, to identify areas where additional control may be needed, or
where the level of control may be too onerous.

Croda International Plc
Annual Report and Accounts 2021

51

Risk management (continued)

Our risk framework
What we monitor
Executive risk register
Summary of the principal risks facing us prepared by combining risks identified through the local
bottom-up registers with Group-level risks identified and owned by the Executive Committee

Our risk landscape

What we assess

Current risks
Risks we are managing now
that could stop us achieving ourstrategic objectives

Likelihood and impact: globally applied 6x6 scoring scale

Risk categories we assess

Risk ownership: each risk has a named owner
Gross risk: before mitigating controls

•
•
•
•
•
•

Mitigating controls: subject to internal audit review
and monitoring

Emerging risks
Risks with a future impact fromexternal or internal opportunities orthreats. These can be slow moving,as well as rapid velocity

Six categories, 17 subcategories,
over 50 generic risks, oneframework:

Net risk: after mitigating controls are applied
Risk appetite: defined at generic risk and subcategory
level and transparent through our risk dashboard
Actions: for further mitigation if required

Strategic
People and culture
Process
External environment
Business systems and Security
Financial

Our bottom-up registers
The core of our risk assessment. Owned by market sectors, regions, manufacturing sites and functions,they identify local risks and mitigating controls arising from day-to-day operations in over 30 risk registers globally

How we monitor
Board
Responsible
for the risk
framework anddefinition of risk
appetite. Reviews
key risks with anopportunity forin-depth
discussion of
specific key risks
and mitigating
controls annually.
Approves theviability statement.

Audit
Committee

Risk Management Committee

Reviews theeffectivenessof the Group risk
management
process. Reviews
assurance overmitigating controls,
directing internal audit
to undertake
assurance reviews forselected key risks.
Reviews viability
scenarioassessments.

Meets quarterly to monitor and review risks other than
Safety, Health, Environment and Quality (SHEQ),
Ethics and Sustainability.

P73

Chaired by Jez Maiden.

Standing agenda item to monitor business IT systems
and cyber risks and currently COVID-19 risk. Covers
proactive risk management, risk monitoring andmitigation and internal and external emerging risks,
including emerging regulatory requirements.
Receives an in-depth presentation of specific key
risks and mitigating controls from risk owners at eachmeeting.
Considers the results of internal audit work for all
risks.

P73

Sustainability
Committee
Chaired by Phil Ruxton.
Meets quarterly tooversee thedevelopment,
measurement anddelivery of oursustainability strategy
and the significance ofclimate-related risks
and opportunities.
Monitors against
stretching targets andagreed KPIs.

P73

Group SHEQ
Steering
Committee
Chaired byMark Robinson.
Meets quarterly toreview SHEQ risks.
Monitors against
stretching targets
and agreed KPIs.
Considers the resultsof assurance audits
over SHEQ controls.

P73

Group Ethics
Committee
Chaired by
Tom Brophy.
Meets quarterly toreview ethics andcompliance risks.
Monitors against
agreed KPIs.
Considers the resultsof assurance audits
over Ethics controls.

P73

P73

Risk heat map
High

Our principal risks are reported gross(before mitigating controls)

2

1

10

5

9
Likelihood

7

Strategic risk

8

4

6

Revenue generation2

Product and technology innovation and protection

3

Digital technology innovation

4

Delivering sustainable solutions — Climate and Land Positive

5

Management of business change

People and culture risk
63

Our people — culture, wellbeing, talent development and retention

Process risk
7

Product quality

8

Loss of significant manufacturing site

External environment risk

Medium9
MediumGross risk increase

52

1

ImpactGross risk no change

Croda International Plc
Annual Report and Accounts 2021

High
Gross risk decrease

Ethics and complianceBusiness systems risk
10

Security of business information and networks

Key
Link to our strategy (page 20)

Risk movement

Link to our business model (page 16)

Risk increase

E

EngageNo changeC

CreateInnovation:
increase the proportion of NPP that we sell

Risk decrease

M MakeIncluded in viability statement(see page 57)

S

V

Growth:consistent top and bottom-line growth

Sell

Strategic
Principal risks

1. Revenue generation

2. Product and technology
innovation and protection

3. Digital technology
innovation

4. Delivering sustainable
solutions – Climate and Land
Positive

President Regional Delivery
and Sector Presidents

Nick Challoner
Group Chief Scientific Officer

Jez Maiden
Group Finance Director

Nick Challoner
Group Chief Scientific Officer

V

E

S

V

E

C

V

C

M

S

V

C

M

Why this matters to us
Our ambition is to deliver consistent top
and bottom-line growth, with profit
growing ahead of sales, ahead ofvolume. To grow, we need to innovate
and also keep pace with our customers
as they serve consumers globally inestablished markets and higher risk
developing markets. Failure to manage
these challenges and the consequencesof any geopolitical tensions will adversely
impact delivery of our growth strategic
objective (page 20). Acquisitions ofadjacent technologies will dilute growth ifthey are not effectively integrated.

Innovation is the lifeblood of our business(page 4). It plays a critical role across ouroperations; it differentiates us from thecompetition, protects sales andimproves our margins. Failure to leverage
the knowledge of our global innovation
teams could lead to a reduction in New
and Protected Products (‘NPP’) and will
impact growth and margin.
Failure to protect the intellectual property(‘IP’) in these products in existing andnew markets could undermine ourcompetitive advantage.

Digital technology is a significant
disruptor, rapidly changing markets that
we operate in, changing the way weinteract with our external partners andeach other. New and establishedcustomers expect a high level of online
service, from researching ingredients tobuying, and failure to meet these aheadof competitors will impact growth, hinder
R&D knowledge sharing and create
inefficient processes.

We have made a bold Commitment to be
Climate and Land Positive by 2030 (page2), aligning our smart science with United
Nations Sustainable Development Goals(SDGs). Sustainability has been a strategic
priority for Croda for over a decade andwe are committed to delivering
improvements in line with the objective tolimit global temperature rises to no morethan 1.5°C above pre-industrial levels.
Climate change, biodiversity loss andrising inequality are changing consumer
demands, making sustainability asimportant to consumer choice as price.
Failure to remain ahead of ourcompetitors and to deliver on ourstretching 2030 targets will damage our
reputation and compromise growth.

How we respond
Through our global sector sales,
marketing and technology teams, we
identify consumer trends and respondswiftly to satisfy customer needs throughkey technologies. Our direct sellingmodel enables us to get closer to ourcustomers. Our resilient business model(page 16) and continued focus on
growing profit ahead of sales ahead ofvolume mitigates profit impact in difficult
trading conditions.

Our outstanding technical research anddevelopment (R&D) teams, based in ourcustomer innovation centres andapplication laboratories globally, focus
innovation on customer and market
needs and are embedded across ourbusiness. We invest in: R&D, Open
Innovation and Smart Partnershipprogrammes, seeking premium niches
and disruptive technology acquisitions(page 12). Our specialist IP team protect
new products and technologies,
defending our IP and challenging
third-party IP where appropriate.

Our functional specialist teams focus on
our business model areas of Create,
Make and Sell (page 16) and provide
global leadership to take advantage ofthe fast evolving digital world. They
deliver an integrated market-facing
environment that encompasses
everything from product development
through artificial intelligence-enabledmanufacture, to customer service. Digitalpilot projects embedded in theorganisation support agile, local trials ofinnovative ideas, which can grow into
global initiatives.

Our sustainability team, led by our Chief
Sustainability Officer, maintain theorganisation’s focus. The Sustainability
Committee, which meets quarterly, hasrepresentatives from all functions andsectors who work together to deliver oursustainability targets. We see more
opportunity than risk in climate change.

Resourced our long-term innovation• Create: selected a provider for ourplatforms, ensuring we enhance theglobal R&D knowledge management
skill levels of experts leading oursystem and started the roll out toapproach to disruptive technology
share global R&D expertisedevelopment• Make: developed a series of pilot
Commenced a multi-million pound
projects to enhance manufacturing
project to introduce artificial
efficiency, including real-time plant
intelligence and data mining acrossmonitoring and advanced process
our global R&D knowledge basecontrol(page 4)• Sell: delivered key strategic projects
Scaled our support of manufacturing
to enhance online presence, including
for lipid delivery systems in botha new suite of websites targeting
Europe and USA enabling continuing
customers in China, integration of
supply to COVID-19 vaccine
Croda’s global Customer Relationshipmanufacturers
Management system with website
enquiries, web improvements to drive
Continued to educate our scientists togreater customer engagement andensure that we support the principles
the introduction of new digitalof green chemistry and sustainable
selling tools
innovation in line with our strategy
Delivered strong increase in NPP,
supported by our Avanti and
Iberchem acquisitions (page 45)
Invested in a new centre for biotech
process design and optimisation in
the UK (page 12)• Committed to climate Science Based
Targets (SBT) and became the third
major chemical company in the world
to have our plan to achieve them
officially verified (page 12)• Invested in market leading technology
to automate the collation and internalreporting of sustainability metrics• Committed to complete roadmaps in
2022 for decarbonisation of all ouroperational site and business sectors,
supported by additional capital
investment• Completed full Executive review of thesustainability strategy, attended by a
Board member• Completed our periodic review of ourmaterial issues and climate relatedrisks and opportunities (page 30)• Prepared carbon budgets for eachsector, sitting alongside the financial
budgets• Engaged our investors in sustainability(see case study on page 19)

For more on Land and Climate Positive
see pages 32 and 33 and in our
Sustainability Report (pages 20 to 29).

What we have done in 2021
• Delivered growth across all regions and •sectors (page 11)• Continued to strengthen our country
selling teams and developed further
digital channels through which ourcustomers can engage with us; crucial •in maintaining the business pipeline
whilst in-person visits have been
restricted by COVID-19• Started integration of Iberchem as partof our Consumer Care sector and•provided a stronger footprint indeveloping markets• Invested in Iberchem Brazil, one of thelargest markets for fragrances globally•• Optimised the opportunities available
to us in Health Care vaccination,building our brand and reputation inthis area and meeting the urgent
needs of the COVID-19 pandemic•• Implemented a global ’voice of thecustomer’ survey to understand what we
do well and where we need to improve, •to continue to deliver innovative products
and excellent service to our customers• Expanded our reach for high value
niche Health Care ingredients globally,building a pipeline of new products• Acquired Alban Muller and Parfex(page 6)

Croda International Plc
Annual Report and Accounts 2021

53

Strategic report

Sustainability:align our business with our Purpose and accelerate
our customers’ transition to sustainable ingredientsRisk management (continued)

Strategic

People and culture

Process

5. Management ofbusiness change

6. Our people – culture,
wellbeing, talent development
and retention

7. Product quality

8. Loss of significant
manufacturing site(major safety or
environmental incident)

Steve Foots
Group Chief Executive

Tracy Sheedy
Group Human Resources Director

Tom Brophy
Group General Counsel

Mark Robinson
President Global Operations

Principal risks

E

C

M

E

S

C

M

S

V

M

V

M

Why this matters to us
Delivery of the strategic review
completed in 2021 requires significant
business change globally, including
acquisition and disposal of businesses
and investment in a significant capital
expenditure programme (page 6). Suchtransformational change has thepotential to distract the organisation
resulting in failure to deliver expected
results, or at worst destroy value.

Retaining and developing the experienceand motivation of all our knowledgeableand diverse employees is critical tomaintaining our ability to deliver our
strategic priorities. Failing to maintain our
distinctive Croda culture (pages 2 and 8)
within which people thrive and which
attracts new and diverse talent to join the
Company would significantly damage ourability to innovate.

We sell into a number of highly
regulated applications and thetransition to a focused Consumer
Care and Life Sciences businessincreases our exposure to thisenvironment. Weak product quality
control leading to non-compliancewith our customers’ stringent productquality requirements and global andlocal regulation could expose us toliability claims, significant reputational
damage and compromise our ability
to deliver growth.

We rely on the continued sustainable
operation of our manufacturing sitesaround the world, including newly
acquired sites.

A clear Purpose, strong development
culture, excellent learning opportunities andcompetitive reward programmes support
the retention, engagement and careerdevelopment of the high-quality teams weneed. Global graduate and management
development programmes include
stretching and high-profile assignments andprovide a pipeline of internal talent.

Monitored by our Group SHEQ
Steering Committee (page 52), oursites and products are certified todemanding external quality standards
highly valued by our customers(including ISO 9001, GMP and
Excipact). Our global network ofquality professionals enforce
compliance with the Group Quality
manual, assured through internal
audits delivered by our specialist
Group Quality audit team and external
certification audits. We work
proactively with relevant tradeassociations to shape future
regulation.

Monitored by our Group SHEQ Steering
Committee (page 52), our global networkof site-based safety professionals
enforce compliance with global policies
and procedures defined in the GroupSHE manual. Assurance is provided by
the specialist Group SHE internal audit
team, whilst external auditors certify ourcompliance with international safety
standards. Our sites are certified to ISO
14001 standards.

• Life Sciences appointed sector
Head of Quality to lead andmonitor delivery of GMP
standards across all sector
manufacturing sites• Developed and applied acustomisable quality toolkit acrossall our sites to accelerate progress
towards our sustainability target of
99.5% right first time inmanufacturing operations. The
resulting improvements mean weare ahead of schedule• Demonstrated the strength of ourquality management systems bycontinuing to deliver to customers
despite supply chain disruptions(see case study on page 51)• For more on quality assurance see
page 39 of our Sustainability Report• Prepared a new suite of process
safety guidance standards, developedin consultation with members of
the Group-wide Process Safety
Leaders Academy• Adopted an enhanced approachto process safety, aligned with
Sustainability Accounting Standards
Board (SASB) standards forour industry• Undertook process safety trainingof regional leadership teams• Delivered SHE leadership training to
the management teams of businesses
acquired in the last two years• Continued focus on process safetyleading metrics, which drive ourinvestment in assets• For more on process safety andenvironmental stewardship see
page 37 of our Sustainability Report

Ineffective management of change could
result in a failure to integrate newacquisitions effectively and impact therealisation of benefits.

Climate change directly impacting thelocation of a site or availability of utilities
used, or a major event causing loss of
production and violating safety, health orenvironmental regulations, could limit ouroperations. This could also expose theGroup to liability, cost and reputational
damage, especially in light of ourcommitment to sustainability andcustomer service.

How we respond
The Board and Executive have oversightof the strategic change programme andreceive regular updates of status andprogress. Skilled programme managers,
supported by external consultants, leadour delivery of change programmes,
including the PTIC separation, and our
Capital Project Director monitors andoversees the capital investment
programme.
We also acknowledge that the potential
separation has to be technically welldesigned to minimise the impact on theorganisation.

Our bi-annual global talent review process
considers resources and succession plansfor critical roles, with actions monitored by
the Executive Committee and the Board.

Risks specific to each site are identifiedin ‘bottom-up’ risk registers and local
business continuity plans are in place
which are regularly tested.

What we have done in 2021
• Considered the implications of thesale of the majority of the PTIC
business through a Board andExecutive process extending overmany months (case study page 69)• All major change programmes are
subject to oversight from Executive
level steering groups and have an
Executive level sponsor. Progress
is reported to the Board on aperiodic basis• Separation Programme Director andworkstreams supported by external
consultants• Dedicated programme managementfor other significant change
programmes• Global Capital Project Director
developed capital projects frameworkand governance to monitor progressin capital projects

54• Reviewed and upgraded all our internal
leadership programmes in conjunction
with Hult Ashridge business school(page 36)
• Continued to expand our online training
courses and our mentoring programmes• Developed and launched a new global
competency framework to support andenhance the roll out of our values, asummary of our cultural aspirations(page 36)
• Addressed increased risks to employee
wellbeing and mental health through theprovision of employee assistanceprogrammes, online mental health tools,
wellbeing activities and increased
communications• Continued to benchmark rewards
regionally, introduced new reward andrecognition programmes and the Croda
Free Share Plan (pages 90 and 91)• For more on our people see page 30 of
our Sustainability Report

Croda International Plc
Annual Report and Accounts 2021

Key
Link to our strategy (page 20)

Risk movement

Link to our business model (page 16)

Risk increase

E

EngageNo changeC

CreateInnovation:
increase the proportion of NPP that we sell

Risk decrease

M MakeIncluded in viability statement(see page 57)

S

Growth:consistent top and bottom-line growth

V

Strategic report

Sustainability:align our business with our Purpose and accelerate
our customers’ transition to sustainable ingredients

Sell

Business systems and security

External environment
Principal risks

9. Ethics and compliance

10. Security of businessinformation and networks

Tom Brophy
Group General Counsel

Jez Maiden
Group Finance Director

V

E

C

M

S

V

E

C

M

S

Why this matters to us
We are subject to UK legislation which is far-reaching interms of global scope and often more rigorous thanlocal legislation (for example, the Bribery Act).
Our increased presence in emerging economies andthe increasingly frequent introduction of new regulation
create an elevated compliance and reputational risk.

Society and business are subject to more numerous
and increasingly sophisticated threats to security,
including hackers, viruses and ransomware attacks,
and keeping our data safe is subject to increasingly
stringent regulatory requirements globally. Our businessmodel relies heavily on the availability of IT networks
and systems; an extended interruption of these
services may result in an inability to operate.

How we respond
Our Group Ethics Committee (page 73) meets quarterly
to consider new legislation requirements and topromote the importance of ethics and complianceacross our business and stakeholder ecosystem.
Compliance training and education programmes arerolled out globally, with results monitored by theCommittee.
Our Audit Committee reviews the effectiveness of theGroup’s anti-bribery and fraud procedures on anannual basis (page 81).

We run our key applications in distributed computing
environments with regular failover testing andpenetration testing being undertaken. Our information
security specialists monitor our IT services andnetworks, oversee cyber protection solutions andprovide cyber awareness education globally, whilst
internal and external auditors review and report on theoperation of cyber and system controls annually.

What we have done in 2021
• Continued with the ethics integration of newly
acquired companies, with particular focus on thosein emerging markets with the associated higher
ethical risks• Developed an automated KPI dashboard thatenables the tracking and monitoring of the ethics
programme and provides leading and lagging
indicators of ethical risks• Supplemented the ethics procedures manual withpractical ‘how to do’ guidance notes. The Group
undertakes ethics risk assessments at site level,
which record detailed risks and mitigating controls• Undertook over 2300 third-party reputational
screenings• Undertook our annual review of antibribery andcorruption, fraud and whistleblowing procedures(page 83)
• Reported to the Board on the ethical complianceprogramme (page 66)• Developed and adopted a new medium-term
information security strategy• Assessed our IT operations against the NIST Cyber
Security Framework• Developed new security controls within Croda’s
Operational Technology environment at a pilot
manufacturing site
• Conducted a third-party facilitated review of data
privacy compliance, to maintain the health of the
global data privacy framework and improve where
necessary• Completed an in-depth review of the IT control
framework, including assessment of governanceand monitoring processes (page 81)• Carried out an internal audit review to provide
assurance over asset management and third-party
processes• Carried out a full review of cyber security controls at
Incotec China

Croda International Plc
Annual Report and Accounts 2021

55

Long-term viability statement

Long-term viability statement
Based on their assessment of prospects and viability, the Directors
confirm that they have the expectation that the Company will beable to continue in operation and meet its liabilities as they falldue over the next three years.
Confirmation of viability
Based on their assessment of prospects andviability, the Directors confirm that they have an
expectation that the Company will be able tocontinue in operation and meet its liabilities as
they fall due over the next three years to
31 December 2024. The Directors also
considered it appropriate to prepare thefinancial statements on a going concern basis,
as explained in the Group accounting policies(page 125).
The viability assessment period
The Directors have assessed the longer-term
viability of the Company over the three year
period to 31 December 2024, taking account of
the Company’s current financial position andthe potential impact of the Company’s principal
risks identified on pages 53 to 55.

For 2021 the Board considers that, inassessing the prospects of the Company anddetermining the appropriate viability period, its
investment and financial planning horizon of
three years is the appropriate benchmark. In
reaching this conclusion they considered
the following:• the three year financial planning horizon,
supported by detailed financial modellingwhich considers profitability, cash flows,
gearing and other key financial metrics;• the three year investment planning cycle
which reflects the typical maximum lead time
involved in developing new capacity. Bothfinancial and investment planning are led by
the CEO and reviewed by the Board;• the Company has demonstrated a strong
balance sheet and cash generation which
ensure its ability to repay, renew and raisenew debt facilities in most market conditions(page 49). The most common debt maturity
term is five years;• the resilient business model (page 16) andthe Company’s diversified portfolio of
products, operations and customers, which
reduce exposure to specific geographies andmarkets, as well as large customer/productcombinations; and• the strong, sector-led innovation pipeline(pages 24 to 29) extending over more than
three years, which supports the Company’sbusiness through development of new sales
growth opportunities, protects sales andmargins, differentiates the Company fromcompetitors and provides barriers to entry
Given the progressive development of a longer
term strategic plan for the Group, the Board will
review over the coming year whether it isappropriate to consider a longer viability period
in future Annual Reports.

Assessment of viability
We assess our longer-term resilience to risk in two ways:• Top down: we test the Company’s overall funding capacity to withstand catastrophic events through stress testing the reduction in EBITDA
required to breach the bank leverage covenant;• Bottom up: we assess the existing unused committed liquidity available and peak debt leverage rates under multiple bottom-up worst case risk
scenarios, both individually and in combination. These risks are the principal risks which present long-term threats to the business as identified
through our risk management process (page 50) and agreed by the Board. To ensure consistency, we use the base case model developed forgoing concern assessment (page 125).
In 2021 we assessed viability assuming the sale of the majority of our Performance Technologies and Industrial Chemicals business (‘PTIC sale’)(page 11) will complete in summer 2022. We completed additional scenarios to assess the impact of this sale not completing on the Group’s
viability, with the outcome described on page 57.
Assuming a successful PTIC sale, under each worst case combination of scenarios, top-down headroom is considered to be more than adequate.
The results of the bottom-up scenario modelling showed that no individual event or plausible combination of events (the most significant of which
was scenario F) would give rise to a financial impact sufficient to endanger the viability of the Company in the period assessed, with ample liquidityand debt leverage headroom against funding covenants.
Were the PTIC sale to be unsuccessful, using the same scenarios, the bottom-up modelling also showed that the financial impact of a severe but
plausible combination of events would not endanger the viability of the Company but would require additional funding to be put in place (which is
expected to be available).
Top-down liquidity headroom
We assess our overall funding capacity to withstand catastrophic events by stress testing the EBITDA reduction required to trigger the default of thebank leverage covenant, and the current level of committed debt facilities which mature within the viability period.
• Bank leverage covenant: the leverage ratio at the end of 2021 of 1.4x remains substantially below the maximum covenant level under the Group’s
debt facilities of 3.5x. Based on 2021 results, stress testing assesses that EBITDA would need to fall by 66% to trigger an event of default. In theevent that the maximum covenant level was reached we would also take action to conserve cash;• Unused committed liquidity headroom: at 31 December 2021 over 78% of the current level of committed debt facilities of £1,226m mature after
the end of the viability period, with current committed unused headroom of £334m (page 153). The Company expects to have access toadditional liquidity funding in most market circumstances.

56

Croda International Plc
Annual Report and Accounts 2021

Scenario combination modelled

Key assumptions

Principal risks (pages
53 to 55) considered*

Assuming PTIC sale
Unusedcommitted
liquidity(£m)**

Peakdebt
leverage

Assuming no PTIC sale
Unusedcommitted
liquidity(£m)**

Peak debt
leverage

A: Regulatory issues damage
reputation, enabling competition
across multiple market sectors andloss of business.

Loss of business in
1. Revenue generation
Personal Care and Health 4. DeliveringCaresustainable solutions– Climate and Land
Positive

600

0.4x

200

1.3x

B: Disruptive competitive technology
and supply chain disruption results inloss of significant business.

Alternative production
2. Product andtechnology, limited
technology innovation
availability of key raw
and protection
material and fail to deliver 3. Digital technology
digital strategy
innovation
Security of supply***

600

0.4x

200

1.4x

C: Significant cyber attack results inloss of IT systems for a prolonged
period impacting ability to operate.

Cyber attack results inloss of key systems

10. Security ofbusiness informationand networks

600

0.5x

200

1.6x

D: Significant compliance breachcombined with a significant cyberattack damages our reputation
resulting in loss of business.

Cyber attack and majorcompliance breachleading to government
investigation and fine

9. Ethics andcompliance
10. Security ofbusiness informationand networks
4. Delivering
sustainable solutions

600

0.4x

200

1.5x

E: Product recall from product quality
failure results in loss of business.

Damages and costs from 7. Product quality
product recall in Health
1. Revenue generation
Care

300

1.3x

additional
fundingrequired

2.4x

F: Catastrophic uninsured loss ofmanufacturing capability damages
reputation resulting in loss ofsignificant business.

Uninsured loss of major
UK and US
manufacturing sites
resulting in lost margin
for an extended period

300

1.5x

additional
fundingrequired

2.5x

Risks considered to have a slower
velocity, giving the Group time to takemitigating action.

8. Loss of significant
manufacturing site
1. Revenue generation

6. Our people
5. Management ofbusiness change* See how we respond to mitigate these risks on pages 53 to 55** Excluding cash on deposit*** Not a principal risk in 2021

Considering the impact of the sale of the majority of PTIC
The approach adopted to assess the impact of the sale of the majority of the PTIC businesses was to overlay the cash impact of not receiving
the agreed proceeds on the debt headroom and debt gearing covenant over the three year viability period, using the same scenario
combinations. We also considered a less impactful scenario of a limited warranty claim as a result of failing to separate the business effectively.
Linking to going concern assessment
The same base case and business model is used to assess the impact for both the viability statement and the going concern assessments. For
more on going concern see page 125.

Croda International Plc
Annual Report and Accounts 2021

57

Strategic report

Bottom-up risk scenario headroom
We consider the potential financial impact of combinations of the Group’s principal risks identified on pages 53 to 55, both individually and inplausible combination. Using the going concern base case model, we assess the impact of the risks on EBITDA and the consequent cumulative
impact on net debt over the three year period based on worst case impact assumptions. The combinations modelled are identified below:

Chair’s statement on
corporate governanceOur strategy and stakeholders
As well as collaborating with the Executive
team on the development of our five-year
strategy, focusing on our Consumer Care andLife Sciences market sectors, the Board spenta considerable amount of time overseeing thedisposal of the majority of our Performance
Technologies and Industrial Chemicals
business. As well as considering the strategic
and financial implications of the disposal for
Croda, the Board took account of the interestsof our key stakeholders; this is further
described in the case study on page 69.

Anita Frew
Chair

Our strong
well establishedgovernanceframework
underpins thedelivery of thestrategy andall our decision
making byensuring
accountability,
responsibility andtransparency.”
Anita Frew
Chair

Dear fellow shareholder
Despite the ongoing challenges in 2021
associated with the COVID-19 pandemic, theBoard was able to work together with the
Executive Committee on a five-year strategy
centred on sustainability and innovation todeliver growth. This focus and collaboration
were enabled through our clarity of Purpose
and a well-established and transparent
governance framework. Together theseunderpin our decision making, ensuring webalance the interests of all our stakeholders
whilst continuing to promote the long-term
interests of the Company for our shareholders
to provide a good return on their investment
in Croda.
At the same time, we have remained focusedon supporting the wellbeing of our employees
across the Group, who have once again shown
exceptional resilience to the challenges
presented to them during the year. Our
employees have continued supporting ourcustomers, suppliers and local communities
and there are many examples of thisthroughout this report. I am also delighted that
we continued with our track record of paying
regular dividends to our shareholders.
This report, together with the Directors’
Remuneration Report, set out on pages 84 to
108, describe how the 2018 UK Corporate
Governance Code (the Code) principles havebeen applied by the Company. I am pleased toreport that the Company has complied with theprovisions of the Code for the period underreview. The 2018 UK Corporate Governance
Code is available at www.frc.org.uk.

The Board continued with the regularscheduled programme of meetings throughin-person meetings when possible, via videoconferencing and additional calls were held as
required throughout the year. Our first priority
in the Board meetings is always the health andsafety of all our employees and others
impacted by our operations.
In our meetings, we were presented with anumber of strategic deep dives, which thisyear covered health and safety, our Health Careand Consumer Care businesses, innovation
and also our operations strategy. These
allowed the newly appointed Presidents ofConsumer Care and Life Sciences to present to
the Board on their strategic vision of the future
for these businesses. These were then debatedand challenged.
In all its deliberations and decisions, the Boardis always mindful of the impact on the business’
various stakeholders and on its long-term,
sustainable success, in line with Section 172(1)of the Companies Act 2006.
We describe on page 68 how the Board
engaged with each of our key stakeholders
during 2021 and give some examples of how
we have considered their interests in some of
the Board’s decisions made during the year.
Leadership and diversity
We consider that creating an inclusive Board isessential to ensuring we attract a diverse set ofcandidates for Board roles. The greater thediversity of our directors, the more likely we canfoster innovative thinking in the boardroom.
On 1 September 2021 we welcomed Julie Kimto the Board and more recently on 1 February
2022 we were joined by Nawal Ouzren. These
two additional Non-Executive Director
appointments have brought fresh perspectives
to our discussions and support our strategic
priorities. We look forward to working with themin the years ahead.
Following these appointments, I am delighted
to report that the composition of the Board not
only meets, but exceeds the ambitions set out
in the Hampton-Alexander and Parker reviews
for FTSE 100 companies. Our approach to58

Croda International Plc
Annual Report and Accounts 2021

The composition of the Executive Committee
was reviewed and refreshed with theappointment of new members following
consideration of the talent, development andsuccession throughout the business. Details ofthese changes and our succession processes
are included in the report of the Nomination
Committee.
On the recommendation of the Nomination
Committee, the Board agreed to extend myappointment for a further year following thecompletion of my second three-year term ofoffice. This annual extension is in line with ourpolicy to review appointments annually once six
years’ tenure has been completed. Helena
Ganczakowski’s appointment for a further year
was also recommended and agreed by the
Board. Roberto Cirillo and Jacqui Ferguson
completed their first three-year terms and theNomination Committee recommended to theBoard that their appointments be extended fora further three years. Before making therecommendations to the Board, the Nomination
Committee considered the contribution madeto the Board and the Committees by theindividual and their time commitments. No
director being considered for re-appointment
took part in any discussion relating to their own
appointment. Further information about thetenure of other Board members can be foundon page 75.
Board evaluation
I am pleased to report that the Board evaluation
this year confirmed that we continue to operate
as a very effective Board. With the addition of
our new Non-Executive Directors we have theright composition, experience, skills and diversity
on the Board to support the strategic ambition of
the Group as we emerge from the pandemic.
Full details of the evaluation and the outcomes
are included in the report on page 74.
Annual general meeting
Last year in light of government guidance
relating to COVID-19 prohibiting publicgatherings and restricting non-essential travel,
shareholders were strongly advised not toattend the Annual General Meeting (AGM). We
know our AGM provides investors with avaluable opportunity to communicate with us
and this dialogue is very important to theBoard. We therefore arranged an online
shareholder presentation from Steve Foots
which included the opportunity for shareholders
to attend virtually and ask questions at, and inadvance of, the meeting.

Directors’ report

the recruitment of these directors and tomaintaining this Board diversity is set out in
the Nomination Committee Report on pages
76 to 77.

Company Culture
Our Purpose, values and culture are discussed in the Strategic Report.
Our Purpose is to use our Smart science to improve Lives™, and guides the choices we makeas a business. In line with our Purpose we have committed to be the most sustainable supplierof innovative ingredients by ensuring we are Climate, Land and People Positive by 2030.
Our Purpose is reflected in the Board’s strategy and is underpinned by our values and ourunique culture. The cultural tone of the Company is set by the Board, who are responsible
for assessing, monitoring and promoting the company culture through its decisions andconduct. Further information on how the Board factors stakeholders into Board decisions is
on pages 68 to 69.
Croda’s positive culture continued to support employees, suppliers, customers and our local
communities throughout the second year of the pandemic and examples of this can be seen
throughout this report. During the year the Croda Foundation made its first grants toemployee nominated projects that that will help improve the lives of our local communities
around the world.
During 2021, the Board monitored and assessed culture through multiple sources:• Inviting employees to present at Board and Committee meetings.
• Regularly meeting with management. See page 64 for information on Board interaction
outside the boardroom.
• Receiving regular reports and data on health and safety and sustainability matters. These
were of prime focus for the Board.
• Receiving regular quarterly reports from all areas of the business including corporate
functions. These include progress and compliance with key performance indicators.
• Reviewing reports on significant instances of inappropriate conduct, whether through theCompany’s Speak-Up line or other grievance channels.
• Engaging directly with employees around the world through listening groups, site visits andtown halls.
• Discussing the feedback from listening groups and pulse surveys, which enabledcommunications and policies to be tailored and adjusted to ensure employees’ needs werebeing met.
• Assessing management’s attitude to risk and assurance of the external and internal audit
functions through the work and reports of the Audit Committee.
• Reviewing the work on diversity and inclusion and succession planning through the reportsof the Nomination Committee.
• Receiving feedback from the Remuneration Committee. The Remuneration Policy is aligned
to culture and also embedded in the Remuneration Committee’s discretion framework is anassessment of our cultural performance. Maintaining this alignment will form a vital part of
the review of the Remuneration Policy in 2022. Further detail on how remuneration isaddressed across the Company is included in the Remuneration Committee report on
pages 84 to 108.
The Board was satisfied that Croda’s Purpose, values, strategy and culture are aligned andwill act together to preserve long-term value.
This year we will be holding a hybrid AGM, withthe ability for shareholders to attend in-person
or join virtually. Our AGM will take place on
20 May 2022 and I look forward to being able
to meet with many of you in-person once again.
More details of this event are set out in the
Notice of Meeting and I would be delighted tosee you, whether in-person or online, andanswer any questions that you may have.

Anita Frew
Chair
Croda International Plc
Annual Report and Accounts 2021

59

Corporate governance

Board leadership &company Purpose
Contents of corporate governance report
Board leadership and Company purpose
Effective Board

61

Purposes, values and culture

59

Governance framework and Board resources

72-74

Stakeholder engagement

68-71

Workforce policies and practices

109

Division of responsibilities
Board roles

72

Independence

74

External commitments and conflicts of interest74

Key activities of the Board in 2021

64-67

Composition, succession and evaluation
Nomination Committee Report

76-77

Appointments to the Board
Board skills, experience and knowledge

75
62-63

Annual Board evaluation

74

Audit, risk and internal control
Audit Committee Report

79-83

External Auditor & Internal audit

82-83

Review of the 2021 Annual Report

78

Internal financial controls

78

Risk management

78

Remuneration
Remuneration Report

84

Linking remuneration with Purpose and strategy

84

Report of the Remuneration Committee

87

Remuneration Report for the year ended 31 December 2021
Summary of Remuneration Policy

94106-108

UK Corporate Governance Code (the Code)For the year ended 31 December 2021 the principles of good corporate
governance contained in the 2018 UK Corporate Governance Code have been
complied with.
The Annual Report has been structured to allow shareholders to evaluate how
the Code Principles have been applied. Cross references are included whereappropriate to where supporting information is contained outside of the
Directors’ Report.
Further information on the Code can be found on the Financial Reporting
Council’s website at: www.frc.org.uk

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At the date of this report, the Board comprises
10 Directors: the Chair; the Group Chief
Executive; the Group Finance Director; six
independent Non-Executive Directors and one
non-independent Non-Executive Director, who
was the Company’s Chief Technology Officer
until his retirement in 2017. The size of theBoard allows time for constructive debate andchallenge on key elements of the Company’s
performance and strategic projects and enables
all Directors’ views to be heard. It monitors
operational and financial performance against

agreed goals and objectives and ensures thatappropriate controls and systems exist to
manage risk and that there are the necessaryfinancial resources and people with thenecessary skills to achieve the strategic goals
the Board has set. The Non-Executive Directors
have a broad range of business, financial andinternational skills and experience, which
provide appropriate balance and diversity.
The Directors’ biographical details appear on
pages 62 and 63 and at www.croda.com.
The Board maintains a formal schedule ofmatters reserved for its approval. These matters
include approving the Group’s strategy andbudget, material corporate transactions and theauthorisation of capital expenditure above
delegated authority limits. They include mattersrelating to risk management, approval of theAnnual Report and Accounts, dividends,
appointing new directors and significant
communications to shareholders.

The full schedule of matters reserved for the
Board can be found in the governance sectionat www.croda.com.
The Board discharges some of its
responsibilities directly and others through its
Committees, details of which can be found on
page 73.
Execution of the strategy and day-to-day
management of the Company’s business isdelegated to the Executive Committee, andsubsequently to senior leadership teams where
relevant, with the Board retaining responsibility
for overseeing, guiding and holding
management to account. In addition to its
monthly scheduled meetings, the Board met
and heard from the Executive Committee
members, senior management and a wider
range of colleagues on a regular basis.
Contributions from the Executive Committee
members can be found throughout this report.

Board balance
40-49 years – 1
50-59 years – 5

0-3 years – 3
3-6 years – 3

60-65 years – 4>6 years – 4

AgeTenureGender balanceAllemployees

Seniormanagement

Boardof Directors*

Male – 63%

Male – 64%

Male – 50%

Female – 37%

Female – 36%

Female – 50%* As at 28 February 2022. Post-year
end appointment means we have
now achieved full gender balance on
the Board of Directors.

Croda International Plc
Annual Report and Accounts 2021

61

Directors’ report

Board leadership
The Company is led by an effective andentrepreneurial Board, whose role is to promote
the long-term sustainable success of theCompany, generating value for shareholders
and contributing to wider society. The Board
has ultimate responsibility for the overall
leadership of the Group. In this role, it oversees
the development and delivery of a clear
Group strategy.

Corporate governance (continued)

Our Leadership TeamWe have a Board that is well equipped to provide oversight andchallenge to the Executive Committee and has the breadth of skills,
experience and diversity to lead the business in delivering ourambitious strategic priorities that will deliver long-term growth.

NE

Anita Frew
Chair

Steve Foots
Group Chief Executive

Jez Maiden
Group Finance Director

Appointment: March 2015 andChair since September 2015

Appointment: July 2010 and Group
Chief Executive since January 2012

Appointment: January 2015 asGroup Finance Director

Nationality: British

Nationality: British

Nationality: British

Nationality: British

Anita has served on Plc boards in thechemical, resources, engineering,water and financial services industries
for over 20 years. Prior to joining
Croda, she was Chair of Victrex Plc
and Senior Independent Director of
Aberdeen Asset Management Plc,
IMI Plc and was Deputy Chair of
Lloyds Banking Group Plc. During
her time as a Director, she has
chaired main Boards, Remuneration,
Responsible Business and Risk
Committees. Currently she is also
Chair of Rolls-Royce Holdings Plc.
Anita brings extensive experience as
Chair to the Croda Board as well as
leadership in strategic management,
mergers and acquisitions and risk
experience from working
internationally across many sectors.

Steve joined Croda as a Graduate
Trainee in 1990 and brings to theBoard a business, strategic andoperational background gained froma number of senior leadership roles
across the Group. Having spent
several years leading many different
Croda businesses, he has also
gathered extensive insight into themarkets served, the importance ofcustomer focus and the power of an
innovative culture. Outside of Croda,
Steve’s role as Industry co-Chair of
the UK Chemistry Council enables
him to work alongside Government
Ministers and industry peers to bringwider industry knowledge into the
Croda business.

Jez is an experienced Group FinanceDirector, having served in this role onfive UK listed company Boards. As achartered management accountant,his expertise in all aspects of financemanagement, gained in speciality
chemical, FMCG and othermanufacturing environments, allows
him to support the Board andExecutive of Croda in managing theperformance of the business, risk
management and control, and incapital allocation and investment
evaluation. Jez acts as business
partner to the Group Chief Executive
and leads the finance, IT and digitalteams. He is also on the Board of theCentre for Process Innovation Ltd, an
independent technology innovation
organisation, and has also been a
Non-Executive Director and Audit
Committee Chair in two other
UK Plcs.

With 23 years of experience inmarketing and corporate strategy
at Unilever and a further eight as a
strategic consultant for othermultinational businesses, Helenabrings marketing skills and an
end-consumer perspective to the
Croda boardroom, as well as
challenge and support to the CEO instrategy development. Her academicroots in engineering, with a PhD from
Cambridge University, drive herpassion and curiosity for bothproduct and process innovation.

Key
Chair of the Committee
Member of the Committee
Secretary of the Committee
Nomination CommitteeN

Remuneration Committee

RM

Audit Committee

A

Risk Management Committee

R

Group Executive Committee

E

Group Ethics Committee

ET

Group Finance Committee

F

Group SHEQ Committee

SHEQ

62

Croda International Plc
Annual Report and Accounts 2021

F

SHEQ

R

E

F

RM

A

N

F

Helena Ganczakowski
Non-Executive Director(Senior Independent Director)
Appointment: February 2014

Helena is also a Non-Executive
Director and Remuneration
Committee Chair of Greggs Plc.

RM

N

A

RM

N

A

RM

N

N

John Ramsay
Non-Executive Director

Roberto Cirillo
Non-Executive Director

Jacqui Ferguson
Non-Executive Director

Keith Layden
Non-Executive Director

Appointment: January 2020

Appointment: April 2018

Appointment: September 2018

Nationality: British

Nationality: Swiss

Nationality: British

John has over 30 years’ broad-based
international finance background withLife Science businesses such as ICI,
AstraZeneca and Syngenta. A largepart of this experience was gained
while working in Latin American andAsian countries. John brings extensive
knowledge of business strategy to the
Croda Board as well as a keeninterest in building on Croda’s strong
culture to deliver superior businessperformance. He is also a member of
the Supervisory Board at Koninklijke
DSM NV and a Non-Executive
Director at RHI Magnesita NV and
Babock International Plc. He is also
Audit Committee Chair at each ofthese companies.

With ten years’ experience as Country
and Group CEO in the Service and
Health Care industries, and many
years spent as a strategy practitioner
in Europe and Asia, Roberto brings
knowledge of, and passion for,growth and operations to the Croda
boardroom. He can also sharelessons learned from largetransformations and M&A. Roberto’s
engineering background enables him
to link Croda’s R&D and production
competences with the evolving
demands of its multinational markets.

Jacqui is an experienced CEO fromthe technology industry with generalmanagement and M&A experience ininternational and emerging markets.
She has first-hand insight oftransformational/disruptive digital,
cyber security, technology andbusiness process solutions. Jacqui
spent three years in Silicon Valley as
Chief of Staff at Hewlett Packard,
focused on a new company strategy
and turnaround. Away from Croda,
she is a Non-Executive Director ofJohn Wood Group Plc and Tesco
Bank, a fellow of the IET, a Trustee ofEngineering UK and a member of theAdvisory Board of Engie UK.

Appointment: February 2012 andNon-Executive Director since May
2017

Alongside his role as Non-Executive
Director for Croda, he is CEO of
Swiss Post. He was previously theGroup CEO at Optegra Eye HealthCare Ltd, France CEO and Group
COO at Sodexo SA and Associate
Partner at McKinsey & Co.

Nationality: British
Keith brings to the Croda Board 33
years’ experience of working at Croda
in a variety of positions, most recently
leading the Global Research,
Development and Innovation function
and as President of the Global Life
Sciences business. He also has aninterest and background inorganisational culture, which is a key
consideration in the decision makingof the Board. In his roles of Honorary
Professor of Chemistry and Industry
at the University of Nottingham,
member of Council at the Universityof Sheffield and a Fellow of the Royal
Society of Chemistry, he widens his
network of emerging technology
companies and research institutes tospot new talent that will aid Croda’s
future success.

Appointment since
the year end

A

RM

N

Julie Kim
Non-Executive Director
Appointment: September 2021
Nationality: US
Julie has nearly 30 years ofexperience in the health care industry,
with more than 15 years ininternational leadership positions. She
is currently President, Plasma-Derived
Therapies at Takeda Pharmaceutical,
a global, values-based, R&D-driven
biopharmaceutical leader
headquartered in Japan.
Her geographic experience covers
both global and regional roles,
focused on Europe, Asia and Latin
America.
Previous executive positions include
roles as Head of International Market
Access and Global Franchise Head ofmultiple therapeutic areas at Shire,
Baxalta and Baxter.
Julie also sits on the industry board
for the Plasma Protein Therapeutics
Association.

ET

A

RM

N

R

E

Tom Brophy
Group General Counsel
and Company SecretaryA

Appointment: December 2012as Board Secretary

Nawal Ouzren
Non-Executive Director

Nationality: British
Tom is an experienced corporate
lawyer, having worked at City law firm
Hogan Lovells and FTSE 100
company Ferguson. His expertise inpublic and private acquisitions
supports Croda’s inorganic growthplans and his professional
background and breadth ofexperience in insurance, risk andcompliance enable him to Chair the
Ethics Committee. He has also acted
as Managing Director of the Western
European Region.
Tom provides corporate governanceknowhow to the Board and Croda.
Having spent many years leading
global teams, Tom leads the Legaland Company Secretary team.

RM

N

Appointment: February 2022
Nationality: French
Nawal has 20 years of expertise
across a wide range ofinternational business roles,
including clinical development,
operational and strategic
management roles within thepharmaceutical industry. Nawal
currently serves as CEO at
Sensorion, a Euronext listed
biopharmaceutical company
headquartered in France.
Nawal brings with her first-handexperience in biologics and novel
gene therapies and is a
Non-Executive Director of Arena
Pharmaceuticals, the US
headquartered biopharmaceuticalcompany.

Croda International Plc
Annual Report and Accounts 2021

63

Directors’ reportACorporate governance (continued)

Board activity in 2021
Board activity in 2021
Board meetings are the main forum for the
Directors to debate, review and challenge
strategic, operational and governance mattersconcerning the Company, as required to ensurethat the Directors discharge their duties
including under section 172(1) of theCompanies Act 2006.
There were seven meetings of the Board
during the year. In addition to the formal Board
meetings, the Board had additional ad-hoc
update calls to discuss business performanceand key projects as they progressed. This
ensured that sufficient time was given to allow
in-depth consideration of our stakeholders in
relation to the key decisions made by the Board.
The Board agenda has strong links to thestrategic objectives for the business and is set
via a collaborative process between the Chair,Group Chief Executive and Company
Secretary. The Board agenda programme
ensures that strategic, operational, financial,human resources and corporate governanceitems are discussed at the appropriate timewith additional deep dives into key strategicareas during the year. This ensures enoughtime is allocated to allow effective discussion.
A separate strategy day, attended by membersof the Executive Committee, is held during theyear. The strategy day is held in the first half ofthe year, followed by the consideration of thestrategic plan in the autumn and then theapproval of the budget towards the end of
the year.
See more on our strategic priorities on pages
20 and 67 of this report.
The Group Chief Executive’s report to theBoard focuses on strategic and operational
activities. A safety report is always the first
matter he reports on at each meeting, with afocus on both employee behavioural safety andprocess safety issues. The CEO’s report also
covers the performance of each business unit,
including sales and regional activity as well ascompetitor insights and performance. Market
trends and opportunities are considered anddialogue with major customers and regulatory
bodies discussed. Each quarter the Board
receives comprehensive reports from membersof the Executive Committee in relation to all
aspects of the business, including market
sectors, regional delivery, sustainability,
operations, innovation, people, risk andfunctional updates. This is in addition to thedeep dive sessions covered under the Board’s
programme of business.

64

Croda International Plc
Annual Report and Accounts 2021

The Group Finance Director presents reports
on monthly and year to date sales performance,
profit, cash flow, cost base, capital expenditureand outlook for the year. The CFO also reports
during the year on performance against budget,
dividends, treasury items, including liquidity,
and keeps the Board abreast of investor
discussions and feedback.
The Group General Counsel and Company
Secretary updates the Board on changes torelevant laws, regulations and governancematters at each Board meeting. In addition, hetakes responsibility for reporting on complianceand insurance matters.

Outside the boardroom
The Board were unable to undertake in-personsite visits in 2021 due to ongoing UK andoverseas Government travel restrictions. They
were, however, able to participate in threevirtual Board visits during the year, in Brazil,
Spain and China. These virtual Board sessions
included Town Halls with question and answer
sessions and presentations from local
management and operational employees. The
presentations covered briefings on health andsafety and key risks at each site as well as areview of the current performance (bothfinancial and non-financial) and the future
strategy in each country. Further detail of thevirtual site visit to Iberchem as part of the Board
strategy day is on page 66.
In addition to these site visits, an extensive
programme of listening groups was undertaken
and further information on these can be foundon page 70.
The Executive Committee attended a two day
strategy session on sustainability strategy,
which the Senior Independent Director
attended and reported back to the Board.
The Chair spends time interacting with the
Executive Committee team between Board
meetings; during 2021 each member of the
Executive management team had monthly
meetings with the Chair. This ensured that she
was kept up to date on significant
developments and emerging issues andopportunities, as well as forging good working
relationships with the senior management team.
The Non-Executive Directors have directaccess at any time to the Executive Directors,
senior management teams and employees
across the Group. This provides the opportunity
to develop a deeper understanding of theCompany’s operations or to request
information about specific areas. These
interactions not only build connections withthe employees in the business, they also help
provide the knowledge for Non-Executive
Directors to provide constructive challenge at
Board meetings. Each of the Directors(excluding the new appointees) has a mentoring
relationship with employees below the
Executive Committee level. This will be
extended to the two new Non-Executive
Directors once they have completed theirinduction programme. The Executive Directors
use the specific areas of expertise of the
Non-Executive Directors as a source of ideas,
experience, as well as challenge whendeveloping strategic plans.
The Chair and Non-Executive Directors met
without the Executive Directors present to allow
an additional opportunity to discuss areas
relevant to the operation of the Board. The
Non-Executive Directors also met on their own,
without the Chair.
The Board activities during the year are outlined
on page 65. All these activities and outputs
provide the context for future strategic
decisions. References are made in this section
to areas of the report where further informationon the activities outlined below can be found.

Training
All Directors keep their knowledge and skills up
to date and include training discussions with
the Chair in their annual performance reviews.
As required, professional advisers are invited toprovide in-depth updates and the Board also
receives updates on market trends,
environmental, technological and social
considerations when appropriate. The
Company Secretary provides regular updates
to the Board and its committees on regulatory
and corporate governance matters. Our
Directors receive training on their duties under
section 172(1) of the Companies Act 2006 as
part of their induction process from the Group’s
corporate lawyers. All Directors participate inonline compliance training courses as required.

Key highlights and priorities of the Board’s activities in 2021 are set out on pages 65 to 67 along with an estimate of the proportion of time that theBoard spent discussing each area.

Strategy (50%)• Group strategic ambition and priorities,
Group strategic projects and targets andregular updates on progress• Disposal of a significant part of the
Performance Technologies and Industrial
Chemicals Business• Sustainability strategy and targets• Growth priorities and future markets• Business presentations from all sector
Presidents• Product innovation programmes andtechnology platforms• Consideration of acquisition opportunities,
including Parfex and Alban Muller• Digital strategy• Product manufacturing strategies• New and Protected Products pipeline• Capital Expenditure submissions to ensure
appropriate capacity infrastructure to meet
Croda’s strategic ambitions.

Strategic deep dives
Sustainability strategy and approach• The Croda Sustainability Committee
attended a Board meeting to review theachievements of the Committee andfocus for 2021.
• Discussed the strategic commitments
to 2030 and the associated Science
Based Targets.
• Received an update from the Chief
Sustainability Officer of the progress
during the year, and detail on the work on
the sustainability strategy refresh.
Information on our sustainability approach
can be found from page 30 to 43.
Operations Strategy• Received an update on operations
strategy progress with a more detailed
focus on activity relating to expanding
capacity in support of our strategic
objectives.
• Approval of the 2030 roadmap covering
the six strategy themes, which formed thestarting point for defining more detailed
execution plans with the buy in of theappropriate parts of the organisation.
Information on operations can be foundfrom page 10.

R&D and innovation strategy• Reviewed the detail of the innovation
model to support the strategic objectives.
• Considered the impact of new technology
platforms on the 2030 sustainability
targets.
Information on our dynamic innovation
model can be found on page 4.
Health Care and Drug Delivery Strategy• Evaluated the Health Care strategy byreviewing the current position and market
opportunities. Considered the future
vision and process to achieve it.
• Received a presentation from an external
specialist in the development of vaccinesand diagnostics which provided uniqueinsights.
Information on our Health Care businesscan be found on page 26.
2021 Capital Expenditure Review• Reviewed actual delivery against planneddelivery of the material capital expenditure
projects in the previous 12 months.
• Discussed trends, learnings andopportunities for improvement that can betaken forward into ongoing and future
strategic initiatives.

Talent review• Debated the competency framework anddefinition of high potential talent at Croda.
• Reviewed Executive Committee
succession and succession development
profiles for new emerging talent.
• Endorsed the relaunch of the refreshedleadership development programmes.
Information on culture and succession
planning can be found on page 36 and in
the report of the Nomination Committee on
page 76 to 77.
Safety, Health and Environment• Reviewed the performance of bothbehavioural safety and process safety
across the group, including leading andlagging performance indicators andinformation on specific incidents.
• Discussed mental health and wellbeingof employees.
• Reviewed the training needs of the Board
to ensure knowledge is kept up to date.

Croda International Plc
Annual Report and Accounts 2021

65

Directors’ report

Board activity breakdownCorporate governance (continued)
Board activity in 2021 (continued)
Financial, risk andperformance management(25%)• Group trading performance, including
COVID-19 response.
• Monthly updates on financial
performance by business unit.
• Review of significant control
weaknesses report.
• Review of key risks, internal and external
assurance of each risk. See page 50.
• Review of risk appetite statements.
• Dividend policy and dividend approvals.
• Long-term viability statement. See page56.
• The approval of the Group’s budget.
• Funding requirements, planned strategic
project expenditure and the timing ofany disposal proceeds.
• Key performance targets and indicators.
• Long-term financial modelling andforecasts.
• A review of the Company’s tax strategy.

People (15%)

Governance and reporting (10%)• Safety, health, environment and quality.
Keeping all employees and contractors
safe on all sites during the ongoingpandemic.
• Succession planning and organisational
restructure, including senior management
succession.
• Diversity – Board diversity policy, diversity
and inclusion of our workforce and thegender pay gap reporting.
• Female talent review and mentoring scheme.
• Leadership training and development.
• The Board’s engagement with employees
and the employee voice.
• Extension of the term of office of Anita
Frew, Helena Ganczakowski, Roberto
Cirillo and Jacqui Ferguson.
• Modern Slavery reporting.
• The introduction of the Free Share Plan
and all-employee share save grants.
• UK pension scheme and the triennial
actuarial valuation. No deficit payments will
be required.

• Board and Committee effectivenessevaluation. Information on the outcomesof this can be found on page 74.
• Annual Report and Accounts and otherfinancial statements. The work undertaken
to assess that the Annual Report is a fair,balanced and understandable assessmentof the Company’s position and prospects
can be found on page 78.
• Presentation from the Director of Investor
Relations and Corporate Affairs. Review ofthe share price performance, valuation andinvestor areas of interest.
• Ethical compliance programme. See
page 83.
• Group litigation reports.
• Group insurance programme is reviewed toensure adequate protection is in place thatbalanced risk appetite.
• The UK pension regime new legislation andregulation.
• Governance compliance review.
• Approved the Notice of AGM 2021 andmeeting arrangements.

Board strategy session
Inputs

Outputs• Global markets and competitor presentations by the
Croda management teams• First Impressions of Life Science and Consumer Carebusinesses by the new sector Presidents• Customer insights by the senior management of two
major customers• Current positioning of the businesses• Opportunities to gain competitive advantage• Key customer trends and expectations• Product portfolio review• Organisational structures required to deliver• Current gaps in capabilities

Virtual site visit to Iberchem
Areas covered
Session one – A deep diveinto the SHE culture andstandards on site.
The Board looked at thecurrent SHE structure at
Iberchem, performance KPIs
and any support that would
be required from Group SHE.

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Annual Report and Accounts 2021

Session two – Getting toknow Iberchem better

Session three –Integration with Croda

This session reviewed theoutstanding history and growthstory of Iberchem and thesuccessful financial
performance. The
management team presented
a view of the current markets
in which the business
operated, an overview of its
strong customer intimacy andthe customer driven R&D
process, which had been able
to capture the most recent
trends. The Board received
presentations on the approachto sustainability, procurement,compliance and the workforce.

An integration steeringcommittee had been set up
to manage the integration
with a detailed plan. The
Board learnt about thereview of the progress inrealising the integration andsynergies, both commercial
and technology/innovation.

Session four – Growthstrategy and current
trading
This session reviewed theactual 2020 and expected2021 trading results. The
business plan to 2025 wasdiscussed as was thepotential for additional
opportunities for thebusiness.

Specific focus areas for 2021
A safety session was held, facilitated by the Group SHE Director. The Board had a particular focus on
the performance of our newly acquired companies to ensure the high standards expected of all Croda
businesses and leaders were being met as regards behavioural safety, process safety and mental
wellbeing. In addition, the training needs of the Board were agreed and progressed, to ensureknowledge is kept up to date.

Continue to oversee delivery of the2030 strategy, with focus in 2021 on
sustainability, innovation and our
Consumer Care and Life Sciences
market sectors

Strategic reviews of both Consumer Care and Life Sciences were undertaken. This included anin-depth review of our fast-growing Health Care business. The Board reviewed our innovation modelin support of the strategic objectives and the impact of new technology platforms on our 2030
sustainability targets.

Consider how to further enhance
Board diversity

Following a detailed assessment of the required skills and experiences that would enhance the Board’s
support of our strategic objectives, we brought two new Non-Executive Directors onto the Board in thelast 12 months; Julie Kim and Nawal Ouzren. Their appointments bring greater diversity to the Board interms of gender, ethnicity, nationality and tenure. They also have broadened the Health Care sector
knowledge around the Board table and they both bring skills and experiences as serving executives.
Further details on these individuals are on page 63.

Bring more external and customer
insights into Board meetings to help
shape thinking and decisions

As part of the Board strategy day, two important customers were invited to attend to provide customer
insights into our performance as a supplier, including in the areas of sustainability and innovation. The
Board also heard from external business and industry experts on their experiences in vaccine
development. These sessions proved invaluable for the Board in working alongside the Executive
Committee in shaping our strategic objectives.

Focus areas for 2022
Continue our focus on
Croda’s strategic progressin transitioning to apure-play Consumer Careand Life Sciencescompany, including key
innovation programmes.

Oversee our expanded
organic capital investment
programme, whilst
ensuring we continue toprioritise safety leadershipand performance.

Continue our oversight of
Croda’s progressive andproactive inorganic
investments in supportof our strategic focus on
our Life Sciences andConsumer Care businesses.

Focus on talent andsuccession planning at
all levels within Croda,
including ensuring that
we continue to have thecapacity and capability
to support our strategic
priorities.

Croda International Plc
Annual Report and Accounts 2021

67

Directors’ report

Ongoing focus on safety leadershipCorporate governance (continued)

Board engagement with
our stakeholder ecosystem
The Section 172(1) statement and the key
stakeholder groups that form part of our
stakeholder ecosystem are on pages 18 and 19
and 68 to 71.
A key objective of the Strategic Report,
Directors’ Report, Financial Statements and theSustainability Report is to help stakeholders
assess how effectively the Board, supported by
the Group Executive Committee, senior
managers and employees, promoted thesuccess of Croda and had regard to the factors
set out in Section 172 during the year.

By understanding how Croda’s activities impact
on our various stakeholder groups, the Board
can have regard to their interests when having
discussions and making decisions. Having
consideration for our stakeholders aligns with
our Purpose and our values, both of which
guide us in our approach to delivering ourstrategic commitments and promoting the longterm success of Croda for our shareholders
and society.

discussion and the Board always seeks tounderstand the priorities and interests of eachstakeholder group during its deliberations anddecision-making process. The Chair andCompany Secretary provide guidance whenrequired at Board meetings to ensure sufficientconsideration is given to the likely
consequences of any decisions in the long-term
and to the interests and impact of suchdecisions on our stakeholder groups.

The relevance of each stakeholder group maychange depending on the issue under

Our customers

Our communities

Our people

Our direct sales model ensures we work
closely with customers and allows us todevelop a deep understanding of theirneeds. The Board receives customer insights
and information through Board reports fromthe CEO and sector teams, as well as during
strategy and business presentations. Our
Group Chief Executive maintains oversight ofthe management of our key customers andregularly updates the Board on theseinteractions with customers and his
engagement with policy makers andregulatory bodies. As part of the Board
strategy day, two important customers wereinvited to attend to provide customer insights
into our performance as a supplier, includingin the areas of sustainability and innovation.

As a responsible business, we believe it isessential that we operate safely andsustainably and that we understand theimpact of our operations on local
communities and on the environment. Living
our Purpose also means we are committed
to providing a positive impact to society andwe nurture the links we have to ourcommunities through our offices and oursites. The Croda Foundation has made its
first grants aligned to Croda’s purpose,values and expertise. The Board regularly
receives information and feedback oncommunity activities across the Group.

Our success depends on our skilled andhighly committed employees who are
central in our decision making process.
The Board meets regularly with
employees, through listening groups andboard presentations. Although businesstravel and face-to-face meetings wereagain restricted during 2021, Board
members continued to engage with a wide
range of employees through video calls
and received and discussed the results of
employee pulse surveys and the listening
groups. The regular reports from the HR
Director and other Executive Committee
members keep the Board up to date on
the wide range of people initiatives.

For information on our customers

P18

For information on our community activities
and the Croda Foundation

P13 and 19

Our shareholders

Our suppliers

Board engagement is primarily through theGroup Chief Executive, Group FinanceDirector and the Investor Relations andCorporate Affairs Director, who maintainregular dialogue with our shareholders.
Committee chairs have responded toqueries from major shareholders regarding
their areas of responsibility and thisengagement is reported back to the Board.
The Directors attend the AGM to allow
shareholders to ask questions directly.
Although shareholder attendance at theAGM was not possible in 2021 due toGovernment restrictions, a separate virtual
shareholder engagement meeting was held.
Analysts notes and reports from brokers
and advisers are also reviewed to keep the
Board informed of shareholders’ views.

Supply chain integrity is essential to beinga sustainable business and our supplier
relationships provide valuable insights to
the Board. Site and purchasing teams
engage and partner with suppliers on awide range of matters, from productstewardship and ethical sourcing toregulatory compliance and operational
improvements. The Board understands
these issues through Board reports andengagement with our operations andfunctional teams.

For information on engagement withshareholders

P19 and 71

68

Croda International Plc
Annual Report and Accounts 2021

For information on suppliers

P16 and 18

For information on the Employee Voice,
Listening Groups, workforce engagement
and reward

P70 and 90

See Appointment of Non-Executive Directors
for detail on a key Board decision andstakeholder considerations

P75

Information on the key methods utilised by
the Board to engage with all stakeholders is
described on page 68. We also note where
further detail is available throughout this reporton this engagement.
The Board receives information through thefollowing additional methods which assists the
Directors in their understanding of stakeholders
and to perform their duties:• An annual strategy review which assesses
the long-term sustainable success of theGroup’s strategy and the impact on our
stakeholders. See page 66.
• Annual presentations to the Board from all
the members of the Executive on theperformance across the sectors and regions.
A broad spectrum of employees from acrossthe business are invited to present to
the Board.
• An annual Board presentation on progresswith the Group’s sustainability agenda fromthe wider sustainability team and regular
updates throughout the year. See page 65.
• The Group Chief Executive and Group FinanceDirector provide updates at Board meetings
on their interactions with key stakeholders, aswell as updating Board members between
meetings on any material issues that arise.
• Comprehensive quarterly reports which
cover risk, innovation, global operations
including customer service, SHEQ and
Sustainability, IT and Digital operations, legal
and Company Secretarial and HR, culture
and diversity.

Decision to divest the majority of
our PTIC businesses
One of the major decisions the Board made during the year was

TB to approve the sale of the majority of our PTIC businesses to
Cargill. The divestment will deliver transition into a focused
Consumer Care and Life Sciences company.

Given the importance and impact of this decision, it was made overmany months of deliberation by the Executive team and the Boardand across numerous meetings during the year.
The Board considered the likely consequences of the decision in thelong term, identified the stakeholders who may be affected, and had
regard to their interests as part of the decision-making process.

Tom Brophy is Group General Counsel and Company Secretary

Initially, a detailed strategic review was undertaken that focused on thebusinesses and activities within PTIC that did not directly support theConsumer Care and Life Sciences sectors. The Board considered
whether Croda was the best future owner of all the PTIC businesses
within the context of opportunities to deploy more capital andresources within the higher returning Consumer Care and Life
Sciences businesses. The review considered what ownership
structure would best serve the PTIC business going forward, not only
to create a stronger platform for its future growth, but importantly toprovide a secure future for our employees within the business.

to a wider all-employee announcement and to ensure they could thensupport the messaging. This helped reassure all our employees andenabled their views and concerns to be addressed throughout theprocess, which in turn minimised any disruption to our business in atime of uncertainty.

Soundings were taken from our advisers and the investor community
at the appropriate time and the Board gained comfort that ourshareholders would support the strategic rationale for the separation,
which was important in confirming the direction of travel for the
strategic review.
Such a complex divestment required careful management of internaland external communications, talent and resources, and ofinteractions and interdependencies with other Group programmes toensure the continued successful performance of the PTIC business,
as well as the management of the process itself. Steering and project
implementation processes were established to ensure the Executive
team remained close to the views of those affected by all thedecisions under consideration.
Extensive and regular engagement by the Executive management
team with our employees was undertaken. This was initially aimed atsenior leaders, particularly those directly affected by the divestment,so they could absorb the news and raise concerns and questions prior

Their needs were mapped and communication plans addressing thoseneeds were developed. This communication strategy included criticalstakeholders such as works councils, unions, business partners andour pension trustees. A range of communication channels were
utilised, ensuring our key stakeholders remained informed as thereview progressed. Members of our Executive and Board held
employee listening sessions during this time and were able to hearfirst-hand how employees were feeling about the strategic review
and ensured areas of importance highlighted by employees wereconsidered and reflected in the decisions that were made.
The Board and Executive team spent time reviewing the interested
bidders to ensure they held similar values to Croda, which was animportant factor for the employees moving with the business. The
Board considered that under Cargill’s ownership, the divested
business and our talented, hardworking employees could look forward
to a bright future.
Completing the sale in 2022 will enable us to meet our strategic andsustainability objectives, which will be to the advantage of all our
stakeholders and support our shared Purpose to use Smart scienceto Improve Lives™.

Croda International Plc
Annual Report and Accounts 2021

69

Directors’ reportManagement is tasked with ensuring that
potential impacts on stakeholders are fully
considered when presenting to the Board.

Corporate governance (continued)

Employee engagement

Listening to the Employee VoiceThe Board engages directly with employees inseveral different ways, including ‘Town Hall’meetings, both face-to-face and virtual, thatincorporate Q&A sessions and by holding
smaller listening groups. The Chair has regular
one-to-one meetings with employees, as doother Directors whenever practicable.
Regular pulse surveys have been held during
the year which focus on specific issues. Recent
surveys have gathered employees’ views on
inclusion, health and safety (including mental
health) and culture. The results of these surveys
provide invaluable information for the Board togauge how employees feel on these important
topics. For example, it is through such surveys
that the Board was able to understand any
concerns employees had during the pandemic
whilst working from home and in returning to
the workplace. These surveys are one inputthat the Board uses to help guide them in theirdecision making.
Information on employees is also received at
Board meetings through management reports,
with people KPIs in the HR report.
Each Director has the opportunity, and isencouraged, to undertake site visits. Whilst
face-to-face site visits remained a challenge
during 2021 due to travel restrictions, theBoard continued to engage with our sites

through virtual site visits. These enabled
Directors to meet a broad spectrum of
employees from different departments. In
addition to the Board’s virtual strategy day
session with the Iberchem team in Spain, twovirtual visits were held during the year to Brazil,
and China. These included health and safety
presentations, town hall and listening groups
and strategy presentations from the senior
management. Each visit was attended by three
Non-Executive Directors and feedback wasgiven at the next Board meeting.
As well as holding virtual site visits, a number oflistening group sessions were organised during
the year. These sessions covered topics
including Croda’s response to the pandemic,
the Group’s strategy, the role of the Board andthe Remuneration Committee, our sustainability
programme and the effectiveness of thecommunication across the business. Thesesessions were used as a sounding board tounderstand employees’ views and opinions for
proposals, as well as providing time for
employees to discuss other topics which theywanted to bring to the Board’s attention. Suchsessions are a mechanism to gain diversity ofthought as well as enhancing the relationship ofthe Directors across a wider employee base.

Another employee voice route includes SpeakUp reports, a summary of which are provided
to the Audit Committee each year, including
trends in the types of reports and regions
reporters came from.
A significant communications programme wasundertaken as part of the sale of the majority of
the Performance Technologies and Industrial
Chemicals businesses and further informationon this can be found on page 69.
The results and feedback of all the engagementwith employees were shared and discussed by
the Board. The Board also considers annually if
the current framework continues to be effective.
Feedback from 2020 concluded thatengagement had been too UK focused andthat a wider global voice should be heard. In
2021 the virtual overseas visits in Brazil andChina included listening groups and there was
global representation in all the other listening
groups.
The Board considers that it has meaningful andgenuine dialogue with employees and thecorrect breadth of coverage using the existingmechanisms. Croda is good at engagement
and has an open culture. Site visits are valuable
and result in candid discussions and the Board
are looking forward to recommencing theirface-to-face engagement during 2022.

Listening group date

Countries attendees from

Departments attendees from

NED’s that participated

January 2021

Global Representation Three sessions –Americas, Asia and Europe

All functions

Helena Ganczakowski

April 2021

Italy (two sessions)

R&D, Sales, Marketing, Logistics

Roberto Cirillo

June 2021

BrazilAll functions

Anita Frew
Keith Layden
Jacqui Ferguson

June 2021

China

All functions

John Ramsay
Roberto Cirillo
Helena Ganczakowski

November 2021

70

Global representation Three sessions –Americas, Asia and Europe

Croda International Plc
Annual Report and Accounts 2021

All functions, weighted towards
supply chain and operations

Anita Frew

Investor engagement

Other – 3%
Europe (ex. UK) – 28%
North America – 29%

Approach
The Board is committed to maintaining regulardialogue with investors and communicating ina clear and transparent manner. The investor
engagement programme is led by the Investor
Relations and Corporate Affairs Director and is
a comprehensive programme compromising
results events, investor roadshows, attendanceat conferences, investor seminars andad-hoc meetings.
The investor relations programme includes direct
Board engagement through the Group Chief
Executive and Group Finance Director. The Chairand other Non-Executive Directors also makethemselves available to engage on topics such as
governance, strategy, ESG performance,
remuneration and other relevant topics. This gives
the Board insight into investors’ views, helping to
inform key Board decisions and shape the future
direction of the company. The Board is also
regularly updated through monthly Board papers,
management presentations and feedback fromthe investor relations team. This extends tocommentary on the trading environment andCroda’s performance relative to peers.
Our AGM traditionally offers the opportunity forinvestors to engage directly with the Board andreceive an update on business performance. As it
was not possible to conduct this in the usual way
in 2021 due to COVID-19 restrictions, we hosted
a pre-AGM Question and Answer session offering

investors the opportunity to engage directly with
the Board. Results presentations are webcast live,with a replay facility available on our website,
ensuring all investors have equal opportunity toparticipate in our results presentations. Investors
can also sign up to receive regulatory alerts on
our website making sure they are notified of any
company updates.
In addition to engaging with investors, theGroup engages with other key audiences suchas analysts and ESG ratings agencies. We
typically hold regular analyst calls following
results, ensuring all covering analysts have thesame opportunity to discuss our results.

UK – 40%

Directors’ report2021
engagement
by investor
location

Holder – 50%
Non-holder – 50%

2021
engagement
by investor
statusActivities during the year
Investor engagement in 2021 was of a hybrid
nature, predominantly compromising virtual
meetings. Throughout 2021 we met with over
500 investors, covering a balance of bothholders and non-holders. This includes all
active fund managers among our top 30
shareholders. Over the last two years there has
been an increase in engagement with fundmanagers outside the UK, particularly in theEuropean Union, with the geographic
breakdown of the meetings reflecting the global
nature of our investor base.

Croda’s strategy and the Group has a wellembedded sustainability programme. In March
2021 we hosted a virtual seminar to launch our2020 sustainability report covering ournon-financial performance in 2020 against key
metrics and new interim milestones to ensure
we achieve our Commitment to be Climate,Land and People positive by 2030. We saw
good engagement from a range of audiences,with questions from institutional and private
investors, ESG specialists and sell-side
analysts. The seminar also led to further
engagement with several follow up meetings
and questions from investors.

We have continued to see increased
engagement around ESG, with investors
looking for increased disclosure andtransparency. Sustainability is a core part of

Looking forward to 2022 we will continue toproactively engage with investors with seminars
and site visits to provide a better understandingof our business model and investment case.

Commonly asked investor questions
1. What has the impact of raw material inflation been on Croda?

Inflation and price increases have been a key theme throughout the economy in2021. Croda uses a diverse range of raw materials in production and we haveexperienced significant cost increases in 2021 averaging approximately 17% in theunderlying business. We typically provide critical ingredients into formulations at
low concentrations, so the cost of our ingredients in our customers’ formulations incomparison to other ingredients is relatively small. As a result, we have broadly
managed to pass on raw material cost increases to customers and have not seen
any negative impact on our operating margins due to inflation.
2. What is driving the recovery in Consumer Care?

The Consumer Care sector was created at the beginning of 2021 comprising
Croda’s leading global position in Personal Care and the high-growth Home
Care and Iberchem fragrances and flavours businesses. Personal Care sales
improved in early 2021, led by a resurgence in Beauty Actives. Sales anddemand remained strong throughout the year with a recovery in “going out”
sales offsetting a moderation in customer restocking. Consumer Care is asustainability driven sector and our innovation programme is driving growth
as consumers seek ‘green, clean and conscious’ beauty products.
3. How sustainable is revenue in lipid systems and how will this evolve?

We delivered approximately US$200m of sales of lipid systems in 2021, andexpect a similar level of sales in 2022. Lipid drug delivery has significant
potential for applications beyond COVID-19 in areas such as gene therapy
and oncology. We expect to see an ongoing expansion in the range ofapplications for lipid systems in vaccines and therapeutic drugs.

4. How will you utilise proceeds from the divestment of the majorityof your PTIC operations?

We have a clear capital allocation policy which prioritises organic
investment and we see exciting opportunities to invest in new capacity,
product innovation and attractive geographic markets to support our
growth in Consumer Care and Life Science markets. This organic
investment will be complemented by inorganic investment, targetingknowledge intensive businesses in exciting niches that can accelerate ourgrowth. In line with our capital allocation policy, we will continue to makeregular returns to shareholders and should we not identify suitable
opportunities to deploy capital with our leverage ratio remaining
consistently below our targeted range, we would look to return capitalto shareholders.
5. How will the divestment of the majority of your PTIC operations
impact the progress you are making implementing yoursustainability strategy?

We have set out a bold sustainability commitment to be Climate Positiveby 2030, and for 75% of our raw materials to be bio-based from 69%
today. The operations being divested have a higher bio-based footprint
than the Croda average, meaning that on divestment the Group average
will fall, but we will retain our 75% target. Conversely, as the divested
operations are more energy intensive, on divestment our scope 1 & 2
emissions intensity will fall, so we will re-baseline our carbon reduction
targets accordingly. As a result, the divestment and the approach we are
adopting to adjusting our targets, will enhance the positive impact of oursustainability strategy overall.

Croda International Plc
Annual Report and Accounts 2021

71

Corporate governance (continued)

Division of responsibilities

The Board
Chair
The Chair leads the Board and sets the tone from the top promoting a culture of opennessand debate and effective communication between the Executive and Non-Executive Directors.
She creates an environment at Board meetings in which all Directors are able to contribute to
discussions and feel comfortable in engaging in healthy debate and constructive challenge.

SeniorIndependent Director

Independent
Non-Executive Directors

Non-Independent
Non-Executive Director

The Senior Independent Director
provides a sounding board for the Chair
and acts as an intermediary for the
Non-Executive Directors, where
necessary. She is available to shareholders
where communication through the
Chair or Executive Directors has
not been successful or where
it may not seem appropriate.

The role of independent Non-Executive Director
is central to an effective and accountable Board
structure as they provide strategic andspecialist guidance together with effective
governance. They constructively challenge the
Executive Directors and scrutinise theperformance of management in meeting agreed
goals and objectives and ensure all stakeholder
views are considered.

Having served Croda for 33 years, thelatter five of which were as a memberof the Board, Keith Layden is notconsidered independent. However,
because of that experience, Keith
contributes strongly to the Board’s culture
and personality, and adds
unique and valuable insight andconstructive challenge.

Group Chief Executive

Group Finance Director

The Group Chief Executive has day-to-day responsibility for theeffective management of the Group’s business and for ensuringthat Board decisions are implemented. He plays a key role indevising and reviewing Group strategies for discussion andapproval by the Board. The Group Chief Executive is tasked
with providing regular reports to the Board.

The role of Group Finance Director is to bring a commercial andfinancial perspective to the boardroom. Working with the Group Chief
Executive, he is responsible for the leadership and management of
the Company according to the strategic direction set by the Board.
He leads the global finance function and oversees the relationshipwith the investment community.

Group General Counsel and Company Secretary
The Group General Counsel and Company Secretary is secretary to the Board and
its Committees. He works closely with the Chair in formulation of meeting agendas and yearly agenda
programmes. He ensures that Board procedures are complied with and also advises on regulatorycompliance and corporate governance. This role is to support the Chair and the Non-Executive Directors.

Meetings
Membership of the Board and its Committees, and attendance (eligibility) at meetings held during the year ended 31 December 2021
Nomination
Committee

Board

Remuneration
Committee

Anita Frew (Chair)

7 (7)Roberto Cirillo

7 (7)

4 (4)

6 (6)

6 (6)

Jacqui Ferguson

7 (7)

4 (4)

6 (6)

6 (6)

Steve Foots

7 (7)Helena Ganczakowski

7 (7)

4 (4)

6 (6)

6 (6)

Keith Layden

7 (7)

4 (4)

Jez Maiden

7 (7)John Ramsay

7 (7)

4 (4)

6 (6)

Julie Kim

3 (3)

1 (1)

1 (1)

C

C Chair of the Committee

72

Croda International Plc
Annual Report and Accounts 2021

4 (4)

Audit
Committee

C

C

6 (6)
2 (2)

C

Directors’ report

Governance structure
The Board has three main Committees: the Nomination Committee, the Audit Committee, and the Remuneration Committee.
The terms of reference for each Board Committee can be found at www.croda.com.
The day-to-day operational management of the Business is delegated by the Board to the Group Chief Executive, who uses several Committees
to assist him in this task: the Group Executive Committee; the Group Finance Committee; the Risk Management Committee; the Group Safety,
Health, Environment and Quality (SHEQ) Steering Committee; the Group Ethics Committee; and the Sustainability Committee.
Further information on each of the Committees and the membership as at year end is shown below.

Principal Board Committees
Nomination Committee

Audit Committee

Remuneration Committee

Chaired by Anita Frew

Chaired by John Ramsay

Chaired by Helena Ganczakowski

Reviews the structure, size and compositionof the Board and its Committees, identifies
and nominates suitable candidates forappointment to the Board and has
responsibility for Board and Executive
Committee succession planning. For more
information see pages 76 to 77.

Monitors the integrity of the Group’s financial
statements and announcements, theeffectiveness of internal controls and risk
management as well as managing theexternal auditor relationship. For more
information see pages 79 to 83.

Recommends the Company’s remuneration
policy and framework and determines the
remuneration packages for members of senior
management. For more information see
pages 84 to 108.

Group Chief Executive
Group Executive
Committee

Group FinanceCommittee

Risk Management
Committee

Group SHEQ
Steering Committee

Group Ethics
Committee

Sustainability
Committee

Chaired by
Steve Foots

Chaired by
Steve Foots

Chaired by
Jez Maiden

Chaired byMark Robinson

Chaired by
Tom Brophy

Chaired byPhil Ruxton

The Committee met
12 times in 2021
and is responsible
for: developing andimplementing
strategy, operational
plans, policies,
procedures andbudgets; monitoring
operationaland financial
performance;
assessing andcontrolling risk;
and prioritising andallocating resources

The Committee met
11 times in 2021 toreview monthly
operating results andexamine capital
expenditure projects.
The Finance Director,
President of Global
Operations,
President of Regional
Operations, Chief
Scientific Officer andGroup Financial
Controller also
attend.

The Committee
meets quarterly toevaluate andpropose policies andmonitor processes tocontrol business,
operational andcompliance risks
faced by the Group,and to assess
emerging risks.
Three Executive
Committee members
attend as well as theGroup Financial
Controller and VP
Risk and Assurance.

The Committee
meets quarterly tomonitor progressagainst the Groupsafety, health,environment andquality objectives
and targets, review
safety performanceand audits, anddetermine therequirement for new
or revised SHEQ
policies, procedures
and objectives. The
Chief Executive andfour Executive
members attend.
The VP Risk andAssurance also
attends.

The Committee
meets quarterly insupport of ourculture of integrity,honesty andopenness, and topromote theimportance of ethics
and complianceacross the Groupand amongst our
supply chain
partners. It
comprises three
Executive Committee
members. The VP
Risk and Assurance
also attends.

The Committee met
five times in 2021 tofurther develop theGroup sustainability
strategy, to embedsustainability
practices throughout
the organisation andto monitor progress
towards achieving
our Commitment. It
comprises a diverse
group of leaders
representing all
aspects of ourbusiness, including
four Executive
Committee
members. Each
Committee member
is the champion for
one or more of the
KPIs in our
Commitment.

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Annual Report and Accounts 2021

73

Corporate governance (continued)

Composition, succession & evaluation
Board support
Each Director has access to the advice andservices of the Company Secretary. Where
necessary, the Directors may take independent
professional advice at the Company’s expense.
Papers are made available electronically one
week in advance of meetings, which ensuresthat each Director has the time and resources
to fulfil their duties. A resource centre within the
web portal provides access to useful
information about the Group, including
corporate governance materials, finance andstrategy information, Group policies andprocedures, and information on topics such as
risk and insurance. In order to build andincrease the Non-Executive Directors’ familiarity
with, and understanding of, the Group’s
people, businesses and markets, senior
managers regularly make presentations at
Board meetings. Their understanding of theGroup’s operations is enhanced by regularbusiness presentations and site visits wheneverpossible. At induction, and as requirementschange, training is provided on governance,
legal and regulatory matters. Online training isprovided on competition law and anti-bribery
and corruption. Specific training is provided
when requested by the Directors. To remain
up-to-date with wider issues the Directors areencouraged to participate in events hosted byexternal organisations to develop broader
perspectives.

Conflicts of interest
A well-established process is in place whereby
the Board regularly reviews and monitors
potential conflicts of interests. Under theCompany’s Articles of Association, thenon-conflicted Board members have authority
to authorise a conflict or potential conflict ofinterest.
Directors holding significant commitments
outside of the Company are required todisclose them prior to appointment and on an
ongoing basis when there are any changes.
Actual and potential conflicts of interest areincluded on a register which is maintained by
the Company Secretary and reviewed annually.
During the appointment process for the two
new Non-Executive Directors, the candidate’s
other commitments were taken into account, in
addition to whether or not a conflict or potential
conflict would exist. In each case it was agreed
that no potential conflict existed.
Details of the professional commitments of the
Chair and the Non-Executive Directors areincluded in their biographies on pages 62 to 63.
The Board is satisfied that these do notinterfere or conflict with the performance of
their duties for the Company.

Independence of Non-Executive
Directors
Croda complies with the Financial Reporting
Council’s Reporting Code in having
experienced Non-Executive Directors who
represent a source of advice, strong judgement
and challenge to the Executive Directors. At
present there are eight such Directors, including
the Chair and the Senior Independent Director,
each of whom has significant commercial
experience. Details of their experience is on
pages 62 to 63.
The independence of the Non-Executive
Directors is kept under review to ensure
continuing independence and objective
judgement. The Chair was independent upon
her appointment in 2015 and both the Chair ashead of the Board and the Chief Executive ashead of executive management have clearly
defined roles. Further information on their roles
is included on page 72. With the exception ofKeith Layden, the Board considers that all
Non-Executive Directors who served during theyear are independent in character andjudgement, with no relationships orcircumstances that are likely to affect, or could
appear to affect, their judgement. Keith Layden
is not considered independent, having served
as the Company’s Chief Technology Officer
prior to retirement from the Company
and appointment as a Non-Executive Director
in May 2017.

Board evaluation
Following the previous years’ external
evaluation, the 2021 Board evaluation was
conducted using questionnaires and reports
facilitated by Lindstock. The questionnaires
were developed by the Company Secretary andwere set in consideration of the strategy and inline with best governance practice. These
questionnaires were issued to the Board
members, senior leaders and key advisors who
regularly attend the Board and Committee
meetings. Responses were on an anonymousbasis. Lindstock collated the responses andprepared reports that summarised the findings
and outlined key areas for discussion. The
reports were then discussed at the Board andCommittee meetings.
Evaluation outcomes
The Board’s size, range of skiIIs, experienceand level of diversity were rated highly.
International diversity had been improved
through the recent Board appointments. The
value of further life sciences, consumer careand sustainability experience would beconsidered when the process for the
succession of the Chair and the Senior
Independent Director commenced.

The Board’s testing and development of thestrategy was rated highly overall as were themonitoring KPls provided to the Board. The
understanding of the company’s performance
relative to competitors was identified as an area
for continued review.
The Board’s understanding of the views of major
investors and stakeholders was rated highly. The
Board’s monitoring of culture was also rated
highly, but it was concluded that there wasalways scope for even greater focus on this area.
The relationships amongst individual Board
members and between the Board andmanagement were rated very effective, as was
the Board’s relationship with the Chief Executive.
The Board’s monitoring of the Company’s
health and safety performance was rated highly
as was its understanding of the likelihood andimpact of key risks. The Board’s risk appetite
was seen to be appropriate. The evaluationemphasised the need to continue to review
past decisions to ensure learnings wereincorporated into future decision making.
The Board will agree areas for improvement
and monitoring. The progress in the key focus
areas for 2021 can be found on page 67.
The Senior Independent Director met with the
Chair to provide feedback on her performance
following discussions with the other NonExecutive Directors and the Executive
management to gather their views. It wasagreed that the Chair was highly engaged anddedicated to her role. She creates a culture oftrust, openness and debate, facilitating an
atmosphere of challenge whilst encouraging theeffective contribution of all Board members.
The Chair met and provided feedback to each
Non-Executive Director and the Executive
Directors. Following these discussions, theChair was satisfied that all the Directors
continued to be effective and demonstratecommitment to the role, including having time
to attend all necessary meetings and to carryout all their duties.

Board re-election
Following the individual performanceassessments, the Board is satisfied that each
Director continues to perform effectively, allocatessufficient time for their duties and remains fullycommitted to their role. Full biographies for the
Directors are on pages 62 and 63.
The terms and conditions of appointment of
Non-Executive Directors can be viewed atwww.croda.com. Contracts for Executive and
Non-Executive Directors can be inspectedduring normal business hours at theCompany’s registered office by contacting theCompany Secretary and will also be available
for inspection at the AGM.
The Directors will be proposed for election andre-election at the AGM on 20 May 2022 anddetails are in the Notice of Meeting.

74

Croda International Plc
Annual Report and Accounts 2021

BackgroundAt the start of the year the Nomination Committee considered the composition of the Board and concluded that additional Health Careexperience at Board level would be beneficial for the Company. In addition, the Committee recognised the benefit and value of having an evengreater diversity on the Board, which had been a theme identified through the 2020 external board evaluation. As a result, the Committee
concluded that a search for additional Non-Executive Directors should be undertaken and agreed to commence the recruitment process.
Nomination Committee process
1. Search firm selection
A sub-committee of the Nomination Committee, including the Chair, Chief Executive and Senior Non-Executive Director engaged
with five search firms and met with each firm over two days with the aim of choosing one to recommend to the Nomination
Committee. It was a requirement that the executive search firm must have signed up to the Voluntary Code of Conduct for Executive
Search Firms. A key element of the search was to identify a firm that had deep understanding of the Life Sciences sector, and inparticular Health Care. In addition, it was essential that the search firm could demonstrate they would be able to produce a longlist of
candidates that were gender balanced and weighted towards ethnically diverse candidates. MWM Consulting was appointed
following the tender process.
2. NED specification
The Committee was asked to consider and approve a specification for the new Non-Executive position.
The specification included key essential and desirable experience for the role. These included experience of desired markets,
fast-paced change, emerging markets and industries where health and safety had been paramount. The specification also included
personal qualities and specific attributes aligned to Croda’s culture, values and behaviours.
3. Stages of the selection process
Following selection of the search firm a candidate long list was identified by the end of March 2021. All the Committee received thelong list and were able to provide feedback. A short list was identified by a sub-committee including the Chair, Chief Executive andSenior Non-Executive Director and interviews were conducted in April and May 2021.
a. First interview - The Chair and Chief Executive interviewed the short listed candidates separately and the Senior Non-Executive
Director supported by another NED also interviewed candidates together. Two candidates were progressed through to thesecond interview stage.
b. Second interviews - All Committee members and the Company Secretary then met with the two final candidates. This stage
included discussions around their interest in the role, current time commitments and any potential conflicts of interest.
c. Appointment - The sub-committee of the Nomination Committee met and, having reviewed the feedback, and the skills sets of thecandidates against the candidate specification and skills matrix, concluded that an offer be extended to both candidates,
increasing the size of the Board from eight to 10 Directors. Julie Kim joined the Board on 1 September 2021 and Nawal Owzen on
the 1 February 2022. Their biographies can be found on page 63.
Stakeholder considerations.
Strategy – Appointing Board memberswith Health Care business experience,experience of fast-paced change andemerging markets supports the delivery of
the Croda strategy and the long-term
success of the business. Further
information on the strategy can be foundon pages 20 and 21. The appointments will
also bring in-depth understanding of awide of stakeholders.

Values – The new Non-Executive Directors
appointed have the skills and behaviours
that will provide a constructive andempathetic approach, the ability topromote the culture and Croda’s
sustainability ethos alongside theirconsiderable professional experience.

Diversity – The new appointments
increase the diversity of the Board,
including gender, ethnicity, nationality andtenure. Different views bring broader
debate and can lead to better decisions,which reflect the concerns of all the
stakeholders and lead to greatercommercial success.

Key

Non-Executive Directors’ Tenure
The Committee reviews the tenure and succession plans for the Non-Executive
Directors’ tenure annually. The focus in 2022 will be on the on the succession forHelena Ganczakowski’s and her roles as Senior Independent Non-Executive Director
and Chair of the Remuneration Committee. This work will commence early in 2022.
3 years

3 years

6 years

6 years

6 years

6 years

9 years

9 years

9 years

9 years

2023

2024

John Ramsay

Anita Frew

Julie Kim

Jacqui Ferguson

Keith Layden

Roberto Cirillo

Helena Ganczakowski

Nawal Ouzren

3 years

2025

2026

2027

6 years
9 years

2028

2029

9 years2030

9 years2031

Croda International Plc
Annual Report and Accounts 2021

75

Directors’ report

Appointment of Non-Executive Directors

Corporate governance (continued)
Report of the Nomination Committee
for the year ended 31 December 2021

Having a diverse
and talented groupof people at alllevels of Croda isessential fordelivering success.
Anita Frew
Chair

Nomination Committee Overview
Responsibilities

Key Focus Areas

The Committee is responsible for nominating candidates for appointment to the Board forapproval by the Board, and for succession planning. It evaluates the balance of skills,
knowledge, experience and diversity on the Board.

• Board appointments – Reviewed the
updated NED skills/experienceassessment and led the recruitment
process for two new Non-Executive
Directors• Succession planning – Assessed thechanges to the Executive Committee
and senior leadership teams• Governance – Ensured compliance with
key governance issues

Key responsibilities• To regularly review the structure, size andcomposition, including the skills,
knowledge, experience and diversity,of the Board and make recommendations
for any changes to the Board• To give full consideration to succession
planning for Directors and other senior
Executives, taking into accountthe challenges and opportunities facing
the Company and, consequently, whatskills and expertise the Board will needin the future• Where a Board vacancy is identified, toevaluate the balance of skills, knowledge,
experience and diversity on the Board,and prepare a description of the role andcapabilities required for the respective
appointment• To identify and nominate candidates to fill
Board vacancies, for the approval of theBoard, as and when openings arise• To keep the organisation’s leadershipneeds, both Executive and Non-Executive,
under review to ensure that the Company
continues to compete effectively in themarketplace• To review annually the time required froma Non-Executive Director and the Chair• To make recommendations on succession
planning for the Board

Time allocation

The Committee’s terms of reference arereviewed annually and they can be foundin the governance section atwww.croda.com

Details of attendance at the meetings during thecourse of the year can be found on page 72.
When it is appropriate to do so members of the
Executive Committee attend the meetings onrequest of the Chair of the Committee.

Key
Board – 60%
Succession – 20%
Governance – 20%

76

Croda International Plc
Annual Report and Accounts 2021

Dear fellow shareholder,I am pleased to present the Nomination Committee
report for the year ended December 2021.

Board changes
Each year the Nomination Committee considers
the composition of the Board and in terms of
the balance of skills, experience, length ofservice and wider diversity considerations. The
Guidance on Board effectiveness commentsthat boards are more likely to make gooddecisions and maximise opportunities forlong-term success if their members collectively
have the right balance of skills, experience,
knowledge and independence.
As a result of this review early in 2021,and
following a comprehensive recruitment process,two new appointments have been made to theBoard and details of the activities undertakenby the Committee in relation to these
appointments are outlined on page 75.
On 1 September 2021, Julie Kim was appointed
as a Non-Executive Director, bringing 25 years’
experience of health care markets across Europe,
Asia and Latin America. Julie is currently Presidentof Plasma-Derived Therapies at Takeda
Pharmaceutical, a global, R&D driven
biopharmaceuticals company. Then on
1 February 2022, we also welcomed Nawal
Ouzren, currently CEO of biopharmaceuticalcompany Sensorion, to the Board, adding further
health care expertise through her first-handexperience of biologics and novel gene therapies.
Both appointments add relevant experience as
we look to access higher growth markets in
Health Care, and in regions beyond Europe andNorth America. They also bring even greater
diversity to the Board in terms of gender,
ethnicity and nationality. I am pleased
to have fulfilled our commitment to meeting therequirements of the Parker Review on ethnic
diversity and achieving full gender balance on
the Board in line with the Hampton-Alexander
Review. Our Board diversity policy seeks tomaintain this position going forward.
Helena Ganczakowski’s and my own
appointment were considered by theCommittee and both terms were extended byanother year in line with the Nomination
Committee policy that once a Non-Executive
Director has served six years, any extension totheir term would be on a year-by-year basis.
Roberto Cirillo and Jacqui Ferguson having
completed their first three year terms, were also
reappointed for a further three years.
Diversity and inclusion
Having a diverse and talented group of people
at all levels of Croda is essential for delivering
success. The Board supports therecommendations of the Hampton-Alexander
and Parker Reviews in relation to gender andethnic diversity. I am pleased that we have now
achieved a position of 50% of women on the
Board (including female Directors as Chair andSenior Independent Director) and our new
appointments to the Board fulfil therequirements of the Parker Review.

Further information on our current people
initiatives and diversity and inclusion and ourambitions in these areas can be found on
pages 36 and 37 of this report. The Committee
and the Board receives reports from the Group
HR Director on these initiatives throughout theyear. Members of the senior management teamand potential future leaders are given theopportunity to present to the Board whenever
the opportunity arises.
A copy of our Board Diversity Policy, which isregularly reviewed by the Board, is available in thecorporate governance section at www.croda.com.
For more information on our Board see the
Directors Biographies on pages 62 and 63.
Succession planning
The Committee, supported by HR, reviewed
the development plans for the Board and each
Executive Committee member. They also
reviewed the talent and succession planningwithin the Group. Succession plans for sector,
region and function, and the plan to improvefemale talent in senior positions are all wellestablished.
Following the changes made in 2020 to the
Executive Committee structure, a further review
was undertaken in advance of the departure ofMaarten Heybroek, President Consumer Careand the retirement of Stuart Arnott, President of
Sustainability to ensure we could continue todeliver our ambitious strategy.
Following an external search conducted by Egon
Zehnder, Daniele Piergentilli was appointed to
the role of President of Life Sciences. Daniele’s
appointment strengthens Croda’s ability to takeadvantage of the opportunities in Life Sciences
which is in line with our strategy. Daniele has astrong background in Health Care at BASF,
where he worked for 23 years in a number ofsales, marketing and R&D roles.
David Shannon, who was Senior VP North
America was appointed to the role of President
Consumer Care. David has been with Croda for
24 years working in both regional and sector roles
in Personal Care, Health Care and Crop Care. He
has deep customer knowledge and a network ofclose relationships across Croda. David was
appointed following an open internal process.
The opportunity was also taken to strengthen the
Sustainability team to further support our strong
strategic commitment to sustainability. Phil
Ruxton (Vice President Sustainability) was
appointed as Chief Sustainability Officer reporting
into Nick Challoner, Chief Scientific Officer.
All these changes were proactively planned andmanaged and contributions from all these
individuals can be found throughout this report.

Director induction
The Company provides new Directors with acomprehensive and tailored induction process.
One of the first sessions attended is a health andsafety briefing, and the induction schedule
includes meetings with members of the Board
and Executive Committee, meetings with key
senior managers and the Group’s audit partnerand other key advisers. Induction programmes
are developed by the Group’s Company
Secretarial department and discussions startwell in advance of the appointment date to tailor
the experience to the existing knowledge andexperience. New Directors are provided withexternal training that addresses their role andduties as a Director of a quoted public company.
All new Directors are given access to ourelectronic Board papers which provide easy and
immediate access to key documents including
the previous twelve month’s Board andCommittee papers, recent reports from theexternal Auditor; the Group’s risk register and
Schedule of Principal Risks; the latest budget
and strategic plan; recent sell-side analyst
reports and feedback from our stakeholder
engagement programmes; information on oursustainability initiatives and matters reserved for
the Board and the Committee terms of reference
and other key policies. This information is
supplemented by country and site tours and we
expect these to recommence in 2022.
Other activities of the Committee
The Committee reviewed the time commitmentof the Non-Executive Directors. This is assessed
before appointment and on an annual basis.
During the year, I became a Non-Executive
Director and Chair of Rolls-Royce Holdings Plc.
Since the year end John Ramsay had been
appointed as a Non-Executive Director of
Babcock International Group Plc. The
Committee considered each appointment andconcluded that these appointments would not
impact on our commitment and availability to
Croda. It was satisfied that all the Non-Executive
Directors remain able to commit the required
time for the proper performance of their duties.
The Committee considered and concluded
that, except for Keith Layden, all Non-Executive
Directors continue to fulfil the criteria of
independence. As Keith was formerly an
Executive Director of the Company, he is
not currently considered to be independent.
The annual Committee evaluation was
conducted using questionnaires considering
the Committee’s operations, oversight andprogress during the year. The evaluation
confirmed that the Committee continued to bewell led and excellent progress had been madewith the Board appointments during the year.
Positive progress had been made developing
talent and increasing gender balance. Goingforward the oversight on diversity and inclusionneeded to be maintained and monitored.

Anita Frew
Chair of the Nomination Committee
Croda International Plc
Annual Report and Accounts 2021

77

Directors’ report

Main activities and priorities
in 2021

The gender balance on Executive Committee
and senior management teams (direct reports
to the Executive Committee) by 31 December
2021 stood at 36 % female. We continued toincrease the diversity of our leaders below
Board and Executive Committee level. 27%
of our Top 56 employees are female, with the
Top 56 made up of employees across elevennationalities. There continues to be work to
do to create further diversity and the genderbalance in the underlying management teams
and this will take a number of years.

Corporate governance (continued)

Audit, risk and internal control
Fair, balanced and understandable
To assist the Board in determining whether
the Annual Report was fair, balanced andunderstandable, the annual report teamprepared a Board paper that, amongst otherthings, reviewed the process of preparation of
the report, the controls in place to ensure
consistency and reliability of the underlying
information, identified the material positive andnegative matters referred to in the report toensure balanced content and provided detailsof the level of senior level oversight of thecontent of the report.
The Annual Report and Accounts process isdesigned to give the Board enough time toassess whether it is fair, balanced andunderstandable, as required by the Code. The
key themes and messages to be included in the
Annual Report and Accounts are considered by
the Board early in the process.
The Board considered whether the Annual
Report and Accounts contained the necessary
information for shareholders to assess theCompany’s position and performance,business model and strategy. The Directors
received a full draft of the Annual Report andprovided feedback. This review ensures thateach Director has an opportunity to highlight
any areas requiring further clarity as well assuggesting issues and areas that were notadequately covered or on which the report may
have placed too much emphasis.
The key messages in the narrative in theStrategic Report and Governance sections of
the Annual Report and Accounts were reviewed
to ensure they were consistent with the financial
reporting contained in the financial statements.
The Board believed that clear explanations had
been provided for the KPIs.
The Board reviewed whether the Annual Reportand Accounts disclosed the successes and thechallenges that had been faced in the period
and that the narrative and analysis effectively
balanced the information needs and interestsof each of our key stakeholder groups. In
particular the Board considered if the
explanation of the impact of COVID-19 and the
additional sustainability disclosures included
this year had any impact on the balance andclarity of the Annual Report and Accounts.
The framework and layout were considered to
be clear and coherent, with a consistent tone
throughout and clearly signposted linkage
between all sections, in a manner that reflected
a comprehensive narrative and highlighted the
key messages appropriately throughout.
Following this assessment, the Board was of theopinion that the 2021 Annual Report andAccounts are representative of the year andpresent a fair, balanced and understandable
overview, providing the necessary information forshareholders to assess the Group’s position,
performance, business model and strategy.

78

Croda International Plc
Annual Report and Accounts 2021

A full statement of Directors’ responsibilities
can be found on page 111.
Risk management and internal control
The Board acknowledges its responsibility forensuing the maintenance of a sound system ofinternal controls and risk management, in
accordance with the guidance set out in the
Financial Reporting Council’s Guidance on Risk
Management, Internal Control and Related
Financial Business reporting 2014, and in the
Corporate Governance Code itself.
Executive management have established anorganisational structure with clear operatingprocedures, lines of responsibility and delegatedauthority which was reviewed by the Board(page 73). In particular, there are clear
procedures and defined authorities forthe following:
Financial reporting and financial statements
review
Policies and procedures governing the financial
reporting process and preparation of thefinancial statements are owned by the Group
Finance Director and clearly and transparently
communicated through the Group Policies
system. In order to assess the financial
statements, the Audit Committee regularly
reviews reports from members of the financeteam and external audit who are invited toattend the Committee’s meetings. When
conducting its review the Committee considers
material accounting assumptions and estimates
made by management, any significant
judgements or key audit matters identified by
the external auditor (pages 113 to 114 Auditor
report), compliance with relevant accounting
standards and other regulatory reporting
requirements, including the UK Corporate
Governance code, and the accounting policies
and procedures applied (see page 80 Audit
Committee report).
Internal audit function
The internal audit function is a key element of theGroup’s corporate governance framework. Its role
is to provide independent and objective
assurance, advice and insight on governance, risk
management and internal controls to the Board
and Audit Committee and the Group. It supports
the Group’s strategy and objectives by evaluating
and assessing the effectiveness of risk
management systems, business policies andprocedures, system and key internal controls. In
reporting on their reviews, internal audit makes
recommendations to address issues and improve
processes. Once recommendations are agreed
with management, the internal audit function
monitors their implementation and reports to the
Audit Committee on progress at every meeting.
See page 81 Audit Committee report.
Capital investment
The Finance Committee (a subcommittee of the
Executive Committee) operate a clearly defined
capital expenditure process including detailed

business plan appraisal, risk analysis andauthorisation. The Global Capital Project Director
has developed a framework for managing major
capital expenditure, and post-investment review
processes are completed by internal audit (at the
Audit Committee’s request).
Business risk management
As described on page 50 the Executive
Committee has established an ongoing process
for identifying, evaluating and managing
emerging and principal risks. The Board receives
updates on principal risks and risk appetite on
an annual basis (page 66) and the Audit
Committee receives reports from internal audit
on the effectiveness of mitigating controls inplace over selected principal risks at eachmeeting. The Risk Management steering group,a subcommittee of the Executive Committee(page 73), meets on a quarterly basis to monitor
and review both current and emerging risks.
Internal Controls
There is a documented framework of required
internal controls for business processes, IT,
safety and quality, which form part of our‘business as usual’ activities and which are
documented in controls manuals. Policies
governing the internal controls are documented
in the Group Policies system, which is available
online to all employees, and each group policy
is owned by a member of the Executive
Committee. Confirmation that the controls arebeing adhered to is the responsibility ofmanagers, who together with their teams
complete an annual self-assessment processagainst all controls which provides a snapshotof the control environment at the start of theyear. Compliance with controls is tested by theinternal audit team as part of their annual planof work approved by the Audit Committee eachyear (page 81), as well as being tested by otherinternal assurance providers.
The Board discharged its responsibility formonitoring the operational effectiveness of
the internal control and risk management
systems throughout the year using a process
which involved:• Delegation of review of systems of risk
management and internal control to the Audit
Committee, whose activities are described indetail on pages 80 to 81• Receipt of written confirmations from senior
management• Board review of the report on significant
control weaknesses (page 66)• Annual review of risk appetite statements
and principal risks (page 51)
These processes have been in place for the full
financial year up to the date on which thefinancial statements were approved by the
Board. The systems are designed to mitigate,
rather than eliminate, the risk of failure toachieve business objectives and provide
reasonable, but not absolute, assurance
against material misstatement or loss.

Report of the Audit Committee
for the year ended 31 December 2021

John Ramsay
Chair of the Audit Committee

Audit Committee Overview
Responsibilities

Key focus areas in 2021

The Committee assists the Board in ensuring that the Group’s financial systems provide
accurate and up-to-date information on its financial position.

• Maintained our focus on cyber security
improvement: Reviewed the workplan of
the recently appointed Information
Security Manager and assessed theadequacy of proposed control
improvements.
• Monitored Avanti and Iberchem
integration programmes. Reviewed theintegration of Avanti and Iberchem andthe adequacy of internal controls in
relation to Croda standards.
• Reviewed the improved controls andassurance standards in relation to theproject management of major capitalprojects.
• Assessed the impact of regulatorychange on Croda’s risk and control
framework. Reviewed the Government
consultation white paper on Audit
Reform and submitted comments on
proposals as well as initial considerationof the Group’s preparedness for the
major proposals.
• Oversaw the onboarding andeffectiveness of the new external
audit partner.

Key responsibilities• To monitor the integrity of the financial
statements and results announcements of
the Group and to review significant
financial reporting issues and judgements.
• To recommend external auditor
appointment and removal, assess audit
quality, negotiate and approve the audit
fee, assess independence, monitor
non-audit services and be responsible for
audit tendering.
• To review the adequacy and effectivenessof the Group’s internal controls and risk
management systems, and the adequacy,
effectiveness and output of the internal
audit function.
• To review the adequacy of the Group’s
whistleblowing arrangements andprocedures for detecting fraud.
Detailed responsibilities are set out in theCommittee’s Terms of Reference which arereviewed regularly. They can be found in thegovernance section atwww.croda.com

Time allocation

Key
Financial reporting – 25%
Governance – 15%External audit – 25%
Internal audit and risk management – 25%
Specific focus areas for 2021 – 10%

Details of attendance at the meetings
during the year

P72

Details of the key focus areas for 2022

P81

Croda International Plc
Annual Report and Accounts 2021

79

Directors’ report

The ongoingpandemic has meantthat the financial
reporting and audit
process had tocontinue to adapt,reflecting the lessons
learnt from the 2020
audit process.

Corporate governance (continued)
Report of the Audit Committee (continued)
for the year ended 31 December 2021

Report of the Audit Committee forthe year ended 31 December 2021
I am pleased to present the Audit Committee
report for the year ended 31 December 2021.
This report provides shareholders with an
overview of the work undertaken by theCommittee and the key areas considered when
discharging its responsibilities and providing
assurance on the integrity of the annual reportand financial statements for the year ended
31 December 2021.
The ongoing pandemic has meant that thefinancial reporting and audit process had tocontinue to adapt, reflecting the lessons learnt
from the 2020 audit process. The majority ofthe external audit has again been delivered
remotely, while more of the internal audit
programme was delivered in-person. I received
regular updates from the Group FinanceDirector, the wider global finance team, theLead Audit Partner and the VP Risk andAssurance. The dedication and commitment
from the Croda executive management team,
the audit teams and Croda employees has
been exceptional and robust audit processes
were delivered once again.
Committee membership and attendance
The composition of the Committee at the endof the year comprised of five independent
Non-Executive Directors. Julie Kim joined theBoard and Committee on 1 September 2021
and post year end Nawal Ouzren was
appointed to the Board and Committee on
1 February 2022. The experience of each
Board member is outlined on pages 62 and 63.
The Board considers all members of the Audit
Committee have the appropriate and relevant
level of experience in financial matters as well
as a diverse and broad range of competence
relevant to the sector focus and the future
strategic direction of the Group.
These skills and my own experience of over
30 years in international finance and extensive
experience as an audit committee chair
provides the Board with assurance that theCommittee has the appropriate skills andbreadth and depth of experience to ensurethat it can be fully effective. It also meets theCode requirements that at least one member
has significant, recent and relevant financial
experience.
The Chair of the Board, Keith Layden (aNon-Executive Director), the Group Chief
Executive, the Group Finance Director, theGroup Financial Controller, the VP Risk andAssurance (who leads the internal audit
function) and representatives from the external
and internal auditors attend the meetings
by invitation.

80

Croda International Plc
Annual Report and Accounts 2021

The Committee met on six occasions during
the year and has met twice since the financial
year end. The meetings were held in advanceof the Board and I then provided a report of the
key matters that were discussed and any
emerging areas that may require additional
focus. A programme of business is agreed at
the start of the year and it is reviewed andupdated to ensure any additional focus areas
identified are considered.
To ensure the work of the Committee remains
focused on the key and emerging issues, I
regularly meet and speak separately with theGroup Finance Director, Group Financial
Controller, the VP Risk and Assurance and theinternal and external auditors. Meetings without
the Executive present are also held with theinternal and external auditors to facilitate open
dialogue and assurance. Before each Audit
Committee meeting, I also meet with theexternal auditors, the Group Finance Director,
the Group Financial Controller and the VP Risk
and Assurance to discuss control andcompliance issues generally and specificallythe detail of the year end and half year results,
accounting judgements and disclosures. This
helps me to ensure there is a sharedunderstanding of the key issues, technicalmatters and judgements and to make suresufficient time is devoted to them at themeetings.
Committee evaluation
The Committee performance was assessedas part of the internal annual Board evaluation
process (see page 74 for further detail on theprocess). The output of the evaluation wasconsidered by the Committee in January 2022.
The effectiveness with which the Audit
Committee uses its time was rated very highlywith all agenda items being covered withappropriate time allowed for more in-depth
discussion when required. The Chair wasseen to demonstrate effective leadership andrated highly in ensuring all opinions are heard
and considered.
Relationships between the Committee andCroda management were considered very
effective with the Audit Committee providing
both support and challenge. Following therotation of KPMG’s lead audit partner at thestart of 2021 due to an organisation change in
KPMG, the Committee was satisfied that theleadership of the global audit continued to beeffective. Proactive engagement by the lead
audit partner during Committee meetings was,however, encouraged to ensure appropriate
input and challenge was given during theCommittee’s deliberations and discussions,particularly in areas of financial reporting issues
and judgements.

Agenda coverage through the year was seen as
full and appropriate. Committee members were
well prepared for meetings, engendering
informed discussions and constructive debate.
Overall, the evaluation concluded that theCommittee was operating effectively.
Four focus areas for 2022 were identified andthese are summarised on page 81.
Committee activity in 2021
The Committee’s main business as usual
activities, as well as the focus areas, and an
estimate of the proportion of time spent onthem, are detailed below.
Financial reporting (25%)
The Committee:• Monitored the Group’s financial statements
and results announcements, including theAnnual Report and the interim statement,
and with support from the external auditors,
reviewed those items in the Group’s financial
statements that had the potential tosignificantly impact reporting. The Committee
challenged management on the statements
and was satisfied with the explanations
provided. Consideration was given to theappropriateness of accounting policies,
critical accounting judgements and key
sources of estimation of uncertainty.
Recommendations were made to the Board,
supporting the half and full-year accounts
and financial statements.
• Reviewed the Group’s external reporting
framework and use of Alternate Performance
Measures (APMs) to assess ongoingappropriateness. The Committee wassatisfied that the APM’s reviewed wereconsistent with market practice of both thepeer group and the wider FTSE 100
companies, and that disclosure andreconciliation to statutory measures wasappropriate.
• In conjunction with the Board, reviewed thefinancial modelling and stress testing
conducted for the going concern
assessment. A recommendation was madeto the Board to support the going concern
statement. Further information can be foundon page 125.
• Reviewed the viability assessment process
undertaken in support of the long-term
viability statement, based on plausible
scenarios arising from key risks and theirimpact on headroom and debt covenants.
The Committee challenged the assumptions
and scenarios noting the effect they would
have during the viability period. Further
information can be found on pages 56 to 57.
• Undertook regular reviews of the Group’s
litigation. The Committee receives reports
twice a year from the Group General Counsel

Governance (15%)
The Committee:• Reviewed the input from a compliance review
to ensure the Committee met its corporate
governance and regulatory requirements.
The Committee concluded that therequirements were being met.
• Reviewed the effectiveness of the Group’s
anti-bribery and fraud procedures, including
those for whistleblowing. The Committee
received a report on the independent
investigations that had been conducted in
response to concerns raised under thewhistleblowing policy and were satisfied withthe outcome, including follow-up actions.
• Undertook an external evaluation of theCommittee’s effectiveness. Information on
the evaluation process can be found on page
74. The results of the review concluded that
the Committee continued to be effective.
• Reviewed and took account of the annual
FRC letter to Audit Committee Chairs.
• Reviewed the Committee’s terms ofreference and confirmed that the role andresponsibilities of the Committee are alignedwith the UK Corporate Governance Code.
No changes were made during the year.
• Completed its annual review of the Group’s
tax compliance policy and risks relating
thereto. No significant updates wererequired. The policy is available atwww.croda.com.
External audit (25%)
The Committee:• Discussed and approved the external audit
plan, including the assessment of significant
audit risks; the engagement risk profile; theuse of data analytics; the scope of the audit;
the impact of COVID-19; the materiality level
and the de minimis reporting threshold; theco-ordination of external audits; and the key
members of the engagement team. The
Committee monitored the progress made by
the statutory audit team against the agreed
plan and discussed issues as they arose.
• Discussed increases to the audit fee toreflect expansion of the Group throughacquisition, regulatory changes to therequirements for UK managed audits, any
additional work due to COVID-19 andincreased staff costs within the audit
profession. Information on the audit fees canbe found in note 3 on page 134.

• Reviewed a project to develop further the
IT control environment.
• Met with the external auditors without
management present. The Committee
considered KPMG’s views. There were no
significant issues to report.
• Considered the independence and objectivity
of KPMG. The Committee confirmed the
independence of KPMG as further describedon page 83.
• Considered the effectiveness of the external
audit process including the onboarding of the
new audit partner. The Committee concluded
that the audit was effective and arecommendation was made to the Board on
the reappointment of KPMG at the AGM.
Internal audit and risk management (25%)
The Committee:• Reviewed the strategic internal audit planningapproach, reviewed reports on the work of
the internal audit function from the VP Risk
and Assurance and monitored compliancewith the Group risk assurance programme.
The Committee approved the internal audit
plan and the implementation of any resulting
actions by management.
• Discussed the use of data analytics as anintegral part of the internal audits deliveredby the co-source internal audit provider,
PwC. The Committee reviewed the potential
use of such data analytics in continuous
controls monitoring.
• Discussed the results of the 2021 controls
assurance internal audits delivered by PwC.
The Committee considered the adequacy ofmanagement’s response to matters raised
and the timeliness in resolving such matters.
• Received updates on the IT control
environment in-depth review undertaken bymanagement, and the Governance Project
which covered risk assessment, a control
framework review and refresh andgovernance. The Committee considered the
management action that had been
undertaken to address specific control
recommendations during the year. Internal
audit reported into the Committee on the
progress achieved during 2021.
• Assisted the Board in its assessment of theGroup’s emerging and principal risks. The
Committee challenged the results of the2021 risk assurance activity carried out byinternal audit and considered any additional
key risks as a result of acquisitions during theyear.
• Received a deep dive review from therecently appointed Information Security
Manager on the cyber security frameworkand strategy. The Committee was satisfied
with the progress made to date and thesteps forward that had been identified.
Management were tasked with providing
regular updates on progress throughout
2022, together with implementing
comprehensive KPIs.
• Reviewed and approved the 2022 internal
audit plan and scope of the peer reviews.
The Committee approved the plan.
• Met with the internal auditors without
management present. There were no
significant issues identified.
• Conducted its annual review of theeffectiveness of the Group’s internal audit
function. The Committee concluded that theinternal audit team, supported by PwC
resource was effective.

Looking ahead to 2022
In addition to our routine business, theCommittee has four focus areas for2022. We will:
1. Maintain focus on cyber security andthe delivery of projects identified in
the 2021 information security
strategy
2. Monitor progress in the developmentof processes and controls over thereporting of non-financial KPIs,
particularly relating to sustainability
3. Monitor the impact of major businesschange programmes on Croda’s risk
and control environment
4. Review management’s oversight andmonitoring of quality controls within
the Health Care sector

Croda International Plc
Annual Report and Accounts 2021

81

Directors’ report

and Company Secretary and was satisfied
with the approach to provisioning anddisclosure.
• Reviewed the accounting treatment for the
disposal of the majority of the PTIC business.
The Committee was supportive of theapproach adopted.

Corporate governance (continued)
Report of the Audit Committee (continued)
for the year ended 31 December 2021

Specific focus areas for 2021 (10%)
As highlighted above, the Audit Committee has delivered on our ‘business as usual’ work, as set out in our terms of reference.
In addition, last year we noted four specific focus areas for 2021, which absorbed the balance of the Committee’s time.
Specific focus area

Actions during the year

Maintain our focus on cybersecurity with a refreshedrolling annual assurance
programme based on the
NIST security framework

The information security manager attended the November 2021 committee meeting to present his
Moved to BAU
refreshed strategy, which is aligned with the NIST framework. This identified 12 tactical and 12
rolling assurance
strategic projects which will continue to progress through 2022. Internal audit reviewed the risks
processand controls over the asset management and third party supplier management processes as partof the rolling annual assurance plan.

Progress

Monitor Avanti and
Iberchem integration
programmes, including
controls assessment against
Croda risk and control
standards

Facilitated risk reviews were undertaken with the Avanti and Iberchem leadership teams using the
Croda risk management framework (see pages 50 to 52) and the risks were captured in the
Digital Hive. Gap analysis of controls in operation at Avanti and Iberchem were completed byinternal audit against the Croda controls frameworks and actions were discussed withmanagement to define a plan to full compliance and integration.

Review the major
capital projects
assurance programme

A capital programme director was appointed during 2021 and a capital projects framework
developed with comments from the internal audit’s review being incorporated into the finalised
document. A rolling internal audit programme of major capital projects was implemented withfindings discussed with the Audit Committee. The programme of audits planned for 2022 wasagreed to include five major in-flight project reviews.

Assess the impact of
The Audit Committee considered management’s response to the BEIS UK corporate governanceanticipated regulatory
reform white-paper and the Group’s response to the public consultation. Management undertook
changes on Croda’s risk and four self assessment benchmarking reviews with EY to identify any significant gaps in the current
control frameworkcontrol frameworks and actions have been identified, particularly in the IT control environment.
Future regulatory changes in relation to the reporting and monitoring non-financial KPIs werediscussed, with internal audit acting as critical friend to the sustainability team at the request of
the Audit Committee.
Significant financial statement reporting items
The Committee, with support from the external
auditors, reviewed those items in the Group’s
financial statements that have the potential tosignificantly impact reporting. These are set
out below.
Pensions: The Committee monitored theGroup’s pension arrangements, in particular
the funding of the defined benefit plans in theUK, the US and the Netherlands, which aresensitive to assumptions made in respect of
discount rates, salary increases and inflation.
The Group engages external actuarial
specialists. The Committee reviewed theactuarial assumptions used and compared themwith those used by other companies. The
external auditors also challenged the benchmark
assumptions applied and conducted sensitivity
analysis. The Committee considered this workand found the assumptions to be reasonable.
The Committee also assessed theconsiderations in relation to the transfer of theNetherlands defined benefit pension scheme toa collective defined contribution arrangement,
resulting in the settlement of the scheme’s
assets and liabilities of £207.1m and acorresponding gain of £11.2m. After review,
the Committee was satisfied with the settlement
accounting in the financial statements.
Goodwill impairment: The strategy of theGroup includes acquiring new technologies andbusinesses operating in adjacent markets. 2021

82

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Annual Report and Accounts 2021

saw two acquisitions for Croda. As a result,goodwill represents a significant asset value on
the balance sheet of £852.0m out of total net
assets of £1,765.9m at 31 December 2021.
The Committee completed its annual
impairment review of the carrying value of
goodwill, as prepared by management,
including the detailed sensitivity analysis to anumber of underlying assumptions, including
the ongoing impact of COVID-19, and thebroader consequences on the markets in which
the Group operates. The Committee assessed
the methodologies used and the adequacy ofthe management disclosures. Particularattention was given to Iberchem’s cash
generating units, which had the smallest
headroom between their carrying values andvalue in use. The Committee reviewed themethodology adopted to evaluate the risk of
goodwill impairment. After challenge, theCommittee was satisfied that the assumptions
were reasonable and that no impairments werenecessary; however, enhanced disclosure wasagreed to be appropriate, given the sensitivityof the calculations to certain assumptions.
Impact of the divestment of the majorityof PTIC: On 22 December 2021, the Groupannounced an agreement to dispose of the
majority of the PTIC businesses and is currently
working with the acquirer on the process toseparate the businesses, with completion of
the divestment expected in summer 2022.

Completed

Moved to rollingassurance
process

In progress

The Committee assessed the key accounting
considerations, and after challenge, wassatisfied that the disposal group did not meetthe requirements to be classified as held-forsale as at 31 December 2021.
Parent Company’s carrying value ofinvestments in subsidiaries andintercompany receivables: The Committee
considered the carrying amount of parent
Company’s investments in subsidiaries andintercompany debtors, held at cost less
impairment, representing 98% of parent
Company’s total assets (2020: 99%).
The recoverability of these balances is notconsidered judgemental; however, they are themost significant component of the parent
Company balance sheet and therefore require
additional consideration as part of preparing thefinancial statements. This included comparing thecarrying amount with the respective subsidiary’s
net asset value, profitability and cash generation.
After review, the Committee was satisfied thatthe recoverability of these balances was
acceptable, and no impairments were necessary.
Internal audit and risk management
I met with the Vice President Risk andAssurance several times during the year outsideof the formal meetings to discuss theperformance and output of the internal audit
function and aspects of risk management. The
Vice President Risk and Assurance attended
each Committee meeting and presented aninternal audit report that was fully reviewed anddiscussed, highlighting any major deviations
from the annual plan agreed with the Committee.

In January, the Committee conducted its
annual review of the internal audit function,
including its approach to audit planning and risk
assessment, communication within thebusiness and with the Committee and its
relationship with the external auditors. Senior
management feedback from sites included in
the 2021 audit programme is gathered byquestionnaire to support this process. These
did not highlight any significant areas fordevelopment. In the light of the continuingrequirement for virtual audits in 2021, theCommittee was pleased with progress.
Details on how the Business monitors risk andhow it implements its risk management
framework are set out on pages 50 to 55.
External auditors’ effectiveness
During the year, the Committee assessed theeffectiveness of KPMG as Group external
auditor. To assist in the assessment, theCommittee considered the quality of reports
from KPMG and the additional insights provided
by the audit team, particularly at partner level.

The Committee also reviewed the output froma questionnaire completed by senior membersof the finance team to obtain their views on
KPMG’s effectiveness in carrying out the 2021
audit. The questionnaire covered:• Quality of planning, delivery and executionof the audit.
• Quality and knowledge of the audit team.
• Effectiveness of communications between
management and the audit team.
• Robustness of the audit, including the audit
team’s ability to challenge management aswell as demonstrate professional scepticism
and independence.
Following the review, the Committee
concluded that the audit was effective andoverall the Committee was satisfied with theperformance of KPMG.
Croda is in compliance with the Statutory Audit
Services Order 2014. We undertook an audit
tender in 2017 and the Board appointed
KPMG as external auditor, with Chris Hearld
as the Lead Audit Partner. The first year to beaudited by KPMG was the year ended
31 December 2018. Following anorganisational change in KPMG, Chris Hearld
stepped down as Lead Audit Partner following
the AGM 2021 and was succeeded by
Ian Griffiths.

External auditor’s independence
The Committee and the Board place greatemphasis on the objectivity of the Group’s
external auditors in reporting to shareholders.
Our Group policy on the provision of non-audit
services by external auditors, which is on our
website www.croda.com, sets out permitted
and prohibited non-audit services and thecontrols over assignments awarded to theexternal auditor to ensure that audit
independence is not compromised and theprovision of such services do not impair theexternal auditor’s objectivity. KPMG have notbeen required to terminate any services thatwould not be permissible under the Standard.
In 2021, non-audit fees were £0.1m, significantly
less than the total audit fees of £1.7m; thenon-audit to audit fees ratio stands at 0.1:1.
The Committee undertook its annual review of
the Group’s policies relating to external audit,
including the policy that governs how and whenemployees and former employees of the Group’s
auditors can be employed by the Company. Nochanges were made. The Committee also
reviewed and accepted KPMG’s Independence
letter which annually confirms their independence
and compliance with the Financial Reporting
Council’s (FRC) ethical standard.
In conclusion, the Committee agreed that
KPMG were independent.
External auditor reappointment
As noted above, the Committee recommended
to the Board that KPMG be offered for
re-election at the forthcoming AGM.
I will be available at the shareholder
engagement event to respond to any questions
shareholders may raise on the Committee’s
activities in the year.

John Ramsay
Chair of the Audit Committee

Ethical compliance review
Under its terms of reference, the Committee is tasked with anannual review of the Company’s anti-bribery and corruption, fraud
and whistleblowing procedures. In 2021, the Committee’s reviewof these matters consisted of receiving reports and presentations
from the executive owner of the procedures. The Committee wassatisfied that the design and focus of the ethics programme tookaccount of the Company’s increasing presence in emerging
economies, which could often pose elevated compliance andreputational risks.
The Committee discussed the progress of integrating Iberchem
and other recently acquired companies within the Group’s ethics
programme and were comfortable with the work undertaken andwith the level the engagement by the newly acquired businesses.
The Committee considered that the work of the ethics committee in its
robust oversight of the development and reinforcement of the Group’s
ethics strategy and considered that it was demonstrative of the
top-level commitment to anti-bribery by the executive team. The
Group had 48 ethical risk assessments in place at the site level, which
accurately recorded detailed assessments of the local bribery risk.

The recently updated ethical compliance manual had beeneffective in proceduralising the ethics programme, and had been
supplemented with practical ‘how to do’ guidance notes. Training
programmes continued to operate effectively, with over 1,000
employees undertaking training during the year (online or face-toface). The Group’s Speak Up line was working effectively, and theCommittee were satisfied that the procedure for investigating
reports was robust and being undertaken by independent experts.
During 2021, 93 reports were made using the Speak Up line andevery report had been investigated with no serious allegations
having been substantiated.
The Committee reviewed the KPIs that tracked and monitored how
the ethics programme was embedded and were used as leading
and lagging indicators of ethical risks.
The Committee conducted a review of the Group’s fraud policy andprocedures – with no changes being required. No instances of fraud
were brought to the Committee’s attention.

Croda International Plc
Annual Report and Accounts 2021

83

Directors’ report

At each meeting, the Committee considered
the results of the audits undertaken and theadequacy of management’s response tomatters raised, including the time taken to
resolve such matters. Particular focus wasaddressed to those areas where there was amajor divergence between the outcome of theinternal audit and the scoring of the selfassessment questionnaire, completed annually
by each business unit. In these instances, theCommittee challenged management as to what
actions it was taking to minimise the chances ofdivergences arising in the future.

It took account of the views of the Group
Finance Director and Group Financial Controller,
who had discussed subsidiary component
audits with local audit partners, to gauge thequality of the team and knowledge andunderstanding of the business. The Committee
also considered how well the auditor assessed
key accounting and audit judgements and theway it applied constructive challenge andprofessional scepticism in dealing withmanagement.

Remuneration Report
Report of the Remuneration Committee
for the year ended 31 December 2021

Croda’s remuneration
approach plays a keyrole in the continued
achievement of theGroup’s strategic
objectives and in thedelivery of sustainable,
profitable growth.”
Dr Helena Ganczakowski
Chair of the Remuneration Committee

Contents
A Chair’s letter
B 2021 Remuneration at a glance
C Report of the Remuneration
Committee for the year ended
31 December 2021
• How our reward strategy aligns toand supports our business strategy• Executive Directors’ remuneration
for the year ending 31 December
2022
D Directors’ remuneration for the year
ended 31 December 2021
E Summary of the Remuneration Policy

A. Chair’s letter
On behalf of the Board and the Remuneration
Committee, I am pleased to present Croda’s
Directors’ Remuneration Report for the year
ended 31 December 2021. I would like to thankmy colleagues for their engagement throughout
the year, and to welcome Julie Kim as a newmember of the Committee in 2021 andNawal Ouzren who joined the Committee
in February 2022.
The Committee believes that Croda’s
remuneration approach plays a key role in thecontinued achievement of the Group’s strategic
objectives and in the delivery of sustainable,
profitable growth. In 2019 we reviewed andupdated our policy to ensure ongoing alignment

84

Croda International Plc
Annual Report and Accounts 2021

to Croda’s evolving ambition and received
97.6% votes in favour. Last year we werepleased to receive 98.8% votes in favourof the 2020 Remuneration Report.
The Remuneration Committee is not proposing
any material changes to the operation of thepolicy in 2022, being satisfied with both theoutcome of the 2019 review and subsequent
minor changes made last year.
Continued strong progress
I am pleased to confirm that Croda continues
to progress successfully in line with its strategy,
with excellent, profitable growth across all
sectors. Recent acquisitions have beensuccessfully incorporated, opening up new fast
growth markets, and vigorous progress has
been made in building the Life Sciences
platform. The full year financial results werevery strong, with reported sales up 36%,
driven by organic growth and acquisitions,and with improving margin driving excellent
profit growth.
This pleasing performance was delivered
despite the ongoing challenges of COVID-19
where we continued to balance the needs ofall our stakeholders while always ensuring thehealth and safety of our employees. As wereported last year, in managing COVID-19,
we have not made anyone redundant or
furloughed any employees and have protected
pay and benefits, including for those unable
to work normally due to the need to self-isolate
or work from home. We also provided support
for our suppliers and customers, whereappropriate, and continued to pay dividends
for our shareholders.

Alignment to strategic objectives
Croda’s strategy continues to focus onconsistently delivering sustainable, profitable
growth by providing innovative, sustainable
solutions to our customers consistent with
our Purpose: Smart science to improve livesTM.
During 2021 we conducted a strategic review
of our Performance Technologies and Industrial
Chemicals (PTIC) businesses to decide on thebest ownership structure going forward.
The conclusion of this review was to sell the
majority of the PTIC businesses to Cargill,a company which has a distinguished history
and strong values.
Under Cargill’s ownership, PTIC and its
employees will benefit from further investment
which will enable the business and employees tocapture new growth opportunities and flourish.
In March 2021 we acquired Alban Muller,a leader in the creation and supply of naturaland botanical ingredients for the global beauty
industry, and in June 2021 our wholly owned
Iberchem subsidiary successfully completed
the acquisition of Parfex S.A., a fine fragrance
business based in Grasse, France. These
acquisitions, alongside Iberchem and Avantiin 2020, all represent strong alignment to our
objective of transitioning to a pure-play Life
Sciences and Consumer Care company.
Delivering sustainable, profitable growth isdirectly reflected in our performance measuresand stretching targets. The Group Profit
Incentive Bonus Scheme (senior annual Bonus
Plan) is based on a single operating profit
metric with no pay-out unless the previous
year’s outcome is exceeded.

Performance is always considered holistically;each year the Committee applies a Discretion
Framework to satisfy itself that the outcome
in terms of primary performance metrics has
not been to the detriment of other measuresof corporate performance. Health & safety
always remains a key metric of particularfocus in this review.
Workforce engagement
In 2021 I met with a cross section of
employees through a series of listening groups
in Asia, the Americas and Western Europe.
Participants expressed their appreciation at thecontent and openness of the sessions which
provided me with valuable feedback on abroad range of reward topics, including
executive remuneration. In addition, there isa dedicated email address where employees
can communicate with me directly and my
Board colleagues also held listening groups
throughout 2021 covering a range of topics
including reward.
The Committee receives regular updates on
employees’ global terms and conditions, andwe are made aware of any significant policychanges impacting employees. In 2021 wewere pleased to note that flexible working was
extended across the business including thefacilitation of increased home working andflexible hours. The pay and benefits of
employees that choose to work flexibly are
maintained in full reflecting our belief thatflexible working enhances productivity.
In response to COVID-19 we also continued
our wellbeing initiatives; all sites offeredtargeted activities; some have been local
one-off events and others are more broadly
applicable such as the availability of
Employee Assistance Programmes globally.
We continued to use our online recognition
programme in North America and Latin
America and our Asia colleagues launchedtheir own programme, ‘Kudos!’.
Alignment of executive reward with thewider workforce
Our ‘One Croda’ culture drives focus on thealignment of executive reward with the wider
workforce. In 2021 we launched a ‘Free SharePlan’ for all of our employees who are noteligible to receive the senior annual Bonus Plan.
As the senior annual Bonus Plan paid out for
2021, every employee globally in the Free
Share Plan, around 5,150 in total, will receive
ten Croda shares or the cash equivalent,payable in May 2022. This Plan is in addition
to other reward plans offered at a local level.
In 2018 we gained accreditation in the UK as a
Living Wage Employer from the Living Wage
Foundation. In 2021 we extended this globallyto complete an assessment of all employees
worldwide, in partnership with the Fair Wage
Network, establishing a Living Wage in each of
the countries in which we operate and ensuring all
employees receive this as a minimum. Our target
for 2022 is to ensure that this is also applied to allof our regularly employed contractors.
In line with our ‘One Croda’ culture, our seniorleaders all share the same performance metrics
for the senior annual Bonus Plan and PSP.
Around 510 employees participate in the seniorannual Bonus Plan and 66 of these are also in
the PSP. We believe that this focuses ourleadership on working together globally todeliver the best overall outcome for ourcustomers and, in turn, our shareholders andother stakeholders.
Pay for all employees is set in line with themarket and closely monitored and in 2021 we
conducted extensive salary benchmarking inmany countries, making adjustments where it
was appropriate to do so. Local bonus
schemes are available for those below seniorleader level in most regions. Around 84% of our
UK workforce and 60% globally participate inshare plans and therefore benefit from therewards enjoyed by all shareholders.
We continue to offer a career average defined
benefit pension scheme that is open to all newand existing UK employees, a generous andinclusive benefit for our UK workforce. An
important part of the value to employees is thatthe level of accrued pension is guaranteed, as
the Company bears all the investment risk. Thissecurity for our workforce is an important partof our ‘One Croda’ culture. In 2020 we reduced
Executive Director pension supplements toalign to the UK workforce.
Remuneration out-turn for 2021
Croda delivered an outstanding performance in
2021 with very strong sales and profit growth,
driven in part by lipid system sales for
COVID-19 applications. The Committee
determined that, given the unique nature andscale of this piece of business, the profit fromour principal COVID-19 vaccine contract should
be excluded from the Bonusable Profit
calculation for both the 2021 and 2022 bonus.
In line with our usual practice, profit contributions
from in-year acquisitions (e.g. Parfex and Alban
Muller) are excluded from the calculation to ensure
a like-for-like comparison with the base year.
Bonusable Profit (after exclusion of in-year
acquisition profits and the lipid system sales forour principal COVID-19 vaccine contract)significantly exceeded the outcome for 2020
and the maximum payout target. The
Committee used the Discretion Framework tosatisfy itself that this performance was robust

and sustainable by reviewing underlying
performance. The Committee determinedthat 100% of the senior annual Bonus Plan
was payable.
Croda’s longer-term performance in profitable
growth and Total Shareholder Return was also
very strong and reflected the long-term growthtrajectory of the business. 2021 was the year inwhich PSP grants made in 2019 concluded
their three-year period, and the Committee
reviewed performance for the targets that wereset at that time. Over the period TSR
performance was 109.8%, placing Croda in the
top quartile against our bespoke comparatorgroup with 100% of this part of the award
vesting. Our strong profit performance led to
EPS growth of 31.4%, which resulted in a
93.5% payment of this part of the award.
NPP growth, for the first time, met thestretching vesting target, which reflected
the ambition of this metric and led to apayment of 100% of this part of the award.
The PSP award is dependent on satisfactoryunderlying financial performance of the Group.
The Committee considered this, and a range ofother broader performance criteria using theDiscretion Framework, and concluded that the
PSP awards were consistent with and reflectiveof overall financial performance over the time
period. Therefore, after consideration of all
factors, an overall PSP vesting of 97.4%
of the total award was agreed.
Salaries for 2022
For 2022, the general salary increase set for
the UK workforce is 5%, with additional funds
available to address specific market issues.
The Committee considered the salaries of the
Executive Directors in the context of the UK
workforce increases, low positioning against
market benchmarks, Croda’s overall strong
performance and the strong performance of
the Executive Directors, and concluded that the2022 salary increase for Executive Directors
should be in line with that of the UK workforce.
A review of the Chair fees was also undertaken
and, reflecting similar principles and thecontinuing high time commitment, an increasein line with that of the UK workforce wasalso awarded.
Looking ahead
Measures and targets for 2022 have been set
for the senior annual Bonus Plan and PSP, as
outlined above.
The Remuneration Policy is due for its triennial
renewal at the 2023 AGM and therefore during2022 we will be undertaking a comprehensive
review to ensure that it continues to align to ourstrategy, taking on board input and advice from
our investors and other stakeholders. We remaincommitted to ensuring that our remuneration
framework reflects the evolving needs of all of
our stakeholders and the communities in which
we operate.

Dr Helena Ganczakowski
Chair of the Remuneration Committee

Croda International Plc
Annual Report and Accounts 2021

85

Directors’ report

For the longer-term Performance Share Plan
(PSP), 35% of the award is based on earnings
per share (EPS) growth and 35% is based onrelative Total Shareholder Return (TSR)
performance against a bespoke group of ourmost relevant competitors. 30% of the 2022
award will continue to be based onsustainability metrics. Within this, 15% will bebased on our innovation metric, New andProtected Products (NPP); those productsthat will drive our future growth. Innovating
sustainably is core to Croda’s success, and wecontinue to focus management on the deliveryof this. The remaining 15% will be focused on
selected KPIs aligned to the delivery of our‘Climate Positive’ and ‘People Positive’sustainability commitments. We have also
revised our EVA underpin to a more
discretionary basis following the divestmentof the majority of the PTIC businesses.

Remuneration Report (continued)
B. Remuneration at a glance
How we performed in 2021
Adjusted Operating Profit

Adjusted EPS+46.6% to+42.5% to£468.6m

250.0p

NPP

Total Shareholder Return37%

109.8%of Group sales

over the three-year PSP performance
period (1 January 2019 to
31 December 2021)

Single figure remuneration:
SalaryBenefits

PensionAnnual bonus

LTIPs

Other

Steve Foots(total £4,427,284)
Jez Maiden(total £2,499,195)
0%

20%

40%

60%

80%

100%

Operation of our policy in 2021
Key component
and timeline

FeatureMetrics and results

Basic salaryCompetitive package to attract
and retain high calibre
executives.

• Pay rise of 1% awarded to Executive Directors.
• UK workforce was awarded a 1% increase. An additional 1%
increase was awarded to the majority of the UK workforce inJuly 2021, excluding Executive Directors and those in our
most senior grades.

Annual bonus

Incentivise delivery of strategicplan, targets set in line withGroup KPIs.

Bonusable Profit(see page 95 for definition of Bonusable Profit)
Threshold2020 actual

Maximum

2020 actual plus 10%

Actual2020 actual plus 24%

Group
Chief
Executive
(CEO)

Group
Finance
Director(GFD)£682,340£470,579£1,023,510£588,224

Of which£341,170
is deferred

Of which£196,075
is deferred£2,556,242£1,322,175

100% of maximum bonus paid
Deferred elementof bonus

Compulsory deferral of one third of N/Abonus into shares with three-year
holding period to align withlong-term business performance.

PSP

Incentivise execution of theVesting of the 2019 PSP awardbusiness strategy over long-term
ThresholdMaximum
measuring profit, shareholder
EPS*
5%
11%
value and innovation.
TSRMedianUpper
Quartile
(UQ)
NPP**

NPP sales growth to be atleast twice non-NPP sales.

Actual

% payout

10.5%

93.5%

89.4
percentile
Above UQ

100%

3.8x

100%

Total payout – 97.4%* EPS growth p.a. is calculated on a simple average basis over thethree-year period.
** Subject to a minimum average of 5% growth per year and overall
positive Group profit growth.

PensionPension benefits are either aN/Acapped career average defined
benefit pension plan with a cash
supplement above the cap, or acash supplement. For 2021, cash
allowance of up to 20% of salary,in line with the UK workforce.

£136,635£94,116

Shareholding
requirements

Share ownership guideline to• CEO – 225% of salary
ensure material personal stake in • GFD – 175% of salarybusiness.

>225%
of salary>175%
of salary86

Croda International Plc
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C. Report of the Remuneration Committee for the year ended 31 December 2021
1. Summary of Remuneration Policy adopted in 2020

• Our Discretion Framework
4. Reward in the wider employee context• Workforce engagement• How our Remuneration Policy relates to reward in the wider
employee context
5. Sharing success across the business• Free Share Plan
• All-employee share plans• Living Wage
• More than just pay
6. Promoting diversity & inclusion
7. Other disclosures• UK gender pay gap• UK CEO pay ratio
8. Remuneration Committee year ended 31 December 2021
9. Executive Directors’ remuneration for the year ending
31 December 2022

An updated Remuneration Policy was presented and approved byshareholders at the 2020 AGM. This is intended to operate until the AGM
in 2023. In reviewing the Policy and its implementation, theRemuneration Committee undertook a thorough review of existingarrangements with a particular focus on alignment to Croda’s strategy
and ambitions. This review was completed with the following principal
objectives in mind:• achieve the closest possible alignment with the Company’s strategy;• support the Company’s ambition to be a purpose-led organisation
focused on Smart science to improve lives™;• ensure that business performance is appropriately measured andrewarded and that the scale of reward is proportionate;• make certain that the Policy properly reflects the various interests of all
our stakeholders in its structure and metrics;• ensure that the Policy is fair and competitive and that it also considers
reward more broadly in the organisation;• disclose the Policy in an open and transparent way.
The Remuneration Committee is not proposing any substantive changes
to the operation of the Policy in 2022, being satisfied with both theoutcome of the review and the minor changes made since then.
In line with the normal three-year cycle under the remuneration reporting
regulations, a new Policy will be subject to shareholder approval at the2023 AGM. In advance of this, during 2022, the Remuneration
Committee will undertake a review of the existing Policy to ensure it
continues to align to Croda's strategy, taking on board input and advice
from investors and other stakeholders.

Summary of Policy and its operation
SalarySet taking into account an individual’s responsibilities, performance and experience as well as pay andemployment conditions elsewhere in the Group and other external factors.

Annual bonus

Maximum annual bonus opportunities:• Group Chief Executive – 150% of salary• Group Finance Director – 125% of salary
Bonusable Profit growth targets, with no bonus payable until the previous year’s profit is exceeded.
Discretion Framework applies, which includes health, safety and environmental performance.
One third deferred for three years.
Malus and clawback provisions apply.

Performance Share Plan

Normal maximum PSP opportunities:• Group Chief Executive – 225% of salary• Group Finance Director – 175% of salaryAwards based on financial (e.g. EPS), shareholder return (e.g. relative TSR) and strategic (e.g. sustainability) metrics.
The Discretion Framework also applies, which includes satisfactory underlying financial performance.
Three-year performance period with an additional two-year holding period.
Malus and clawback provisions apply.

Pension and benefits

Pension benefits are either a capped career average defined benefit pension plan with a cash supplement above thecap, or a cash supplement.
Cash allowance for Executive Directors of up to 20% of salary which aligns with our UK workforce.
Typical other benefits include a company car, private fuel allowance, private health insurance and other insured benefits.

Shareholding guidelines

Shareholding guidelines of:• Group Chief Executive – 225% of salary• Group Finance Director – 175% of salary
Post-employment shareholding guidelines also apply for two years after leaving employment. These are set at 100%of the in-employment guideline for the first year after leaving employment, tapering to 0% by the end of year two.
This policy applies to shares from awards that vest in 2020 and beyond. The Committee is implementing structures toensure that post-employment shareholding guidelines are adhered to, by the placing of restrictions on the sale of shares
via our third-party share plan administrator.

Further details about the Policy can be found on pages 106 to 108.

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Contents
1. Summary of Remuneration Policy adopted in 2020
2. How our reward strategy aligns to and supports the delivery of
our business strategy
3. How our Remuneration Policy reflects the UK Corporate
Governance Code

Remuneration Report (continued)
2. How our reward strategy aligns to and supports the delivery of our business strategy
Over the last eighteen months we have accelerated key elements of our strategy to complete our transition to a dedicated Consumer Care and Life
Sciences company. Across these markets, innovation and sustainability will be the core drivers of our future growth. In developing and implementing
our Remuneration Policy the Committee has been mindful to ensure that every element of reward directly aligns to our strategy, ensuring we provide
and protect long-term shareholder value.

Element of reward

Link to strategy

Sustainability

Innovation

GrowthLong-termshareholder
value

✓

✓

Annual bonus
Clear and simple measure that supports our strategic
objective of consistent bottom-line growth. One third ofawards are deferred, further protecting shareholder value.

ProfitPerformance Share Plan
Earnings per share (EPS)

A measure of earnings growth over a three-year period
recognising that sustained growth can only come throughrelentless innovation.

✓

✓

✓

Total Shareholder Return(TSR)

Measured against our peers, a key indicator of long-term
growth and shareholder value.

✓

✓

✓

New & Protected Products(NPP)

An established measure of innovation, the metric is growth of
NPP products versus non-NPP products rewarding growththat is driven by innovation.

✓

✓

✓

✓

Sustainability

Over the last three years we have incorporated sustainability
metrics directly linked to our ambitions to be Climate,Land and People Positive by 2030.

✓

✓

✓

✓

Underpins & Discretion Framework
Safety, Health andEnvironment (SHE)The SHE underpins ensure that rewards are not made at theexpense of the safety, health and environment of ouremployees or the communities that we serve.

Financial underpins

The financial underpins including EVA within our Discretion
Framework ensure that reward reflects the overall financial
health of the business.

Culture and ethics

The culture and ethics underpin ensures that reward reflects
strong governance and the experience of all our
stakeholders.

✓

✓

✓

✓

✓

✓

✓

Other features
Holding periods

Extends the period to five years before shares are released,further protecting shareholder value.

✓

Shareholding requirements

Ensures that our Executives’ interests are aligned toshareholders.

✓Malus and clawback

Allows incentive awards to be clawed back or reduced in theevent of significant financial or personal misconduct.

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3. How our Remuneration Policy reflects the UK Corporate Governance Code
When developing the Remuneration Policy, the Committee was mindful of the UK Corporate Governance Code and considers that the executive
remuneration framework appropriately addresses the following factors:
How these are addressed

Clarity

Our values of openness and transparency are reflected in our reward principles. The Committee is committed to providing
open and transparent disclosure on executive remuneration for our stakeholders.
Our arrangements are clearly disclosed and any changes to our Remuneration Policy and its operation are highlighted in a waythat defines their alignment to both our strategic ambitions as well as the provisions of the UK Corporate Governance Code.
Our executive remuneration arrangements, as well as those throughout the global organisation, are simple in nature and wellunderstood by both participants and shareholders.

Simplicity

Our senior annual Bonus Plan, in which around 510 of our global employees participate, is based on a single profit metric,
with a simple key requirement that no bonus can be paid until the previous year’s profit is exceeded.
The Committee considers that the structure of incentive arrangements does not encourage inappropriate risk-taking.
Performance is based on a balance of metrics which also reflect our broader stakeholders, for example inclusion of sustainability
targets and health and safety underpins. We then take a holistic assessment of performance using our Discretion Framework.

Risk

Annual bonus deferral, the PSP holding period and our shareholding guidelines provide a clear link to the ongoing performance ofthe business as well as alignment with shareholders. Executives will be rewarded for sustainable long-term shareholder return.
Malus and clawback provisions also apply for both the senior annual Bonus Plan and PSP.
Predictability

Our Remuneration Policy contains details of maximum opportunity levels for each component of pay, with actual incentive
outcomes varying depending on the level of performance achieved against specific measures.

Proportionality

Our Remuneration Policy directly aligns to our strategy and financial performance. The Committee considers performancefrom a range of perspectives. Poor financial performance is not rewarded.

Alignment to culture

Alignment to our ‘One Croda’ culture is clearly established in our Remuneration Policy; our senior annual Bonus Plan has the same
metric for all participants, our PSP metrics reflect our commitment to sustainability and pensions are aligned across the workforce.

Our Discretion Framework
To enhance the rigour with which performance is reviewed the Committee has adopted a Discretion Framework which it applies when assessing
bonus and long-term incentive plan outcomes. As with all Board/Committee decisions (in line with section 172) we also reflect on the experienceof all our stakeholders throughout the course of the plan periods.
What is the formulaic result following consideration of the existing underpins?
What is the single figure outcome?
Committee to consider year-on-year change and whether this mirrors the trend in performance
How does the outcome compare with wider shareholder experience?
Committee to consider Total Shareholder Return in both relative and absolute terms over a number of different periods
How does the outcome compare with overall Company performance?
Consider performance against other KPIs, for example
ROIC and EVA

SalesProfit growth

Sustainability

Culture and conduct
CultureConduct

Health and safety

Systems and control

Are there any external headwinds or tailwinds which need to be considered?
Are there any other events that should be factored in?
Other events could be reputational/risk related or a change of accounting standards
As an additional reference point, are the bonus and PSP outcomes consistent?
Input from others?
Draw on input from other Committees as well as other management teams including HR, Legal, Internal Audit and Risk
Consider shareholder response to results
The Committee may also want to reflect on how the market is likely to respond to the preliminary results
Compare with historical use of discretion
Does the outcome appear reasonable/fair, or should an adjustment be considered?
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Factors

Remuneration Report (continued)
4. Reward in the wider employee context
Workforce engagement
Engagement with the workforce is an area in which we continue to make progress. In addition to continuing with established workforce engagement
channels (pulse surveys and a dedicated email address for employees to contact the Chair of the Committee), in 2021, the Chair of theRemuneration Committee attended virtual listening groups where employees discussed and shared their thoughts on executive remuneration andreward in the wider business. As 2022 will be the year that we consider our Remuneration Policy, with any changes adopted in 2023, we plan toengage the workforce more widely through pulse surveys and further listening groups with the Chair of the Remuneration Committee. A summaryof engagement activities undertaken to date is as follows:
Reward principles

Our reward principles, which were developed and approved during 2019, guide the way we recognise and remunerate all
our global employees. These principles focus on total reward including intangible rewards and were strongly influenced by
the results of our previous Global Employee Survey. These have been shared across the organisation.

Employee pulse
surveys

In 2021, a small number of pulse surveys covering a range of topics, including COVID-19 and resulting changes to theworkplace, were undertaken and findings were shared with the Board as well as management to help guide decisions.
For 2022 a new series of pulse surveys covering culture and reward will be issued.

Listening groups

During 2021, Helena Ganczakowski, Chair of the Remuneration Committee, held listening groups across a cross-sectionof employees in Asia, the Americas and Western Europe. Helena presented on the role of the Board and the Remuneration
Committee and also shared an overview of the Elements of Reward at Croda and feedback on the Global Reward pulse
survey conducted in 2020. The sessions were greatly appreciated by those who attended, with a number of participants
noting that they had limited knowledge of the Board and Remuneration Committee before the session.
The Chair of the Board and other Non-Executive Directors also attended listening groups throughout the year. Anita Frew
held listening groups to better understand how employees were feeling on a range of different topics, including strategy,
culture, recognition, and value. These listening groups also focused on employees’ wellbeing at Croda and what additional
support the Board could offer. Roberto Cirillo presented listening groups on Board responsibilities to a cross section of
employees in Italian.

Dedicated email to
Chair of Committee

A dedicated email address has been established for employees to send comments or questions to the Chair of theRemuneration Committee.

Overview of pay andpolicy decisions

Committee members are updated annually on global employees’ terms and conditions and are made aware of any
significant changes to policies and other pay-related matters.

How our Remuneration Policy relates to reward in the wider employee context
When making decisions about executive remuneration the Committee considers the pay and reward structures across the business. Annually, theGroup Human Resources Director provides the Committee with a review of workforce remuneration, and the Committee is updated periodically on
any feedback received on remuneration practices across the Group.
One of the principles of Croda’s culture is to drive ‘One Croda’, therefore, many of the remuneration structures that apply to Executives also apply
further in the global organisation, as set out in the table below. The key difference between the policy for Executive Directors compared to other
employees is that remuneration for Executive Directors is more heavily weighted towards variable pay and share ownership.
Remuneration element

Who participates?

Details

Base pay

All employees

Pay is set in line with the market and closely monitored. Any comparator group used as areference point is country and/or industry specific.

Annual bonus

Executive Directors, Executive Consistent senior annual Bonus Plan aligned to increase in annual profit.
Committee, senior leaders
Operates on a tiered basis from 150% of salary to 20% of salary across the most seniorand senior managers
global grades. Deferral applies for Executive Directors and members of the Executive

We pay a ‘Living Wage’ globally.

Free Share Plan(c. 510 employees globally)

Committee.

All other employees

Local schemes apply in many locations.

All employees who do not
New for 2021, an award of free shares or the cash equivalent if the senior annual Bonus
participate in the senior annual Plan pays out. For 2021 this will be 10 shares or the cash equivalent.
Bonus Plan(c. 5,150 employees globally)

Performance Share Plan Executive Directors,
Executive Committee andsenior leaders

Consistent PSP based on EPS, TSR and sustainability metrics, including NPP.
Operates on a tiered basis from 225% of salary to 30% of salary across the most seniorglobal grades.

(c. 66 employees globally)
Restricted Share Plan

Selected employees generally Discretionary awards can be granted annually to selected employees to reward exemplary
not eligible for PSP
performance.

All employee share plans1 All employees

Employees can participate in our global Sharesave Scheme, subject to qualifying service,
allowing everyone to save monthly and purchase discounted shares.

All employees

Defined benefit plan based on career average salary plus 20% cash supplement paid forsalaries above the cap or to employees who are tax limited and have opted out of thepension scheme.

Pension (UK only)2

1. Sharesave or similar schemes are provided where local social security laws allow.
2. Other pension arrangements, aligned to local practice and legislation, are available in many of our locations.

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5. Sharing success across the business
The Committee believes in sharing success across the business and extending share ownership more widely across our employee base.
This is promoted through the operation of a new ‘Free Share Plan’ and a number of all-employee share schemes.

The Free Share Plan was developed in response to findings from the Global Reward Survey in 2020 and aims to share success more widely acrossthe business and encourage share ownership.
As the senior annual Bonus Plan paid out for 2021, all eligible employees will receive 10 Croda shares (or the cash equivalent) in April 2022 under
the Free Share Plan. The value of the award is determined by the share price at vesting and based on the recent share price will be in the region of£706 (based on a share price of £70.60 on 18 February 2022).
All-employee share schemes
Workforce participation in these plans has remained consistently strong and is driven by our culture of employees feeling a strong loyalty
to the business.
UK
Overseas

100
90

83%

85%

84%

83%

84%

80
70

57%

60

61%

59%

63%

60%

50
40
30
20
10
0

2017

2018

2019

2020

2021

Croda’s strong share price performance has led to the all-employee share schemes being a strong benefit for employees.
Example value of the 2018 Sharesave Scheme
The 2018 Sharesave Scheme which was granted in September 2018 at a share price of 4144p could be exercised from November 2021. The
price of Croda shares on the settlement date in November 2021 was 9438.2p, meaning employees could have made a potential return of c.128%
on their savings. For example, an employee saving £50 a month would have made a profit in excess of £2,258.

£1,800£0£500£1,000£1,500£2,258£2,000£2,500Total amount saved by employee over the three-year period£3,000£3,500£4,000£4,500Return as a result of share price appreciation

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Directors’ reportFree Share Plan
Croda is proud to announce that in 2021 we launched the ‘Free Share Plan’. Under this new plan, all employees globally who are not eligible for thesenior annual Bonus Plan will be gifted Croda shares (or the cash equivalent) if the senior annual Bonus Plan pays out. Unlike other elements ofremuneration this award is not set as a multiple of salary, instead it rewards all eligible employees at the same value.

Remuneration Report (continued)
Living Wage
We were pleased to announce in 2018 that we gained accreditation in the UK as a Living Wage Employer from the Living Wage Foundation.
In 2022, we will continue to ensure that all our UK employees and regular contractors are paid at, or above, the rates advised by the Living
Wage Foundation.

NETWORKIn addition, the business continues to pursue its Global Living Wage target, one of our sustainability KPIs linked to the UN SDGs. In 2020 we forgeda partnership with the Fair Wage Network (FWN) to establish, using an independent and economically rigorous methodology, Living Wage levels
across the world. In 2021, we compared our global wage levels to Living Wage comparators provided by the FWN and made all necessary
adjustments to ensure that all our employees are now paid a Living Wage at a minimum.
We have established processes to ensure that Living Wage levels are reviewed annually and the necessary adjustments to wages are made in order
to continue paying a Living Wage to all employees.
In addition, we will also begin to plan for and progress towards our commitment of paying a Living Wage to all regularly employed contractors
globally by the end of 2022.
More than just pay
Our employees and our culture remain central to the continued success of Croda. Croda has been resilient in its response to COVID-19 and during
the pandemic the wellbeing and safety of our employees has been and continues to be a key priority.
In addition, we continue to enhance our range of other workforce initiatives, including:• We continued with the rollout of our online recognition programme, Croda Stars, in North America and Latin America. An online recognition
programme, Kudos! was also launched in Asia. All programmes have been positively received by employees.
• We are proud of the training and development that we provide for employees and have set a target of ensuring all employees receive at least one
week of training a year by the end of 2025. In 2021, our employees undertook over 93,000 hours of training with the average number of hours an
employee completed being 16 hours.
• We relaunched and redesigned our core company development programmes for senior leaders and future leaders with our values at their heart.
• We launched a new inclusion based global leadership programme, Phoenix Rising, and a series of leadership webinars on diversity & inclusive
leadership.
• We recorded over 100 wellbeing activities which took place in 2021. We also extended Employee Assistance Programmes in many of our countries.

6. Promoting diversity & inclusion
As a business with innovation at its heart, diversity of thought and ideas is critical to our long-term success and we are committed to encouraging
and promoting all types of diversity within our organisation. We have established a global Diversity & Inclusion Steering Committee plus a number ofregional and country committees designed to discuss and promote diversity & inclusion.
At the beginning of 2021, we published a Board diversity & inclusion policy and communicated our commitment to greater diversity within ourbusiness. Julie Kim was appointed as a new member of the Board in 2021 and Nawal Ouzren joined the Board in February 2022. These two
appointments mean we have fulfilled our commitment to meeting the requirements of the Parker Review on ethnic diversity as well as also achieving
full gender balance on the Board.
In 2021 we ran a global diversity survey to collect wider diversity data in the organisation. All data was collected in good faith, in line with local laws
and legal restrictions, including data privacy regulations. The data will be used to influence future work and is the first step in being able to report on
our ethnicity pay gap. For further information on this please refer to page 37.

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7. Other disclosures
UK gender pay gap
The table below shows a summary of the gender pay gap for UK employees of Croda Europe Ltd:
2018

2019

2020

2021

27.68%
23.10%
63.05%
33.26%

27.06%
23.90%
67.08%
33.36%

18.72%
19.22%
64.36%
0%17.70%
21.11%
62.58%
0%* The senior annual Bonus Plan and Croda Europe Discretionary Bonus Scheme did not pay out for 2019 (payable in 2020) or 2020 (payable in 2021). A small numberof employees received a sales bonus but the median bonus for both female and male employees was zero giving a median bonus gap of 0%.

We are confident that our gender pay gap is not an equal pay issue but is a result of a lack of female representation across our business at seniorlevels and particularly in production roles which represent the bulk of the workforce between the 25th and 75th percentile. Addressing this issue will
require a long-term approach but we have already begun work to increase the number of females working in production and in senior positions.
The number of women in leadership positions is now 36%. We are also pleased to report that we have 43 women working as process operators
across 13 of our sites globally.
Over 2020 and 2021 only 40% of hires and promotions to leadership positions were female. At this rate we will not meet our 2030 target to achieve
gender balance across our leadership. Therefore, we have included a ‘People Positive’ target in our 2022 PSP. This target relates to the genderbalance of appointments and promotions to our most senior grades.
Other actions taken to address the gender pay gap include:• Ensuring we have a balanced shortlist for all positions that we are recruiting for; we have a target of achieving balanced shortlists for 80% of roles
by 2023.
• Further improving our talent and succession planning processes to help identify and nurture talent early in their career.
• Finding ways to reduce shift work (especially night work) and to examine the feasibility of part-time and job share arrangements in our production
facilities.
• Changing the way we advertise production roles to ensure we reach a diverse population.
• Improving family-friendly policies; in 2019 we introduced a new Global Parental Leave Policy and in 2020 we launched new Flexible Working
guidance. All locations have implemented this and have local policies in place.
• Continuing to invest in our STEM activities to encourage a wide range of applicants to apply for roles in our business.
More information is available on the Croda website.
UK CEO pay ratio
The table below sets out the ratio of the CEO’s ‘single figure’ total remuneration to the 25th, 50th and 75th percentile full-time equivalent total
remuneration of the Company’s UK employees. The pay ratios are calculated on a Group-wide basis by reference to UK employees only.
Under the regulations, there are three methodologies that companies can choose to report their pay ratio, known as Option A, B and C. For 2021
we have chosen to continue to use the Government’s preferred option, Option A. Using this methodology, we have determined the full-time
equivalent total remuneration for all UK employees and have ranked this data to identify employees whose remuneration places them at the 25th, 50thand 75th percentile. The pay ratios are then calculated by comparing total remuneration for these three employees against our CEO ‘single figure’
total remuneration.

FY 2021
FY 2020*
FY 2019
FY 2018**

Methodology

25th percentile

50th percentile

75th percentile

A
A
A
C

132:1
48:1
57:1
85:1

96:1
37:1
44:1
67:1

80:1
31:1
37:1
57:1

1. Calculations for the workforce exclude severance pay, notice pay, SIP repayments, fractional share payments, SAR payments and relocation expenses.
2. The calculations for the workforce exclude the value of the defined benefit pension plan due to the difficulty of calculating these figures for our complex historicalpension arrangements.
3. Excludes Non-Executive Directors, contractors and employees who left during the relevant year.
4. New starters, part-time employees and employees on long-term sick and maternity are included; their salary has been amended to reflect a full-time and full-year
salary.
* The ratio for 2020 has been restated to reflect the updated CEO ‘single figure’ total remuneration for 2020. This was due to the 2020 PSP award being updated toreflect the actual share price at vesting.
** The CEO pay ratio for 2018 was calculated using Option C, which enabled us to calculate, on an indicative basis, the total remuneration packages of three individual
UK employees at the 25th, 50th and 75th percentile. Option C was used in 2018 because the full administrative process to enable us to calculate the equivalent total
remuneration for UK employees was not in place.

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Mean pay gap
Median pay gap
Mean bonus gap
Median bonus gap*

Remuneration Report (continued)
The CEO pay ratio is calculated based on the total remuneration payable to the CEO, which could include payments under the senior annual Bonus
Plan and PSP. The outcomes of these elements are directly linked to performance, with the value of the PSP also incorporating share price growth.
It is therefore expected that the ratios will fluctuate significantly year-on-year to reflect Croda’s performance. In respect of the 2021 figures, as thishas been an outstanding year for performance both the senior annual Bonus Plan and PSP have paid out at high levels. As the senior annual Bonus
Plan did not pay out last year this represents a large increase in remuneration for the CEO; the PSP has also paid out at a higher level, from 40% in2020 to 97.4% in 2021.
Employee total remuneration

75th percentile
50th percentile
25th percentile

Actual basesalary 2021

Total remuneration
2021£48,904£30,603£27,865£55,440£46,050£33,654

We believe that our CEO pay ratio is consistent with our pay, reward and progression policies. The sharing of success has been a strong theme in
2021 and although the CEO pay ratios have widened, employees have also benefitted from a strong performing year. The newly launched ‘Free
Share Plan’ will pay out for 2021, rewarding our most junior employees proportionally the most, annual bonus plans will pay out globally and weawarded over double the amount of RSP awards compared to previous years.

8. Remuneration Committee year ended 31 December 2021
Responsibilities
The Committee determines and agrees with the Board the Company’s Remuneration Policy and framework, which should:• Support the Company’s strategy and promote long-term sustainable success; and• Ensure that the senior management of the Company are provided with appropriate incentives to encourage enhanced performance and are, in afair and responsible manner, rewarded for their individual contributions to the success of the Company.
The Committee also determines the remuneration packages for all Executive Directors, members of the Executive Committee, including theCompany Secretary, and the Chair of the Board and recommends and monitors the level and structure of remuneration for senior managers.
Key responsibilities

Key focus areas

Detailed responsibilities are set out in the Committee’s terms of reference, which can befound at croda.com/en-gb/investors/governance/boardcommittees/remunerationcommittee.

Remuneration outcomes for 2020 and approachfor 2021:

A summary is provided below:• Determine and agree with the Board the framework or broad policy for the remunerationof the Company’s Chair, the Group Chief Executive, the Executive Directors, theCompany Secretary and other members of senior management• In determining such policy, take into account factors which it deems necessary, including
relevant legal and regulatory requirements, the provisions and recommendations of the
UK Corporate Governance Code and associated guidance• Review workforce remuneration and related policies and the alignment of incentives andrewards with culture, taking these into account when setting the Remuneration Policy for
Directors• Feedback to the Board on workforce reward, incentives and conditions in support of theBoard’s monitoring of whether the workforce policies and practices of the Company arealigned with its Purpose, values and strategy• Review the ongoing appropriateness and relevance of the Remuneration Policy• Establish the selection criteria, select, appoint and set the terms of reference for any
remuneration consultants who advise the Committee and obtain reliable, up-to-date
information about remuneration in other companies• Oversee any major changes in employee benefits structures throughout the Group.

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• Remuneration outcomes for 2020, including vestingof 2018 PSP awards• Establishing the senior annual Bonus Plan and PSP
targets for 2021
• Granting of 2021 PSP awards and Restricted
Share Plan awards
Wider workforce:• Introduction of Free Share Plan
• Feedback from employee listening groups attended
by the Remuneration Committee Chair• Annual review of wider workforce remuneration
Remuneration approach for 2022:• Review of latest market and governancedevelopments• Consideration of approach for 2022, including newsustainability targets• Approval of salary increase for the CEO and Group
Finance Director effective 1 January 2022
• Approval of Chair fee increase effective 1 January2022

9. Executive Directors’ remuneration for the year ending 31 December 2022
Implementation in 2022

Basic salary

Executive Directors’ base salaries were reviewed during the final quarter of the financial year ended 31 December 2021.
Salaries for 2022 are as follows:
Salary at Jan 2022

Salary at Jan 2021

% Increase

Steve Foots£716,457£682,340

5%

Jez Maiden£494,108£470,579

5%

Commentary• For 2022, the general salary increase set for the UK
workforce is 5%, with additional funds available toaddress specific market issues.

Other benefits
Performancerelated Annual
Bonus Plan

• The Committee considered the salaries of the Executive
Directors in the context of the UK workforce increases, lowpositioning against market benchmarks, Croda’s overall strong
performance and the strong performance of the Executive
Directors, and concluded that the 2022 salary increase for
Executive Directors should be in line with that of the UK
workforce.

Other benefits such as company cars or car allowances, fuel allowance and health benefits are made available to Executive
Directors.
Steve Foots 150% of salary

Jez Maiden 125% of salary

The targets for the awards are set out below:
Level of award*Bonusable Profit% of bonus payable

Threshold

Equivalent to 2021 actual0%

Maximum

2021 actual plus 10%

100%* Bonusable Profit is the growth in underlying profitability (defined for bonus purposes as Group EBITDA for continuing operations before
exceptional items and any charges or credits under IFRS 2 Share-based Payments) less a notional interest charge on working capital employedduring the year. Target is measured after providing for the cost of bonuses on a constant currency basis. For 2022, considering the uniquenature of the business, the profit from our lipid system sales for our principal COVID-19 vaccine contract, will be excluded from the Bonusable
Profit calculation.

Commentary• No change to maximum award levels or performancemeasures from last year.
• When determining bonus outcomes, the Committee
applies the Discretion Framework which includes a range
of factors, see page 89.
• The Committee remains comfortable that the structure of
the senior annual Bonus Plan does not encourage
inappropriate risk-taking and that the mandatory deferralof one third of bonus into shares provides clear alignment
with shareholders and fosters a longer-term link between
annual performance and reward.

• Malus and clawback provisions apply.
• One third of any bonus paid will be deferred into shares for athree-year period.
• Full retrospective disclosure of targets and actual performanceagainst these will be made in next year’s Annual Report on
Remuneration.
• The Committee considers the targets set for 2022 to be atleast as demanding as in previous years and were set after
taking due account of the Company’s commercial
circumstances and inflationary expectations.

Croda International Plc
Annual Report and Accounts 2021

95

Directors’ report

Key component

Remuneration Report (continued)
Performance Steve Foots 225% of salaryshare plan
The targets for the awards are set out below:

Jez Maiden 175% of salary

Performance measure (weighting)Threshold vesting

Maximum vesting

EPS1 (35%)

5% p.a.

11% p.a.

TSR2 (35%)

MedianUpper quartile

Sustainability
metrics (30%)• NPP (15%) – NPP sales to grow at twice the rate of non-NPP, subject to overall positive Group profit growth
and a minimum average of 3% NPP growth per year (25% vesting), with payments being made on a sliding
scale up to 5% growth per year (maximum vesting).
• ‘Climate Positive’ (7.5%) – a reduction target specifically aimed at Scope 1 and 2 emissions and aligned with
our external commitment to achieve a Science Based Target (SBT) in line with a 1.5°C pathway. Over thethree-year PSP performance period the target is a 25.2% reduction compared to a 2018 baseline3 with any
award paid in defined ranges between:• a reduction of 25.2% and above would result in maximum vesting• a reduction of 21% would result in 50% vesting, with no vesting below this.
• ‘People Positive’ (7.5%) – a target aimed at increasing the number of women in leadership positions, aligned toour gender balance ambition. Over the three-year performance period the target is to appoint or promotewomen in more than 50% of available leadership roles with any award paid in defined ranges between:• 55% or above leadership roles hired being filled by women would result in maximum vesting• 40% of leadership roles being filled by women would result in 25% vesting, with no vesting below this.

An EVA underpin applies across the whole PSP award, such that vesting is subject to satisfactory EVA performance in theperformance period, as determined by the Committee.
1. EPS growth p.a. is calculated on a simple average basis over the 2. TSR peer group constituents: AzkoNobel, Albermarle, Ashland, BASF,
three-year period and therefore growth of 33% or more over
Clariant, Koninklijke DSM, Eastman Chemicals, Elementis, Evonik Industries,
three years is required for maximum vesting.
Givaudan, Johnson Matthey, Kemira, Lanxess, Novozymes, Solvay, Symrise,
Synthomer, Victrex.
3. 2018 baseline of 208,992 MTCO2e has been independently verified by
Avieco. As of 2021 a reduction of 12.7% has been achieved.

Commentary• No changes to maximum award levels fromlast year.
• No change to the balance of sustainability metrics
from last year. NPP and sustainability targets
remain equally weighted at 15% of the total PSP.
Sustainability targets aligned to key 2030
sustainability ambitions.
• Performance period 1 January 2022 to
31 December 2024.
Pension96• Revision to the EVA underpin to a more discretionary basis, taking into
account the changes to the capital allocation strategy following thedivestment of the majority of the PTIC businesses.
• When assessing outcomes, the Committee applies the Discretion
Framework which considers, for example, the management of ROIC,
health and safety and sales growth and may adjust awards if it considers
appropriate.
• An additional two-year holding period will apply for any shares vesting.
• Malus and clawback provisions apply.

20% of salary as pension supplement aligned to UK workforce.

Croda International Plc
Annual Report and Accounts 2021

D. Directors’ remuneration for the year ended 31 December 2021 – Audited information

Directors’ report

In this section
1. Directors’ remuneration for the year ended 31 December 2021
2. Pension
3. Payments for cessation of office
4. Payments to past Directors
5. Share interests
6. Performance graph
7. Ten-year remuneration figures for Group Chief Executive

8. Board Chair and other Non-Executive Directors’ fees 2021
and 2022
9. Non-Executive Directors’ remuneration
10. Service contracts and outside interests
11. Remuneration Committee attendance and advisers
12. Other disclosures
13. Statement of voting

1. Directors’ remuneration for the year ended 31 December 2021
Elements of remuneration
Executive Directors’ remuneration
Executive Director

Steve Foots

Salaries
Benefits1
Pension supplement2
Pension3
Total fixed pay
Annual bonus
Long-term incentives4A-B
Other5
Total variable pay
Single total figure of remuneration

Jez Maiden

2021

2020

2021

2020

£682,340£24,939£136,218£417£843,914£1,023,510£2,556,242£3,618£3,583,370£4,427,284£675,584£33,642£130,992£7,500£847,718–£692,540£3,119£695,659£1,543,377£470,579£20,126£94,116–£584,821£588,224£1,322,175£3,975£1,914,374£2,499,195£465,920£20,117£93,184–£579,221–£358,215£1,830£360,045£939,266

1. Benefits include benefit-in-kind for company car or cash allowance, benefit-in-kind for private medical insurance and private fuel allowance.
2. This represents the 20% of salary supplement. For January 2021 the supplement for Steve Foots was only in relation to benefits provided above
the salary pension cap.
3. For defined benefit pensions the amount included is the additional value accrued during the year, calculated using HMRC’s methodology forthe purposes of income tax using a multiplier of 20. This methodology can result in year-on-year fluctuations due to underlying inflation inputs.
In 2020, the calculation methodology was amended to align the revaluation rate that is applied to value Steve Foots’ Croda Pension Scheme
benefits to the inflation rate that is allowed for within the calculation of the disclosable benefit. This reduces the level of volatility in the calculated
figure from year to year. Steve Foots was only an active member of the Croda Pension Scheme for one month in 2021.
4. A. The PSP awards granted in March 2019 reached the end of their performance period on 31 December 2021. The awards will vest at 97.4%
of maximum (see page 98). The values included in the table above are based on the three-month average price to 31 December 2021 of 9545.7p.
Of these values, £1,266,031 and £654,834 is attributable to share price growth for Steve Foots and Jez Maiden, respectively. These values will be
updated in next year’s Annual Report based on the share price at vesting which will take place on 14 March 2022.
B. The PSP award included in the 2020 single figure (the 2018-20 PSP award) has been updated to reflect the actual share price at vestingof 6205p. Of these values, £178,130 and £92,137 is attributable to share price growth for Steve Foots and Jez Maiden, respectively.
5. Represents the value received in the year from participation in all-employee share schemes. Steve Foots and Jez Maiden received 24 and23 matching shares respectively as part of the Share Incentive Plan (SIP) with a transaction value of £1,823 and £1,742. Steve Foots and
Jez Maiden also participated in the 2021 Sharesave Scheme and were granted 98 and 122 shares respectively at a discounted rate of 7327p.
The share price on the date of grant was 9158p representing a 20% discount.
Annual bonus
The annual bonus for Executive Directors in 2021 was calculated by reference to the amount by which the profit for the year exceeded the profit
for 2020 (the ‘Bonusable Profit’). Bonuses for 2021 are payable against a graduated scale once the Bonusable Profit exceeds the base profit withbonus targets set, and performance measured, based on constant currency actual exchange rates. Considering the unique nature of the business,the profit from our lipid system sales for our principal COVID-19 vaccine contract contract, has been excluded from the Bonusable Profit calculation.
In line with our usual practice, profit contributions from in-year acquisitions (e.g. Parfex and Alban Muller) are excluded from the calculation to ensure
a like-for-like comparison with the base year.
Executive Director

Threshold target

Maximum target

ActualBonus outcome(% of maximum)

Bonusable Profit£384.8m£423.3m£477.5m

100%

The Remuneration Committee has discretion to reduce (including to zero) the amount of any payment under the scheme if it considers the safety,
health or environment (SHE) performance is in serious non-compliance with the Croda SHE policy statement document of minimum standards.
In addition, the Committee can also reduce any payment (including to zero) if it considers the underlying business performance of the Company is
not sufficient to support the payment of any bonus. The Committee also applies the Discretion Framework, a rigorous framework for the applicationof judgement and discretion, when reviewing awards (see page 89).
The Committee used the Discretion Framework to satisfy itself that performance was robust and sustainable. The Committee therefore determinedthat 100% of the senior annual Bonus Plan was payable.
One third of the bonus payable will be deferred into shares for three years.
Croda International Plc
Annual Report and Accounts 2021

97

Remuneration Report (continued)
PSP
PSP awards vesting in March 2022
The PSP awards granted in March 2019 reached the end of their three-year performance period on 31 December 2021.
MeasureWeightingThresholdMaximum

Actual performance

Out-turn(% of max element)

40%

Median(50th percentile)

Upper quartile(75th percentile)

89.4
percentile

100%

10.5% p.a.

93.5%

3.8x
Total out-turn

100%
97.4%

Relative TSR versus
bespoke peer group1
Adjusted annual
average EPS growthover three years2

40%

NPP

20%

5% p.a.
11% p.a.
Target vesting for NPP sales growth to be atleast twice non-NPP sales, subject to aminimum average of 5% growth per year andoverall positive Group profit growth.

1. TSR peer group constituents: AkzoNobel, Albemarle, Arkema, Ashland, BASF, Clariant, Koninklijke DSM, Eastman Chemicals, Elementis, Evonik Industries, Givaudan,
Johnson Matthey, Kemira, Lanxess, Novozymes, Solvay, Symrise, Synthomer, Victrex.
2. EPS growth p.a. is calculated on a simple average basis over the three-year period; and therefore growth of 33% or more over three years is required for maximum vesting.

As well as considering the EPS, TSR and NPP targets, under the rules of the PSP, the Remuneration Committee is obliged to consider theunderlying performance of the Company over the performance period, which it did using the Discretion Framework on page 89. On review, theCommittee considered the outcome of the PSP consistent with overall Company performance over the three-year performance period.
The forecast vesting value of the awards made in March 2019, subject to the above performance targets, is included in the 2021 single figure tableon page 97. Any shares vesting will be subject to a two-year holding period.
Gains made on exercise of share options and PSP
The gains are calculated according to the market price of Croda International Plc ordinary shares on the date of exercise, although the shares may
have been retained.
Executive Director

Exercise date

Shares exercised

SchemeExercise priceMarket priceGain (before tax)

Steve Foots

15 Mar-21
15 Mar-21
22 Mar-21
01 Nov-21
09 Mar-20
09 Mar-20
15 Mar-21

11,161
5,581
174
173
19,616
7,593
5,773

PSP
DBSP
Sharesave
Sharesave
PSP
DBSP
PSP

0
0
3092p
4144p
0
0
0

6205p
6205p
6257p
9432p
4259p
4259p
6205p

£692,540£346,301£5,507£9,148£835,445£323,386£358,215

15 Mar-21
01 Nov-21
09 Mar-20
09 Mar-20

3,207
217
10,146
4,187

DBSP
Sharesave
PSP
DBSP

0
4144p
0
0

6205p
9432p
4259p
4259p

£198,994£11,475£432,118£178,324

Jez Maiden

PSP awards granted in 2021
The PSP awards granted on 24 March 2021 were as follows:
Executive Director

Number of PSP
shares awarded

Basis of award
granted (% of salary)Face/maximum value ofawards at grant date1% of award vestingat threshold (maximum)

Performance period

24,422
13,100225%
175%£1,535,240£823,505

25% (100%)25% (100%)01.01.21 – 31.12.23
01.01.21 – 31.12.23

Steve Foots
Jez Maiden

1. Face value/maximum value is calculated based on a share price of 6286.3p, being the average mid-market share price of the three dealing days prior to the date of grant.

The 2021 PSP awards are subject to a performance condition which is split into three parts: 35% EPS, 35% TSR, and 30% sustainability metrics,
including NPP. Performance targets were disclosed in full last year, see page 90 of our Annual Report and Accounts 2020. Vesting will take place
on a sliding scale. An EVA underpin applies across the entire award, also detailed on page 90 of our Annual Report and Accounts 2020.
Any shares vesting will be subject to a two-year holding period.

98

Croda International Plc
Annual Report and Accounts 2021

All-employee share plans
Executive Directors are invited to participate in the HMRC tax-approved UK Sharesave Scheme and the Croda Share Incentive Plan (SIP) in line with,and on the same terms as, the wider UK workforce.

Executive Director

Steve Foots
Jez Maiden*

SIP shares held
01.01.21

Partnership sharesacquired in year

Matching sharesawarded in year

Total shares
31.12.21*

SIP shares that
became unrestrictedin the year

Total unrestricted
SIP shares heldat 31.12.21

5,794
429

24
23

24
23

5,842
481

78
103

5,540
107

There have been no changes in the interests of any Director between 31 December 2021 and the date of this report, except for the purchase of 4
SIP shares and the award of 4 matching shares by Steve Foots and Jez Maiden during January and February 2022.
* Jez Maiden also had six additional shares acquired through the Dividend Reinvestment Plan.

Sharesave
Details of awards made under the UK Sharesave Scheme are set out below:
Earliest
exercise date

Expiry dateFace value*

Exercise
price

Number at
01.01.21

Grantedin yearExercised in
the year

Number at
31.12.21

Steve Foots
13 September 201727 September 2018
12 September 2019
10 September 2020
16 September 2021

01 November 2020
01 November 2021
01 November 2022
01 November 2023
01 November 2024

30 April 2021
30 April 2022
30 April 2023
30 April 2024
30 April 2025

£6,725£8,960£6,723£6,724£8,975

3092p
4144p
3898p
4804p
7327p

174
173
138
112
–
597

–
–
–
–
98
98

174
173
–
–
–
347

–
–
138
112
98
348

Jez Maiden
27 September 2018
12 September 201916 September 2021

01 November 2021
01 November 2022
01 November 2024

30 April 2022
30 April 2023
30 April 2025

£11,238£11,206£11,173

4144p
3898p
7327p

217
230
–
447

–
–
122
122

217
–
–
217

–
230
122
352

Date of grantDuring 2021, the highest mid-market price of the Company’s shares was 10365p and the lowest was 6095p. The year-end closing price was
10120p. The year-end mid-market price was 10045p.
* Face value is calculated using the market value on the day before the date of grant, multiplied by the number of shares awarded.

2. Pension
The pension rights that accrued during the year in line with the policy on such benefits as set out in the Policy Report were as follows:

Executive Director

Normal retirement dateunder the CPS

Total accrued pension
at 31.12.21 (p.a.)Single remuneration
pension figure 2021

Single remuneration
pension figure 2020

Single remuneration
pension figure 2021
excluding supplement

Steve Foots
Jez Maiden

14 September 2033
N/A

£128,740–£136,635£94,116£138,492£93,184£417*–* Steve Foots was only an active member of the Croda Pension Scheme for one month in 2021.

Note: Members of the Croda Pension Scheme (CPS) have the option to pay voluntary contributions. Neither the contributions nor the resulting
benefits are included in this table. During 2021, Steve Foots was paid £136,218 (2020: £130,992) and Jez Maiden was paid £94,116(2020: £93,184) in addition to their basic salary to enable them to make independent provision for their retirement.
Croda has a number of different pension plans in the countries in which we operate. Pension entitlements for Executive Directors are tailored to local
market practice, length of service and the participant’s age. In 2016, a Career Average Revalued Earnings (CARE) scheme was introduced with a
cap applied to pension benefits; at this time the cap was set at £65,000. The cap is increased each year in line with inflation, and from April 2022
will be £72,966. Employees who earn in excess of the pension cap or who cannot be members of the plan due to tax limitations receive a pension
supplement. For Executive Directors this supplement is up to 20% of salary in line with the wider UK workforce.
Steve Foots’ pension provision
Steve Foots accrued pension benefits under the CPS up to 31 January 2021 with a CARE accrual rate of 1/60th and an entitlement to retire at age
60. From 6 April 2011 onwards, pension benefits accruing were based on a capped salary. This cap was £187,500 until April 2014 at which point it
reduced to £150,000, and due to annual allowance regulations and changes to the pension scheme, reduced to £37,500 in April 2016 (reduced
from the scheme cap of £65,650 due to annual allowance regulations) and reduced again in April 2020 to £15,000 following new annual allowance
regulations. If Steve Foots retires before the age of 60, a reduction will be applied to the element of his pension accrued before 6 April 2006, unless
he is retiring at the Company’s request. In the event of death, a pension equal to two thirds of the Director’s pension would become payable to thesurviving spouse. Steve Foots’ pension in payment is guaranteed to increase in line with the rate of inflation up to a maximum of 10% per annum forbenefits accrued before 6 April 2006, and in line with inflation up to a maximum of 2.5% per annum for benefits accrued from 6 April 2006 onwards.
Steve Foots is entitled to death-in-service benefits from an Excepted Life Policy. Steve Foots elected to opt out of the Croda Pension Scheme from
31 January 2021 and therefore only now receives a pension supplement of 20% of salary. For January 2021 he also received a pension supplement
at 20% of salary above his personal pension benefit cap in line with the wider UK workforce.
Jez Maiden’s pension provision
Jez Maiden has elected not to join the Croda Pension Scheme and was therefore paid a pension supplement of 20% of salary in 2021. He is entitledto death-in-service benefits from an Excepted Life Policy.

Croda International Plc
Annual Report and Accounts 2021

99

Directors’ report

SIP
Details of shares purchased and awarded to Executive Directors under the SIP are shown in the table below. A brief description of the SIP is set out
in note 23 on page 156.

Remuneration Report (continued)
3. Payments for cessation of office
There were no payments for loss of office during the year under review.

4. Payments to past Directors
There were no payments to past Directors during the year under review.

5. Share interests
The interests of the Directors who held office at 31 December 2021 are set out in the table below:
Legally owned1

Executive Director
Steve Foots
Jez Maiden
Non-Executive Director
Roberto Cirillo
Jacqui Ferguson
Anita Frew
Helena Ganczakowski
Keith Layden
John Ramsay
Julie Kim*

SIP

31.12.20

31.12.21

PSP(unvested)

DBSP(unvested)

Sharesave(unvested)

Restricted

Unrestricted% of salary held
under
Total
shareholding
31.12.21
guideline

163,912
27,167

173,115
21,106

83,44944,235

2,526
1,449

348
352

302
374

5,540
107

265,280 >225% target
67,623 >175% target

–
76
9,425
361
80,314
2,000
–

–
76
9,425
361
60,339
2,000
60

–
–
–
–
–
–
–

–
–
–
–
–
–
–

–
–
–
–
–
–
–

–
–
–
–
–
–
–

–
–
–
–
–
–
–

–
76
9,425
361
60,339
2,000
60

–
–
–
–
–
–
–

* Julie Kim appointed 1 September 2021, holding on appointment Nil.
1. Including connected persons.

Post-employment shareholding guidelines also apply for two years after leaving employment. These are set at 100% of the in-employment guideline
for the first year after leaving employment, tapering to 0% by the end of year two. This policy applies to shares from awards that vest in 2020 andbeyond. The Committee is implementing structures to ensure that post-employment shareholding guidelines are adhered to, by the placing ofrestrictions on the sale of shares via our third-party share plan administrator.

6. Performance graph (unaudited information)
Ten year Total Shareholder Return chart
700

Croda International
FTSE 100

600

FTSE 250
FTSE 350

500

400

300

200

100

0

Dec
2011

Dec
2012

Dec
2013

Source: Thomson Reuters Datastream

100

Croda International Plc
Annual Report and Accounts 2021

Dec
2014

Dec
2015

Dec
2016

Dec
2017

Dec
2018

Dec
2019

Dec
2020

Dec
2021

7. Ten year remuneration figures for Group Chief Executive (unaudited information)
The total remuneration figure includes the annual bonus and long-term incentive awards which vested based on performance in those years. The
annual bonus and long-term incentive award percentages show the payout for each year as a percentage of the maximum.
2013

1,364,048 1,427,156
28%
0%
100%

2014

2015

2016

2017

2018

2019

2021

20201

769,414 1,374,046 2,404,441 3,570,251 3,311,700 1,693,242 1,543,377 4,427,284
0%76.38%
100%
78.36%
36.19%
0%
0%
100%

81.8%

0%

0%

43%

100%

100%

56.2%

40%

97.4%

1. The 2020 total remuneration figure has been updated to reflect the value of the 2020 PSP award at vesting.

8. Board Chair and other Non-Executive Directors’ fees 2021 and 2022 (unaudited information)
The fees paid to the Non-Executive Directors (including chairing of Committees) and to the Senior Independent Director were reviewed in December
2021 and increased by 5%, in line with the UK workforce. These changes took effect from 1 January 2022. The revised fee structure for the Board
Chair and other Non-Executive Directors for 2022 is detailed below.
Position

Board Chair (all-inclusive fee)
Non-Executive Director base fee
Additional fees
Senior Independent Director
Committee Chairs (Audit and Remuneration)

2021 fee£

2022 fee£

303,909
63,872

319,104
67,066

10,611
15,453

11,142
16,226

9. Non-Executive Directors’ remuneration
The remuneration of Non-Executive Directors for the year ended 31 December 2021 payable by Group companies is detailed below; this tablereflects actual payments in 2021.

Anita Frew
Alan Ferguson2
Helena Ganczakowski3
Jacqui Ferguson
Roberto Cirillo
Keith Layden
John Ramsay3,4
Julie Kim5, 6

2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020

Non-Executive
Director fees£

Benefits1
£

Total
£

303,909
300,900–
28,08489,93785,78963,87363,24063,87363,24063,87363,24079,32673,793
–
–

11
–
–
–
456
–
169
–
903
–
89
–
794
–
11,142–

303,920
300,900–
28,08490,39385,78964,042
63,24064,776
63,24063,962
63,24080,12073,793
11,142–

1. The benefits relate to Directors undertaking business travel on behalf of Croda and ensuring the Directors are not out of pocket for related tax.
2. Alan Ferguson retired on 23 April 2020. His fees were pro-rated accordingly.
3. Following Alan Ferguson’s retirement, Helena Ganczakowski was appointed as the Senior Independent Director and John Ramsay was appointed as the Chair of the
Audit Committee. Their fees were pro-rated accordingly.
4. John Ramsay was appointed to the Board on 1 January 2020.
5. Julie Kim was appointed to the Board on 1 September 2021 and has voluntarily decided to waive her fees.
6. The benefits figure for Julie Kim relates to the undertaking of long-haul business travel and ensuring she is not out of pocket for the related tax.

Croda International Plc
Annual Report and Accounts 2021

101

Directors’ report

2012

Total remuneration (£)
Annual bonus (%)
Long-term incentives
vesting (%)

Remuneration Report (continued)
Non-Executive Directors’ appointment
The effective dates of the letters of appointment for the Board Chair and each Non-Executive Director who served during 2021 are shown in thetable below:
Non-Executive Director

Original appointment date

Expiry date of current term

Anita Frew

05 March 201505 March 2023

Roberto Cirillo

26 April 201826 April 2024

Jacqui Ferguson

01 September 2018

01 September 2024

Helena Ganczakowski

01 February 201431 January 2023

Keith Layden

01 May 2017

01 May 2023

John Ramsay

01 January 2020

01 January 2023

Julie Kim

01 September 2021

01 September 2024

10. Service contracts and outside interests (unaudited information)
The Executive Directors have service contracts as follows:
Executive Director

Contract dateTermination provision

Steve Foots

16 September 2010by the Company 12 months, by the Director 6 months

Jez Maiden

09 October 2014

by the Company 12 months, by the Director 6 months

External directorships
Executive Directors are permitted to accept external appointments with the prior approval of the Board. It is normal practice for Executive Directors
to retain fees provided for Non-Executive Director roles. Neither Executive Director held any external directorships during 2021.

11. Remuneration Committee attendance and advisers (unaudited information)
The following Directors served as members of the Committee during 2021:• Helena Ganczakowski (Chair)• Roberto Cirillo• Jacqui Ferguson• John Ramsay• Julie Kim (From 01 September 2021)
See page 72 for details of attendance at meetings during the year.
In addition, the Committee invites individuals to attend meetings to ensure that decisions are informed and take account of pay and conditions in thewider Group. During 2021, invitees included other Directors and employees of the Group and the Committee’s advisers (see page 103), including
Anita Frew (Company Chair), Steve Foots (Group Chief Executive), Jez Maiden (Group Finance Director), Keith Layden (Non-Executive Director),
Tracy Sheedy (Group HR Director), Tom Brophy (Group General Counsel and Company Secretary) and Caroline Farbridge (Deputy Company Secretary).
Attendees at Committee meetings are excluded from discussions that determine their own remuneration.

102

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Annual Report and Accounts 2021

Summary of Remuneration Committee meetings
January 2021

Approved Chair fee increase for 2021
Reviewed the draft Directors’ Remuneration Report

Directors’ report

Considered shareholder feedback on executive remuneration arrangements ahead of implementation in 2021
Considered the sustainability targets for 2021 PSP awards
February 2021

Reviewed the draft Directors’ Remuneration Report
Approved the calculation of the 2020 senior annual Bonus Plan award
Approved the senior annual Bonus Plan targets for 2021
Approved the vesting outcome for the 2018 PSP awards
Approved the PSP targets for 2021 and the grant of PSP awards for 2021
Approved the vesting of the 2018 Restricted Share Plan awards and the grant of Restricted Share Plan awards for 2021
Reviewed feedback from employee listening groups attended by the Remuneration Committee Chair
Approved the introduction of the Free Share Plan
Reviewed Executive Committee salary increases
Reviewed the update on ABI headroom limits as they apply to the business
Reviewed share ownership guidelines
Reviewed the Committee’s Terms of Reference
Considered the mechanism for enforcement of the post-employment shareholding guideline

April 2021

Reviewed shareholder feedback on Directors’ Remuneration Report
Reviewed an update on PSP sustainability targets
Reviewed the rules of the Free Share Plan and timeline for grant
Gave authority for UK employees to join the UK Sharesave Scheme and non-UK employees to join the International
Sharesave Scheme
Agreed dividend enhancement to the Deferred Bonus Share Plan

November 2021

Considered mechanism for enforcement of the post-employment shareholding guideline
Considered Free Share Plan accounting treatment
Reviewed forecast outcomes for 2021
Considered and reviewed remuneration trends
Reviewed quality assessment process for 2020 sustainability targets
Reviewed workforce remuneration
Agreed dividend enhancement to the Deferred Bonus Share Plan
Gave authority for the execution of actions in relation to the 2018 Sharesave maturity
Approved amendments to International Sharesave Plan rules

December 2021

Reviewed initial draft of the Chair’s letter for inclusion in the Directors’ Remuneration Report
Reviewed proposed targets for the 2022 senior annual Bonus Plan and PSP award
Approved salary increases for Chief Executive and Executive Committee
Considered and reviewed proposed treatment of incentives for employees transferring out of the business following thesale of the majority of the PTIC businesses
Considered the Committee’s effectiveness review

Remuneration Committee advisers (unaudited information)
Deloitte LLP were retained as the appointed adviser to the Committee for the whole of 2021 having been appointed in October 2017, following atender and selection process led by the Chair and including Committee members. As well as providing advice in relation to Executive remuneration
and Non-Executive fees, Deloitte LLP also provide advice to the Group in relation to global employer services, global business tax services, indirect
tax and M&A. Deloitte LLP is a signatory to the Remuneration Consultants Group Code of Conduct. The lead engagement partner has no otherconnection with the Company or individual Directors. The total fees paid to Deloitte LLP for its services during the year in relation to Executive
remuneration and Non-Executive fees were £36,650 (excluding VAT). The Committee regularly reviews the external adviser’s relationship and iscomfortable that the advice it is receiving remains objective and independent.

Croda International Plc
Annual Report and Accounts 2021

103

Remuneration Report (continued)
12. Other disclosures (unaudited information)
Percentage change in remuneration levels
The following chart shows the movement in salary/fees, benefits and annual bonus for each of the Group’s Directors between the current andprevious financial year compared with that of the average employee of the Group’s parent Company. The movement for the average UK employee isalso provided for additional reference given the small number of employees employed by the Group parent Company.

Average employee of the Group’s parent Company5
Average UK employee5
Executive Directors
Steve Foots
Jez Maiden
Non-Executive Directors
Anita Frew
Roberto Cirillo
Alan Ferguson6
Jacqui Ferguson
Helena Ganczakowski7
Keith Layden
John Ramsay7,8
Julie Kim9

% change insalary / fees1% change inbenefits2% change inbonus3,4

2021
2020
2021
2020

-5.12%
3.66%
0.68%
3.43%

-25.04%-0.06%-8.63%-3.27%–
0.00%–
27.96%

2021
2020
2021
2020

1.00%
2.00%
1.00%
2.00%

-25.87%
0.50%
0.04%
2.29%

–
0.00%
–
0.00%

2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020

1.00%
2.00%
1.00%
2.00%
-100.00%-67.83%
1.00%
2.00%
4.84%
11.41%
1.00%
2.00%
7.50%
–
–
–

–
-100.00%–-100.00%–-100.00%–-100.00%–-100.00%–-100.00%
–
–
–
–

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

1. Employees of the Group’s parent Company and UK employees received a 1% pay increase in 2021; an additional 1% increase was awarded to the majority of the UK
workforce in July 2021, excluding all Board Directors and those in our most senior grades. Executive Directors and Non-Executive Directors received a 1% pay
increase. The % decrease in the salary of the Average employee of the Group’s parent Company relates to an increase in headcount of the Group’s parent Company.
This increase in headcount of more junior employees has driven the average salary down.
2. The benefits for Non-Executive Directors relate to the undertaking of business travel on behalf of Croda and ensuring the Directors are not out of pocket for related tax.
No taxable business travel expenses were claimed by Non-Executive Directors in 2020 due to the COVID-19 pandemic and therefore there are no comparable figures
to give a % change in 2021. To see the actual value of benefits for Non-Executive Directors in 2021 please see page 101.
3. For 2021, the senior annual Bonus Plan and Croda Europe Discretionary Board Scheme both paid out in full. These schemes however did not pay out for 2019 or2020 and therefore there is no comparable figure to give a % change in 2021 for Executive Directors or the Average employee of the Group’s parent Company. In
respect of the Average UK employee, the % change in 2020 relates to a small number of employees who received a sales bonus. As the senior annual Bonus Plan and
Croda Europe Discretionary Bonus Scheme paid out in full for 2021, the actual amount received by the average UK employee is significantly higher and as such the %change would be misleading.
4. Bonus including annual bonus, DBSP and sales bonus.
5. Excluding Executive Directors and Non-Executive Directors.
6. Alan Ferguson retired on 23 April 2020.
7. In 2020 following Alan Ferguson’s retirement, Helena Ganczakowski was appointed as the Senior Independent Director and John Ramsay was appointed as the
Chair of the Audit Committee. Their fees were pro-rated accordingly.
8. John Ramsay was appointed to the Board on 1 January 2020 and therefore has no comparable remuneration figures for 2019.
9. Julie Kim appointed to the Board 1 September 2021 and therefore has no comparable remuneration figures for 2020.

104

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Annual Report and Accounts 2021

Relative importance of the spend on pay
The chart below showsHeadline
the movement in spend on staff costs versus that in dividends and adjusted profit after tax.
2021

£370.6m

Employeeremuneration
cost1£281.9m£139.5m

Dividends

2£122.7m£350.8m

Adjusted profit
after tax3

£228.2m
0

50

100

150

200
£m

250

300

350

400

1. Employee remuneration costs, as stated in the notes to the Group accounts on page 138. These comprise all amounts charged against profit in respect of employee
remuneration for the relevant financial year, less redundancy costs and share-based payments, both of which can vary significantly from year to year.
2. Dividends are the amounts payable in respect of the relevant financial year.
3. Adjusted profit after tax is profit for the relevant year adjusted for exceptional items, acquisition costs, amortisation of intangible assets arising on acquisition and thetax thereon.

13. Statement of voting (unaudited information)
Remuneration Policy 2020 AGM

Votes cast in favour
Votes cast against
Total votes cast
Withheld

Annual Report on
Remuneration 2021 AGM

number of votes% of votes

number of votes% of votes

97,230,580
2,445,834
99,676,414
152,926

97.55%
2.45%
100%

109,189,937
1,306,221
110,496,158
16,44998.82%
1.18%
100%

I will be available at the AGM to respond to any questions shareholders may raise on the Committee’s activities.
On behalf of the Board

Helena Ganczakowski
Chair of the Remuneration Committee
28 February 2022

Croda International Plc
Annual Report and Accounts 2021

105

Directors’ report2020Remuneration Report (continued)
E. Summary of the Remuneration Policy
An updated Remuneration Policy was presented and approved by shareholders at the 2020 AGM. It is intended that this will operate until the AGM
in 2023. The full Remuneration Policy can be found on pages 77 to 83 of our Annual Report & Accounts 2019.
Main components of the Remuneration Policy
Operation

Maximum opportunity

Framework used to assess performance andfor the recovery of sums paid

Basic salary – to assist in the recruitment and retention of high-calibre Executives
Normally reviewed annually with increases
effective from 1 January. Base salaries will be
set by the Committee, considering:• The performance and experience of theindividual concerned• Any change in scope, role and/or
responsibilities• Pay and employment conditions elsewherein the Group• Rates of inflation and market-wide wage
increases across international locations• The geographical location of the Executive
Director• Rates of pay in international manufacturing
and pan-sector companies of a comparable
size and complexity.

• The Committee considers individual salaries taking due• Salaries may be increased eachaccount of the relevant factors set out in this Policy,
year in percentage of salarywhich includes individual performance.
terms.
• The Committee will be guided by
the salary increase budget set ineach region and across theworkforce generally.
• Increases beyond those linked
to the region of the Executive
Director or the workforce as awhole (in percentage of salaryterms) may be awarded by theCommittee at its discretion. For
example, where there is a change
in responsibility, experience or asignificant increase in the scale of
the role and/or size, value orcomplexity of the Group.
• The Committee retains theflexibility to set the salary of a
new hire at a discount to themarket level initially, and to
implement a series of planned
increases in subsequent years,
in order to bring the salary to thedesired positioning, subject toindividual performance.

Benefits – to provide competitive benefits to act as a retention mechanism and reward service
The Group typically provides the following
benefits:• Company car (or cash allowance)• Private fuel allowance• Private health insurance and otherinsured benefits• Other ancillary benefits, including relocation
expenses/arrangements (including tax
thereon) as required.
Additional benefits might be provided from time
to time (for example in circumstances where an
Executive Director is deployed to, or recruitedfrom overseas).
The Committee will consider whether thepayment of any additional benefits is appropriate
and proportionate when determining whether
they are paid.

106

Croda International Plc
Annual Report and Accounts 2021

• The cost of benefits is not
pre-determined and may varyfrom year to year based on thecost to the Group.

None.

Operation

Maximum opportunity

Framework used to assess performance andfor the recovery of sums paid

Group Chief Executive:
Normally one third of any bonus paid iscompulsorily deferred into shares for three years 150% of salary.
through the Deferred Bonus Share Plan (DBSP). Other Executive Director:
The Committee has the discretion to permit
DBSP awards to benefit from dividends onshares that vest.
The balance of the bonus is paid in cash.

125% of salary.

• Bonus will typically be based on challenging financial
targets set in line with the Group’s KPIs (for example profit
growth targets).
• The Committee has the flexibility to include, for a minorityof the bonus, targets related to other Group measures
where this is considered appropriate.
• For a profit measure, bonus normally starts to accrue
once the threshold target is met (0% payable) rising on a
graduated scale to 100% for outperformance. Were an
additional KPI metric to be introduced, the thresholdwould not exceed 25%.
• The Committee applies a Discretion Framework, which
includes health, safety and environmental performance
when determining the actual overall level of individual
bonus payments and it may adjust the bonus awards
if it considers it appropriate to do so.
• Bonuses paid are subject to provisions that enable
the Committee to recover value overpaid through thewithholding of variable pay previously earned or granted(malus) or through requesting a payment from anindividual (clawback) in the event of a misstatement of
results, serious misconduct, serious reputational damage
or material corporate failure. The provisions will operate
for a three-year period following the date on which thebonus is paid.

Performance Share Plan (PSP) – to incentivise and reward the execution of business strategy over the longer term and to reward sustained
growth in profit and shareholder value• Granted subject to a blend of challenging financial (egThe PSP provides for awards of free shares (i.e., Normal maximum opportunity of:
EPS), shareholder return (eg relative TSR) and strategic
either conditional shares or nil-cost options)• Group Chief Executive:
targets (eg sustainability). The performance targets may
normally made annually which vest after three
225% of salaryalso include an additional underpin (eg an EVA underpin).
years subject to continued service and the• Other Executive Director:
achievement of challenging performance• Targets will normally be tested over three years.
175% of salary.
conditions. Shares are subject to a two-year• In relation to financial targets (eg EPS growth and TSR)
In exceptional circumstances (egpost-vesting holding period.
25% of awards subject to such targets will vest forrecruitment), awards may bethreshold performance with a graduated scale operating
The Committee has the discretion to permit
granted up to 300% of salary to
through to full vesting for equalling, or exceeding,awards to benefit from the dividends paid oncompensate for value forfeited fromthe maximum performance targets (no awards vest forshares that vest.
a previous employer.
performance below threshold). In relation to strategic
targets or underpin targets, the structure of the target willvary based on the nature of target set (eg for milestone
strategic targets it may not always be practicable to set
such targets using a graduated scale and so vesting may
take place in full for strategic targets if the criteria are
met in full).
• Vesting is also dependent on application of the Discretion
Framework, including satisfactory underlying financial
performance of the Group over the performance period
and the Committee may adjust outcomes if it considers it
appropriate to do so.
• There are also provisions that enable the Committee torecover value overpaid through the withholding of variable
pay previously earned or granted (malus) or throughrequesting a payment from an individual (clawback) in theevent of a misstatement of results, serious misconduct,
serious reputational damage or material corporate failure.
The provisions will operate for a three-year period
following the date on which the PSP awards vest.

Croda International Plc
Annual Report and Accounts 2021

107

Directors’ report

Performance-related annual bonus – to incentivise and reward delivery of the Group’s key annual objectives and to contribute to longer-termalignment with shareholders

Remuneration Report (continued)

Operation

Maximum opportunity

Framework used to assess performance andfor the recovery of sums paid

All-employee share plans – to encourage retention and long-term shareholding in the Company and to provide all employees with theopportunity to become shareholders in the Company on similar terms• Periodic invitations are made to participate in • In relation to HMRC plans(or equivalent) the maximum
the Group’s Sharesave scheme and Shareparticipation level is as per HMRC
Incentive Plan.
limits. For any other all-employee• Shares acquired through these arrangements
plan the maximum will be
have significant tax benefits in the UK subject
equivalent to the maximum
to satisfying certain HMRC requirements.
applying to all employees.
• The plans can only operate on an allemployee basis.
• The plans operate on similar terms but on a
non tax-favoured basis outside the UK as
appropriate.
• In the event that Croda were to introduce anall-employee plan similar in nature to thecurrent Sharesave and Share Incentive Plan,
the Committee retains the discretion to allow
Executive Directors to participate on the same
basis as other employees.

• There are no post-grant targets currently applicable to
the Group’s Sharesave and Share Incentive Plan.

Pension – to provide competitive long-term retirement benefits and to act as a retention mechanism and reward service
Pension benefits are typically provided either
through (i) participation in the UK’s defined
benefit pension plan with a cash supplement
provided above any pension salary cap or (ii) a
cash supplement provided in lieu of pension.
Only basic salary is pensionable.

• Career average revalued earnings
scheme (CARE) with a maximum
1/60th accrual up to a cappedsalary plus cash allowance of
20% of salary above the cap or
cash allowance of 20% of salary.

None.

Legacy arrangements
For the current CEO, and in line with other employees, there is a legacy capped defined benefit pension scheme. While there are no future
accruals, the arrangement remains inflation-linked.

108

Croda International Plc
Annual Report and Accounts 2021

Directors’ report
Other disclosures

Research and development
Research and development activities areundertaken with the prospect of gaining
new scientific or technical knowledge
and understanding.
Dividends
The Directors are recommending a final
dividend of 56.5p per share (2020: 51.5p).
If approved by shareholders, total dividends
for the year will amount to 100.0p per share(2020: 91.0p). Details of dividends are shown innote 8 on page 137; details of the Company’s
Dividend Reinvestment Plan can be found on
page 171. The Company has establishedvarious Employee Benefit Trusts (EBTs) inconnection with the obligation to satisfy future
share awards under employee share incentive
schemes. The trustees of the EBTs have
waived their rights to receive dividends on
certain Ordinary Shares of the Company heldin the EBTs. Such waivers represent less than
1% of the total dividend payable on the
Company’s Ordinary Shares. Further details of
the EBTs can be found in note 25 on page 160.
Directors
The Company’s Articles of Association (Articles)
give the Directors power to appoint and replace
Directors. Under the terms of reference of theNomination Committee, any appointment must
be recommended by the Nomination
Committee for approval by the Board of
Directors. The present Directors of theCompany are shown on pages 62 and 63.
In line with the 2018 UK Corporate Governance
Code, each Director will be standing for election
or re-election at the AGM. Details of the
Directors’ service contracts are given in the
Directors’ Remuneration Report on page 102.
Apart from the share option schemes, longterm incentive schemes and service contracts,
no Director had any beneficial interest in any
contract to which the Company or a subsidiary
was a party during the year. A statement
indicating the beneficial and non-beneficial
interests of the Directors in the share capitalof the Company, including share options,is shown in the Directors’ Remuneration
Report on page 100.
The Directors are responsible for managing thebusiness of the Company and may exercise all
the powers of the Company subject to theprovisions of relevant statutes, the Company’s
Articles and any directions given by
special resolution.
Directors’ indemnities
The Company maintains Directors’ andOfficers’ liability insurance that gives
appropriate cover for any legal action brought

without regard to the pre-emption provisions of
the Companies Act 2006. Both of theseauthorities expire on the date of the 2022 AGM,
that is 20 May 2022, and so the Directors
propose to renew them for a further year.

Share capitalAt the date of this report, 142,536,884 Ordinary
Shares of 10.609756p each have been issued
and are fully paid up and quoted on the London
Stock Exchange. At the date of this Report, theCompany has issued and fully paid up 21,900
7.5% Cumulative Preference Shares, 498,434
6.6% Cumulative Preference Shares and615,562 5.9% Cumulative Preference Shares,
all of £1 each (the Preference Shares).
The rights and obligations attached to theCompany’s Ordinary Shares and Preference
Shares are set out in the Articles, copies ofwhich can be obtained from Companies Housein the UK or by writing to the Company
Secretary. There are no restrictions on thevoting rights attached to the Company’s
Ordinary Shares or on the transfer of securities
in the Company. The 7.5% Cumulative
Preference Shares do not confer on the holders
any right to receive notice of or to be present or
to vote at any general meeting of the Company
unless the cumulative preferential dividend onsuch shares is more than 12 calendar months
in arrears. The 6.6% and 5.9% Cumulative
Preference Shares do not confer on the holders
any right to receive notice of or to be present or
to vote at any general meeting of the Company,
unless the cumulative preferential dividend onsuch shares is more than six calendar months
in arrears or the business of the general
meeting includes the consideration of aresolution for reducing the share capital of theCompany, to sell the undertaking of theCompany or to alter the Articles. No person
holds securities in the Company that carryspecial rights with regard to control of theCompany. The Company is not aware of any
agreements between holders of securities that
may result in restrictions on the transfer of
securities or on voting rights.

9.73%
6.62%

Power to issue or buy back shares
At the 2021 AGM, authority was given to the
Directors to allot unissued shares in the
Company up to a maximum amount equivalent
to approximately one third of the issued sharecapital, excluding shares held in treasury, forgeneral purposes, plus up to a further one thirdof the Company’s issued share capital,
excluding shares held in treasury, but only inthe case of a rights issue.
A further special resolution passed at thatmeeting granted authority to the Directors toallot equity securities in the Company for cash,

Substantial Shareholdings
As at 31 December 2021 in accordancewith DTR 5 the holders of notifiable interestsin the Company’s share capital had notchanged since the information declaredin the 2020 Annual Report and are shownin the table below.
Number ofshares% of issued
capitalMassachusetts
Financial Services
Company
12,551,036
BlackRock, Inc.
8,534,795
Mawer Investment
Management Limited 6,438,386
Royal Bank of Canada 5,212,886

4.99%
4.04%

Since the year end and up to the date of thisreport the following information has been
received.

Royal Bank of Canada
Norges Bank

Number ofshares% of issued
capital

5,093,443
4,186,185

3.65%
3.00%

Employees
Diversity: We are committed to the principleof equal opportunity in employment and toensuring that no applicant or employee receives
less favourable treatment on the grounds of any
protected characteristic or is disadvantaged byconditions or requirements that cannot beshown to be justified. Group human resources
policies are clearly communicated to all of
our employees and are available through theCompany intranet.
Recruitment and progression: It is establishedpolicy throughout the Business that decisions
on recruitment, career development, promotion
and other employment related issues are madesolely on the grounds of individual ability,
achievement, expertise and conduct.
We give full and fair consideration toapplications for employment from people withdisabilities, having regard to their particular
aptitudes and abilities. Should an employee
become disabled during their employment with
the Company, they are fully supported by our
Occupational Health provision. Efforts are madeto continue their employment with reasonableadjustments being made to the workplace androle where feasible. Retraining is provided if
necessary.
Development and learning: The Company
recognises that the key to future success liesin the skills and abilities of its dedicated global
workforce. The continuous development of allof our employees is key to meeting the future
demands of our customers, especially in
relation to enhanced creativity, innovation andcustomer service.
Involvement: We are committed to ensuring that
employees share in the success of the Group.
Owning shares in the Company is an important

Croda International Plc
Annual Report and Accounts 2021

109

Directors’ report

Pages 58 to 111 inclusive, together with thesections of the Annual Report and Accounts
incorporated by reference, constitute a
Directors’ report that has been drawn up
and presented in accordance with applicable
English company law; the liabilities of the
Directors in connection with that report are
subject to the limitations and restrictions
provided by that law.

against its Directors. The Company has also
granted indemnities to each of its Directors
and the Company Secretary, which represent‘qualifying third party indemnity provisions’ (asdefined by Section 234 of the Companies Act
2006), in relation to certain losses and liabilities
that the Directors or Company Secretary may
incur to third parties in the course of acting as
Directors or the Company Secretary or as
employees of the Company or of any
associated company. In addition, suchindemnities have been granted to other officersof the Company who are Directors of subsidiarycompanies within the Group. Such indemnities
were in place during 2021 and at the dateof approval of the Group financial statements.

Directors’ report (continued)
way of strengthening involvement in thedevelopment of the Business and bringing
together employees and shareholders’ interests.
In 2021, 84% of our UK employees and 60% of
our non-UK employees participated in one of our
all-employee share plans, indicating employees’
continued desire to be involved in the Company.
Employees are kept informed of matters of interest
to them in a variety of ways, including theCompany magazine, Croda Way; quarterly
updates; the Company intranet, Connect; teambriefings, podcasts, webinars, Yammer and Croda
Now email messages. These communications
help achieve a common awareness of the financial
and economic factors affecting the performance of
Croda and of changes within the Business. We
are committed to providing employees with
opportunities to share their views and provide
feedback on issues that are important to them.
The Directors maintain oversight of employee
matters through the Board and committee
meeting processes and information flows,
including regular updates on employee mattersand employee feedback received throughemployee engagement surveys. How the Directors
have engaged with employees and haveconsidered their interests when taking key
decisions is further detailed on pages 69 and 70.
Non-financial reporting directive
The Companies, Partnerships and Groups(Accounts and Non-Financial Reporting)
Regulations 2016 (the Regulations) requirecompanies to disclose non-financial informationnecessary to provide investors and otherstakeholders with a better understanding of acompany’s development, performance, position
and impact of its activity. Throughout thisAnnual Report the Directors have disclosed a
mix of financial and non-financial KPIs which
they believe best reflect the Group’s strategic
priorities, and which will help to convey anunderstanding of the culture of the businessand the drivers which contribute to the ongoing
success of the Company. Please see thenon-financial information statement on page 38
which sets out where stakeholders can findinformation relating to non-financial matters.

Mandatory XBRL tagging
The Board reviewed the process that had beendeveloped to ensure that the primary financial
statements had been tagged in line withrequired taxonomy.

There have been no events affecting theCompany since the financial year end to reportto shareholders in accordance with the
Accounts Regulations and Disclosure Guidance
and Transparency Rules.

Other disclosures
Certain information that is required to be
included in the Directors’ Report can be foundelsewhere in this document as referred to
below, each of which is incorporated byreference into the Directors’ Report:

For the purposes of Listing Rule (LR) 9.8.4R,
the information required to be disclosed by
LR 9.8.4R can be found in the table below.

• Information on greenhouse gas emissions
can be found on page 39.
• Information on energy consumption can befound on page 39.
• Information on energy efficiency can befound on page 39.
• Information on gas emissions, energy
consumption and energy efficiency - otherdisclosures can be found on page 39.
• For the purposes of Listing Rule (LR)9.8.6R(8) the information on climate-related
financial disclosures consistent with the
TCFD recommendation and the TCFD
recommended disclosure can be found on
pages 40 to 41.
• Further details of the actions which theGroup is taking to reduce emissions can also
be found in the Sustainability Report and at
www.Croda.com.
• An indication of likely future developments in
the Group’s business can be foundthroughout the Strategic Report, starting on
page one.
• The long-term viability statement can befound on pages 56 and 57.
• Information on the appropriateness ofadopting the going concern basis of theaccounts can be found on page 125.
• Our approach to risk management can befound on pages 50 to 55.
• Details of the services provided toshareholders can be found on pages 171 to
172 and on the Company’s website.
• An indication of the Company’s overseas
branches are on pages 168 to 170.

References in this document to otherdocuments on the Company’s website, suchas the Sustainability Report, are included as an
aid to their location and are not incorporated byreference into any section of the Annual Reportand Accounts.

All the information cross referenced above
is incorporated by reference into the Directors’
Report.

Independent auditors
Our auditors, KPMG, have indicated their
willingness to continue in office and, on therecommendation of the Audit Committee, aresolution regarding their reappointment andremuneration will be submitted to the AGM on
20 May 2022.
Audit information
The Directors confirm that, so far as they areaware, there is no relevant audit information ofwhich the Company’s auditors are unaware,and that they have each taken all the steps theyought to have taken as a Director in order tomake themselves aware of any relevant audit
information and to establish that the Company’s
auditors are aware of that information.
Articles of Association
Unless expressly specified to the contrary in
the Articles, the Company’s Articles may beamended by a special resolution of theCompany’s shareholders.
A copy of the Articles is available atwww.croda.com

Listing Rule (LR) 9.8.4R information
Section

Topic

Page reference(1)

Capitalised interest

Page 111(2)

Publication of unaudited financial information

Not applicable(3)

Smaller related party transactions

Not applicable(4)

Details of long term incentive schemes established specifically to recruit or retain a Director

Not applicable(5) (6)

Waiver of emoluments by a Director

Page 101(7) (8)

Allotments of equity securities for cash

Not applicable(9)

Participation in a placing of equity securities

Not applicable(10)

Contracts of significancePage 111(11) (14)Controlling shareholder disclosures

Not applicable(12) (13)Dividend waiver

Page 109

110

Croda International Plc
Annual Report and Accounts 2021

conditions. None of the Executive Directors’
service contracts contains provisions that are
affected by a change of control and there areno other agreements that the Company is party
to that take effect, alter or terminate in theevent of a change of control of the Company,
which are considered to be significant in termsof their potential impact on the Group. The
Company does not have any contractual orother arrangements that are essential to thebusiness of the Group.

Political donations
No donations were made for political purposes
during the year (2020: £nil).
Financial risk management
The Group’s exposure to and management of
capital, liquidity, credit, interest rate and foreign
currency risks are contained in note 20 on
pages 153 to 154.
Capitalised interest
The Group’s policy for capitalising borrowing costs
directly attributable to the purchase or constructionof fixed assets is set out on page 130.

Statement of Directors’ responsibilities in respect of the Annual Report and the financial statements
The Directors are responsible for preparing
the Annual Report and the Group and parent
Company financial statements in accordancewith applicable law and regulations.
Company law requires the Directors to
prepare Group and parent Company
financial statements for each financial year.
Under that law they are required to prepare
the Group financial statements inaccordance with international accounting
standards in conformity with therequirements of the UK-adopted
international accounting standards andapplicable law and have elected to prepare
the parent Company financial statements inaccordance with UK accounting standards
and applicable law, including FRS 101
Reduced Disclosure Framework.
Under Company law the Directors must not
approve the financial statements unless they
are satisfied that they give a true and fairview of the state of affairs of the Group andparent Company and of the Group’s profit
or loss for that period. In preparing each of
the Group and parent Company financial
statements, the Directors are required to:• select suitable accounting policies andthen apply them consistently;• make judgements and estimates that arereasonable, relevant, reliable and prudent;• for the Group financial statements, state
whether they have been prepared inaccordance with international accounting
standards in conformity UK-adopted
international accounting standards;• for the parent Company financial statements,
state whether applicable UK accounting
standards have been followed, subject to any
material departures disclosed and explainedin the parent Company financial statements;• assess the Group and parent Company’s
ability to continue as a going concern,
disclosing, as applicable, matters related togoing concern; and• use the going concern basis of accounting
unless they either intend to liquidate theGroup or the parent Company or to cease
operations, or have no realistic alternative but
to do so.
The Directors are responsible for keeping
adequate accounting records that are sufficient
to show and explain the parent Company’stransactions and disclose with reasonableaccuracy at any time the financial position of theparent Company and enable them to ensure thatits financial statements comply with theCompanies Act 2006. They are responsible forsuch internal control as they determine isnecessary to enable the preparation of financial
statements that are free from material
misstatement, whether due to fraud or error, andhave general responsibility for taking such steps
as are reasonably open to them to safeguard theassets of the Group and to prevent and detectfraud and other irregularities.
Under applicable law and regulations, theDirectors are also responsible for preparing a
Strategic Report, Directors’ Report, Directors’
Remuneration Report and Corporate
Governance Statement that complies with that
law and those regulations.

The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the UK
governing the preparation and disseminationof financial statements may differ fromlegislation in other jurisdictions.
Responsibility statement of the Directors
in respect of the annual financial report
We confirm that to the best of our knowledge:• the financial statements, prepared inaccordance with the applicable set ofaccounting standards, give a true and fairview of the assets, liabilities, financial
position and profit or loss of the Company
and the undertakings included in the
consolidation taken as a whole; and• the Strategic Report includes a fair reviewof the development and performance ofthe business and the position of theissuer and the undertakings included in
the consolidation taken as a whole,
together with a description of the principal
risks and uncertainties that they face.
We consider the Annual Report andaccounts, taken as a whole, is fair, balanced
and understandable and provides theinformation necessary for shareholders toassess the Group’s position andperformance, business model and strategy.

The Directors’ Report and the Strategic Report,
including the sections of the Annual Report andAccounts incorporated by reference, is the‘management report’ for the purposes of the
Financial Conduct Authority Disclosure Guidance
and Transparency Rules (DTR 4.1.8R). It wasapproved by the Board on 28 February 2022
and is signed on its behalf by

Tom Brophy
Group General Counsel andCompany Secretary
28 February 2022
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Significant contracts and change of control
The Group has borrowing facilities which may
require the immediate repayment of all
outstanding loans together with accrued
interest in the event of a change of control. The
rules of the Company’s employee share plansset out the consequences of a change incontrol of the Company on participants’ rights
under the plans. Generally, such rights will vest
and become exercisable on a change of control
subject to the satisfaction of performance

Financial statements
Independent Auditor’s Report to the Members of Croda International Plc
1. Our opinion is unmodified

Overview

We have audited the financial statements of Croda International Plc(“the Company”) for the year ended 31 December 2021 which
comprise the Group Income Statement, the Group Statement ofComprehensive Income, the Group and Company Balance Sheets, theGroup Statement of Cash Flows, the Group and Company Statementsof Changes in Equity, and the related notes, including the accounting
policies on pages 125 to 131 and on page 164.

Materiality: Group financial
statements as a whole£16m (2020: £15m)
4.9% (2020: 5.0%) of normalisedGroup profit before tax

Coverage

85% (2020: 84%) of the total of the
profits and losses that made up
Group profit before tax

In our opinion:• the financial statements give a true and fair view of the stateof the Group’s and of the parent Company’s affairs as at
31 December 2021 and of the Group’s profit for the year
then ended;• the Group financial statements have been properly preparedin accordance with UK-adopted international accounting standards;• the parent Company financial statements have been properly
prepared in accordance with UK accounting standards,
including FRS 101 Reduced Disclosure Framework; and• the financial statements have been prepared in accordance with therequirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities aredescribed below. We believe that the audit evidence we have obtained
is a sufficient and appropriate basis for our opinion. Our audit opinion isconsistent with our report to the Audit Committee.
We were first appointed as auditor by the shareholders on 25 April
2018. The period of total uninterrupted engagement is for the four
financial years ended 31 December 2021. We have fulfilled our ethicalresponsibilities under, and we remain independent of the Group inaccordance with, UK ethical requirements including the FRC EthicalStandard as applied to listed public interest entities. No non-audit
services prohibited by that standard were provided.

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Key audit matters
Recurring risks

vs 2020
Valuation of defined benefit
pension scheme obligation
Goodwill impairment
Recoverability of parent
Company’s investment in
subsidiaries and intercompany
debtors

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements andinclude the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had thegreatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We
summarise below the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above, together with our key
audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These matters wereaddressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial
statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate
opinion on these matters.
Group

The risk

Our response

Valuation of defined
benefit pension
scheme obligation(Gross defined benefit
obligation £1,309.0m;
2020: £1,544.4m),
although this specific risk
is only associated with the
UK scheme (£1,162.6m)
and US scheme(£126.8m).

Subjective valuation:

Our procedures included:• The Group has two defined benefit pension• Benchmarking assumptions: we challenged key assumptions

In prior year the risk related
to the UK scheme(£1,178.5m), US scheme(£133.9m) andNetherlands scheme(£212.3m). During the year
the material scheme heldin the Netherlands has
been converted into acollective defined
contribution scheme, andtherefore the related
defined benefit obligation
has crystallised and been
derecognised from thebalance sheet.
Accordingly, the year-end
risk relates only to theongoing UK and US
schemes.

schemes that are material in the context ofthe overall balance sheet and the results of
the Group.
• Significant estimates, including the discountrate, the inflation rate and the mortality rate,
are made in valuing the Group’s defined
benefit pension obligations (before deducting
the schemes’ assets). The UK scheme is also
still open to future accrual and new members,
and small changes in the assumptions andestimates with respect to the obligation would
have a significant effect on the financial
position of the Group. The Group engages
external actuarial specialists to assist them in
selecting appropriate assumptions andcalculate the obligations.
• The effect of these matters is that, as part ofour risk assessment, we determined that thevaluation of the defined benefit obligations
has a high degree of estimation uncertainty,
with a potential range of reasonableoutcomes greater than our materiality for thefinancial statements as a whole, and possibly
many times that amount. The financial
statements (note 11) disclose the sensitivity
estimated by the Group.

applied (discount rate, inflation rate, and mortality rate) with thesupport of our own actuarial specialists, including a comparisonof key assumptions against market data.
• Actuary’s credentials: we assessed the competence,capabilities and objectivity of the Group’s actuarial expert.
• Sensitivity analysis: we assessed the sensitivity of the defined
benefit obligation to changes in certain assumptions.
• Assessing transparency: we considered adequacy of theGroup’s disclosures in respect of the sensitivity of the grossobligation to changes in key assumptions.
We performed the tests above rather than seeking to rely on anyof the Group’s controls because the nature of the balance is suchthat we would expect to obtain audit evidence primarily throughthe detailed procedures described.
Our results• We found the valuation of the defined benefit pension scheme
obligation to be acceptable (2020 result: acceptable).

Refer to page 82 (Audit
Committee Report), page128 (accounting policy)
and note 11 on pages 139
to 143 (financial
disclosures).

Croda International Plc
Croda
International
Plc
Annual reportandAccounts 2021
Annual Report and Accounts 2021

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Financial statements

2. Key audit matters: our assessment of risks of material misstatement

Financial statements (continued)
Independent Auditor’s Report to the Members of Croda International Plc (continued)Group

The risk

Our response

Goodwill impairment

Forecast based assessment:

Our procedures included:

Goodwill: £852.0m (2020:£866.7m), although thisspecific risk is only associatedwith the Iberchem Fragrances(£242.2m) and Iberchem
Flavours (£123.6m) Cash
Generating Units.

• The Group has, over recent years, acquired• Assessing methodology: we obtained the discounted value inIn the prior year, risk related to
Sipo and Biosector Cash
Generating Units. However,these CGUs are no longer
considered as part of the key
audit matter in the year as theestimated recoverable amount
prepared by the Directors forthese CGUs indicate
significantly improved
headroom.

Refer to page 82 (Audit
Committee Report), page 127(accounting policy) and note
12 on pages 143 to 145(financial disclosures).

a number of companies which has led to amaterial increase in the goodwill balance.
Some of these acquisitions, and in particular
Iberchem, are still at an early stage of theirintegration into the Group and are therefore
subject to greater levels of estimation
uncertainty in respect of the underlying
impairment model assumptions.
• The headroom in respect of theimpairment test on the Iberchem
Fragrances and Iberchem Flavours Cash
Generating Units is relatively small, andsmall changes in the assumptions appliedin the value in use calculations could
impact management’s conclusions about
the carrying value of goodwill and how
this compares to the recoverable amount.
• The effect of this matter is that, as part ofour risk assessment, we determined that
impairment assessments in respect of the
Iberchem Fragrances and Iberchem
Flavours Cash Generating Units have a highdegree of estimation uncertainty, with apotential range of reasonable outcomes
greater than our materiality for the financial
statements as a whole. The financial
statements (note 12) disclose thesensitivities estimated by the Group.

use cash flow models and assessed the methodology, principles
and integrity of each model.
• Sector experience: we involved our own valuation specialists
to assist us in challenging the appropriateness of the discountrate assumption.
• Benchmark assumptions: we challenged the Group’s forecast
assumptions for cash flow projections, including the rate of sales
growth and operating profit growth in the short to medium term, thelong-term growth rates and the appropriateness of discount rates,with reference to internally and externally derived sources.
• Historical comparisons: we assessed the Group’s historical
forecasting accuracy by comparing forecasts from prior years
with actual results in those years.
• Sensitivity analysis: we performed breakeven analysis on the
key assumptions including the discount rate and growth rates.
• Assessing transparency: we considered the adequacy of theGroup’s disclosures in respect of impairment testing andwhether disclosures about the sensitivity of the outcome of theimpairment assessment to changes in key assumptions properlyreflect the risks inherent in the valuations of goodwill.
We performed the tests above rather than seeking to rely on any of
the Group’s controls because the nature of the balance is such that
we would expect to obtain audit evidence primarily through thedetailed procedures described.
Our results• We found the Group’s conclusion that there is no impairment of
goodwill in the Iberchem Fragrances and Iberchem Flavours
Cash Generating Units to be acceptable (2020 result Sipo andBiosector Cash Generating Units: acceptable).

Parent Company

The risk

Our response

Recoverability ofparent Company’s
investments in subsidiaries
and intercompany debtors

Low risk, high value:

Our procedures included:• The carrying amount of the parent• Tests of detail: we assessed 100% of intercompany debtors to

Investments in subsidiaries£1,385.6m and intercompany
debtors £1,325.2m (2020:£1,452.2m)
The parent company funds
subsidiaries through a
combination of equity andintercompany loans andfollowing additions associatedwith the acquisition of
Iberchem the investments in
subsidiaries balance is now
also considered as part of the
key audit matter in the year.

Company’s intercompany debtors, heldat cost less impairment, represents 48%(2020: 51%) and the carrying value ofinvestments in subsidiaries represents
50% of the parent Company’s total
assets.
We do not consider the recoverable amountof these amounts to be at a high risk ofsignificant misstatement, or to be subject toa significant level of judgement. However,
due to their materiality in the context of theparent Company financial statements as awhole, this is considered to be the area
which had the greatest effect on our overall
parent Company audit.

Refer to page 82 (Audit
Committee Report), page 130
and 164 (accounting policy)
and notes F and G on pages
165 and 166 (financial
disclosures).

identify, with reference to the relevant debtors’ draft balance sheet,
whether they have a positive net asset value and therefore coverageof the debt owed, as well as assessing whether those debtor
companies have historically been profit-making.
• Test of detail: we compared the carrying amount of 100% ofinvestments with the relevant subsidiaries’ draft balance sheet to
identify whether their net assets, being an approximation of theirminimum recoverable amount, were in excess of their carrying
amount and assessing whether those subsidiaries havehistorically been profit-making.
• Assessing subsidiary audits: we assessed the work performed by
the subsidiary audit team, and considering the results of that work,on those net assets, including assessing the ability of the subsidiary
to obtain liquid funds and therefore the ability of the subsidiary tofund the repayment of the receivable.
We performed the tests above rather than seeking to rely on any ofthe parent Company’s controls because the nature of the balancemeant that detailed testing is inherently the most effective means ofobtaining audit evidence.
Our results
We found the Group’s assessment of the recoverability ofinvestment in subsidiaries and the intercompany debtors balance tobe acceptable (2020 result: acceptable).

The identification and valuation of intangible assets acquired in respect of the Avanti and Iberchem business combinations was a key audit matter inthe prior year. We continue to perform procedures over identification and valuation of intangible assets acquired in business combinations, however,the degree of subjectivity in assessing the assumptions applied by the Group has reduced given the smaller size of the two business combinations in
2021, and as such we have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately
identified in our report this year.

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Normalised Group profit
before tax

Group materiality£16m (2020: £15m)

Materiality for the Group financial statements as a whole wasset at £16.0m (2020: £15.0m), determined with reference to abenchmark of normalised Group profit before tax (PBT) of £328.6m(2020: £300.2m), of which it represents 4.9% (2020: 5.0%).
We normalised PBT by adding back adjustments that do not represent
the normal, continuing operations of the Group and by averaging overthree years. The items we adjusted were exceptional curtailment gains
and redundancy costs as disclosed in notes 3 and 11.
Materiality for the parent Company financial statements as a whole wasset at £8.7m (2020: £8.7m), which is the component materiality for theparent company determined by the Group audit engagement team. Thisis lower than the materiality we would otherwise have determined withreference to a benchmark of parent Company total assets of £2,778.0m(2020: £2,851.4m), of which it represents 0.3% (2020: 0.3%).
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower threshold,performance materiality, so as to reduce to an acceptable level the riskthat individually immaterial misstatements in individual accountbalances add up to a material amount across the financial statements
as a whole.
Performance materiality was set at 75% (2020: 75%) of materiality
for the financial statements as a whole, which equates to £12.0m(2020: £11.3m) for the Group and £6.5m (2020: £6.5m) for the Parent
company. We applied this percentage in our determination of
performance materiality because we did not identify any factors
indicating an elevated level of risk.

£16m

Whole financial statements
materiality(2020: £15m)£12m£328.6m

The components within the scope of our work accounted for thepercentages illustrated opposite.
The remaining 22% (2020: 22%) of total Group revenue, 15% (2020:16%) of total of the profits and losses that made up the Group profit
before tax and 12% (2020: 10%) of total Group assets is represented
by 71 (2020: 66) reporting components, none of which individually
represented more than 2% (2020: 2%) of any of total Group revenue,
Group profit before tax or total Group assets. For these components,
we performed analysis at an aggregated Group level to re-examine ourassessment that there were no significant risks of material
misstatement within these.

£9m(2020: £300.2m)

Range of materiality at
16 components (£0.9m to £9m)
(2020: £0.45m to £8.7m)

Normalised PBT£0.8m

Group materiality

Misstatements reported
to the Audit Committee(2020: £0.75m)

Group revenue

We agreed to report to the Audit Committee any correctedor uncorrected identified misstatements exceeding £0.8m(2020: £0.75m), in addition to other identified misstatements thatwarranted reporting on quantitative grounds.
Of the Group’s 87 (2020: 85) reporting components, we subjected
10 (2020: 12) to full scope audits for Group purposes and 6 (2020: 7)
to specified risk-focused audit procedures. One component (2020: 1)
for which we performed specific risk-focused procedures was notindividually financially significant enough to require a full scope audit forGroup purposes but did present specific individual risks that needed tobe addressed. The other 5 (2020: 6) components for which we
performed work other than full scope audits for Group reporting
purposes were not individually significant but were included in thescope of our Group reporting work in order to provide further coverageover the Group’s results.

Whole financial statements
performance materiality(2020: £11.3m)

16% 12%

78%

Total of the profit and losses
that made up Group profit
before tax

9%
66% 62%(2020: 78%)7%85%(2020: 84%)

77%

76%

Full scope for Group audit purposes 2021

Full scope for Group audit purposes 2021

Specificrisk-focused
Group
total
assetsaudit procedures 2021

Specific risk-focused audit procedures 2021

Full scope for Group audit purposes 2020

Full scope for Group audit purposes 2020

Specific risk-focused audit procedures 2020

Specific risk-focused audit procedures 2020

Residual components

Residual components

2%

2%

88%

88% 86%(2020: 90%)

Full scope for Group audit purposes 2021
Specific risk-focused audit procedures 2021
Full scope for Group audit purposes 2020
Specific risk-focused audit procedures 2020
Residual components
The 2020 charts have been updated to include
components scoped for specified risk-focusedaudit procedures

Croda International Plc
Croda
International
Plc
Annual reportandAccounts 2021
Annual Report and Accounts 2021

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Financial statements

3. Our application of materiality and an overview
of the scope of our audit

Financial statements (continued)
Independent Auditor’s Report to the Members of Croda International Plc (continued)
3. Our application of materiality and an overview ofthe scope of our audit continued
The Group team adopted a centralised approach to testing revenue,
purchases and journal entries. Data and analytics routines were
performed for 13 components, and the Group team assessed theoutputs of these routines before sending outputs to component
auditors and instructing them to test transactions meeting certain
criteria. The instructions to component auditors also included significant
areas to be covered, including the relevant risks detailed above andthe information to be reported back. The Group team approved thecomponent materialities, which ranged from £0.9m to £9.0m (2020:£0.5m to £8.7m), having regard to the mix of size and risk profile of theGroup across the components. The work on 12 of the 16 components(2020: 11 of the 19 components) was performed by component
auditors and the rest, including the audit of the parent Company, wasperformed by the Group team. The Group team performed procedureson the items excluded from normalised Group profit before tax.
The scope of the audit work performed was predominately substantive
as we placed limited reliance upon the Group’s internal control overfinancial reporting.
On account of travel restrictions in place during the performance of theaudit the Group team did not visit the component auditors and insteadsenior members of the Group audit team held regular video conference
meetings with all in scope components. These meetings involved
explanation of Group audit instructions, involvement in planning audit
procedures, discussing progress updates and emerging findings,
reviewing outcomes of testing performed and involvement in discussing
audit findings with component management. The Group audit teamreviewed the audit documentation of component audits through various
stages of their audits. The Group team also attended the component
virtual clearance meetings. At these meetings, the findings reported to theGroup team were discussed in more detail, and any further work requiredby the Group team was then performed by the component auditor.

4. The impact of climate change on our audit
In planning our audit, we have considered the potential impact ofclimate change on the Group’s business and its financial statements.
The Group has set out its Climate Positive targets and Science Basedtargets in line with limiting global warming to 1.5ºC by 2030, and to be
climate net zero by 2050. The majority of the Group’s carbon emissions
are in the supply chain, and the Group continues to develop its
assessment of climate change. Climate change initiatives impact theGroup in a variety of ways including opportunities and risks relating tobio-based raw material supply, operational and supply chain
decarbonisation and emerging regulatory requirements such as carbon
taxes. Further information is provided on pages 40 to 43.
While the Group has set out its Climate Positive targets and Science
Based targets, the Group continues to assess and develop theconsequences of this in terms of capital expenditure, the cost base andimpacts on cash flows.
The Group considered the impact of climate change and the Group’s
targets in the preparation of the financial statements, including anevaluation of critical accounting estimates and judgements. The Group
concluded that this did not have a material effect on the consolidated
financial statements, as described on page 125 and 126.
As part of our audit, we have made enquiries of management tounderstand the extent of the potential impact of climate change risks on
the Group’s financial statements, including their assessment of criticalaccounting estimates and judgements, and the effect on our audit. We
have performed a risk assessment to evaluate the potential impact,
including the goodwill impairment assessment, the estimates maderegarding useful economic lives of property, plant and equipment, andthe valuation of certain unquoted pension assets.

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We held discussions with our own climate change professionals tochallenge our risk assessment.
Taking into account the extent of headroom on goodwill, the nature of the
Iberchem business, the expected remaining useful lives of property, plantand equipment, and the nature of unquoted pension assets, we assessedthat there is not a significant impact on our audit for this financial year.
There was no significant impact of climate on our key audit matters.
We have read the Group’s disclosure of climate related informationin the front half of the annual report as set out on pages 40 to 43 andconsidered consistency with the financial statements and our
audit knowledge.

5. Going concern
The Directors have prepared the financial statements on the going
concern basis as they do not intend to liquidate the Group or the parent
Company or to cease their operations, and as they have concluded
that the Group’s and the parent Company’s financial position meansthat this is realistic. They have also concluded that there are no material
uncertainties that could have cast significant doubt over their ability
to continue as a going concern for at least a year from the date of
approval of the financial statements (“the going concern period”).
We used our knowledge of the Group, its industry, and the general
economic environment to identify the inherent risks to its businessmodel and analysed how those risks might affect the Group’s andparent Company’s financial resources or ability to continue operations
over the going concern period. The risks that we considered most likely
to adversely affect the Group’s and parent Company’s available
financial resources and metrics relevant to debt covenants over thisperiod were:• The potential impact on Group revenue of economic uncertainty andreduced customer confidence with a reduction in the outlook for
global demand coupled with slower economic recovery; and• The impact of a product quality issue leading to a product recall or
loss of revenue for a period of time.

We also considered less predictable but realistic second order impacts,
such as product quality failures, regulatory incidents and site incidents,
which could result in a rapid reduction of available financial resources.
We considered whether these risks could plausibly affect the liquidity or
covenant compliance in the going concern period by assessing thedegree of downside assumption that, individually and collectively, could
result in a liquidity issue, taking into account the Group’s current andprojected cash and facilities (a reverse stress test). We also assessed
the completeness of the going concern disclosure on page 125. Our
conclusions based on this work:• we consider that the Directors’ use of the going concern basis ofaccounting in the preparation of the financial statements isappropriate;• we have not identified, and concur with the Directors’ assessmentthat there is not, a material uncertainty related to events or conditions
that, individually or collectively, may cast significant doubt on theGroup’s or Company’s ability to continue as a going concern for thegoing concern period;• we have nothing material to add or draw attention to in relation to the
Directors’ statement on page 125 on the use of the going concern
basis of accounting with no material uncertainties that may castsignificant doubt over the Group and parent Company’s use of thatbasis for the going concern period, and we found the going concern
disclosure on page 125 to be acceptable; and• the same statement is materially consistent with the financial
statements and our audit knowledge.
However, as we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent withjudgements that were reasonable at the time they were made, theabove conclusions are not a guarantee that the Group or the Company
will continue in operation.

Identifying and responding to risks of material misstatement due
to fraud
To identify risks of material misstatement due to fraud (“fraud risks”) we
assessed events or conditions that could indicate an incentive orpressure to commit fraud or provide an opportunity to commit fraud.
Our risk assessment procedures included:• Enquiring of Directors, the Audit Committee, internal audit andinspection of policy documentation as to the Group’s high-level
policies and procedures to prevent and detect fraud, including theinternal audit function, as well as whether they have knowledge ofany actual, suspected or alleged fraud.
• Reading Board and Audit Committee minutes.
• Considering remuneration incentive schemes (performance related
annual Bonus Plan and Performance Share Plan) and performancetargets for management, including the EPS growth target.
We communicated identified fraud risks throughout the audit team andremained alert to any indications of fraud throughout the audit. This
included communication from the Group audit team to full scope andspecified risk-focused component audit teams of relevant fraud risks
identified at the Group level and requesting these component audit
teams to report to the Group audit team any instances of fraud that
could give rise to a material misstatement at the Group level.
As required by auditing standards, we perform procedures toaddress the risk of management override of controls, in particular
the risk that management may be in a position to make inappropriate
accounting entries.
On this audit, we do not believe there is a fraud risk related to revenue
recognition because revenue transactions have low individual value
with high volume, are routine and process driven and do not involve
judgement or estimation. This reduces the opportunities forfraudulent activity.
We did not identify any additional fraud risks.
We performed procedures including:• Identifying journal entries to test for all full scope and specified risk

focused components based on risk criteria by the Group audit team.
Component audit teams were instructed to test the identified entries
to supporting documentation. These included those posted by seniorfinance management or other high-risk users and those posted tounusual account combinations.
• Assessing whether the judgements made in making accounting
estimates are indicative of a potential bias.
Identifying and responding to risks of material misstatement due
to non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be
expected to have a material effect on the financial statements from ourgeneral commercial and sector experience, through discussion with the
Directors and other management (as required by auditing standards),
and from inspection of the Group’s regulatory and legal
correspondence and discussed with the Directors and othermanagement the policies and procedures regarding compliance withlaws and regulations.

We communicated identified laws and regulations throughout our teamand remained alert to any indications of non-compliance throughout theaudit. This included communication from the Group audit team to all fullscope and specified risk-focused component audit teams of relevantlaws and regulations identified at the Group level, and a request forthese component auditors to report to the Group team any instances of
non-compliance with laws and regulations that could give rise to amaterial misstatement at the Group level.
The potential effect of these laws and regulations on the financial
statements varies considerably. Firstly, the Group is subject to laws andregulations that directly affect the financial statements including financial
reporting legislation (including related companies legislation),
distributable profits legislation, pensions legislation, and taxation
legislation, and we assessed the extent of compliance with these laws
and regulations as part of our procedures on the related financial
statement items.
Secondly, the Group is subject to many other laws and regulations
where the consequences of non-compliance could have a material
effect on amounts or disclosures in the financial statements, forinstance through the imposition of fines or litigation or the loss of theGroup’s licence to operate. We identified the following areas as thosemost likely to have such an effect: GDPR compliance, health and safety
and product liability, competition, anti-bribery and corruption,
intellectual property, employment law, tax, trade compliance laws andenvironmental legislation, recognising the nature of the Group’s
activities. Auditing standards limit the required audit procedures to
identify non- compliance with these laws and regulations to enquiry of
the Directors and other management and inspection of regulatory andlegal correspondence, if any. Therefore if a breach of operational
regulations is not disclosed to us or evident from relevantcorrespondence, an audit will not detect that breach.
We discussed with the Audit Committee environmental matters related
to actual or suspected breaches of laws or regulations, for which
disclosure is not necessary, and considered any implications forour audit.
Context of the ability of the audit to detect fraud or breaches oflaw or regulation
Owing to the inherent limitations of an audit, there is an unavoidable riskthat we may not have detected some material misstatements in thefinancial statements, even though we have properly planned andperformed our audit in accordance with auditing standards. For
example, the further removed non-compliance with laws andregulations is from the events and transactions reflected in the financial
statements, the less likely the inherently limited procedures required byauditing standards would identify it.
In addition, as with any audit, there remained a higher risk of nondetection of fraud, as these may involve collusion, forgery, intentionalomissions, misrepresentations, or the override of internal controls. Our
audit procedures are designed to detect material misstatement. We are
not responsible for preventing non-compliance or fraud and cannot be
expected to detect non-compliance with all laws and regulations.

Croda International Plc
Croda
International
Plc
Annual reportandAccounts 2021
Annual Report and Accounts 2021

117
117

Financial statements

6. Fraud and breaches of laws and regulations –ability to detect

Financial statements (continued)
Independent Auditor’s Report to the Members of Croda International Plc (continued)
7. We have nothing to report on the otherinformation in the Annual Report
The Directors are responsible for the other information presented in the
Annual Report together with the financial statements. Our opinion on
the financial statements does not cover the other information
and, accordingly, we do not express an audit opinion or, except as
explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work,
the information therein is materially misstated or inconsistent withthe financial statements or our audit knowledge. Based solely onthat work we have not identified material misstatements in theother information.
Strategic Report and Directors’ Report
Based solely on our work on the other information:• we have not identified material misstatements in the Strategic Report
and the Directors’ Report;• in our opinion the information given in those reports for the financial
year is consistent with the financial statements; and• in our opinion those reports have been prepared in accordance with
the Companies Act 2006.
Directors’ Remuneration Report
In our opinion the part of the Directors’ Remuneration Report tobe audited has been properly prepared in accordance with theCompanies Act 2006.
Disclosures of emerging and principal risks and longer-term
viability
We are required to perform procedures to identify whether there is amaterial inconsistency between the Directors’ disclosures in respect of
emerging and principal risks and the viability statement, and thefinancial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or draw
attention to in relation to:• the Directors’ confirmation within the long-term viability statement on

pages 56 and 57 that they have carried out a robust assessment of
the emerging and principal risks facing the Group, including thosethat would threaten its business model, future performance, solvency
and liquidity;• the Principal Risks disclosures describing these risks and how
emerging risks are identified, and explaining how they are being
managed and mitigated; andthe Directors’ explanation in the long-term viability statement of how
they have assessed the prospects of the Group, over what period they
have done so and why they considered that period to be appropriate,
and their statement as to whether they have a reasonable expectationthat the Group will be able to continue in operation and meet its
liabilities as they fall due over the period of their assessment, including
any related disclosures drawing attention to any necessary
qualifications or assumptions.

118
118

Croda International Plc
Crodareport
International
Plc 2021
Annualand Accounts
Annual Report and Accounts 2021

We are also required to review the long-term viability statement,set out on pages 56 and 57 under the Listing Rules. Based on theabove procedures, we have concluded that the above disclosures
are materially consistent with the financial statements and our
audit knowledge.
Our work is limited to assessing these matters in the context of only theknowledge acquired during our financial statements audit. As wecannot predict all future events or conditions and as subsequent events
may result in outcomes that are inconsistent with judgements that werereasonable at the time they were made, the absence of anything toreport on these statements is not a guarantee as to the Group’s andparent Company’s longer-term viability.
Corporate governance disclosures
We are required to perform procedures to identify whether there is amaterial inconsistency between the Directors’ corporate governancedisclosures and the financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of thefollowing is materially consistent with the financial statements and our
audit knowledge:• the Directors’ statement that they consider that the Annual Reportand financial statements taken as a whole is fair, balanced andunderstandable, and provides the information necessary forshareholders to assess the Group’s position and performance,business model and strategy;• the section of the annual report describing the work of the Audit
Committee, including the significant issues that the Audit Committee
considered in relation to the financial statements, and how theseissues were addressed; and• the section of the annual report that describes the review of theeffectiveness of the Group’s risk management and internal
control systems.
We are required to review the part of Corporate Governance Statement
relating to the Group’s compliance with the provisions of the UK
Corporate Governance Code specified by the Listing Rules for our
review. We have nothing to report in this respect.

10. The purpose of our audit work and to whom we
owe our responsibilities

Under the Companies Act 2006, we are required to report to you if, in
our opinion:

This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to theCompany’s members those matters we are required to state to them inan auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members, asa body, for our audit work, for this report, or for the opinions wehave formed.

• adequate accounting records have not been kept by the parent

Company, or returns adequate for our audit have not been received
from branches not visited by us; or• the parent Company financial statements and the part of
the Directors’ Remuneration Report to be audited are notin agreement with the accounting records and returns; or• certain disclosures of Directors’ remuneration specified by law are
not made; or• we have not received all the information and explanations
we require for our audit.
We have nothing to report in these respects.

9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 111,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair view;
such internal control as they determine is necessary to enable thepreparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the Group andparent Company’s ability to continue as a going concern, disclosing, asapplicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate theGroup or the parent Company or to cease operations, or have norealistic alternative but to do so.

Ian Griffiths (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
LondonE14 5GL
28 February 2022

Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether thefinancial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue our opinion in an auditor’sreport. Reasonable assurance is a high level of assurance, but does notguarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individuallyor in aggregate, they could reasonably be expected to influence theeconomic decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.

Croda International Plc
Croda
International
Plc
Annual reportandAccounts 2021
Annual Report and Accounts 2021

119
119

Financial statements

8. We have nothing to report on the other matterson which we are required to report by exception

Financial statements (continued)
Group Consolidated Statements

Group Income Statement
for the year ended 31 December 2021
2021
Note

Revenue
Cost of sales
Gross profit
Operating costs
Operating profit
Financial costs
Financial income
Profit before tax
Tax
Profit after tax for the year
Attributable to:Non-controlling interests
Owners of the parent

1

2
3
4
4
5

2021

2020

2020

Adjusted Adjustments
£m
£m

2021
Reported
Total£m

Adjusted£m

Adjustments£m2020
Reported
Total£m

1,889.6(950.7)938.9(470.3)468.6(24.9)
1.5
445.2(94.4)
350.8–––(30.4)(30.4)(3.3)–(33.7)
5.7(28.0)

1,889.6(950.7)938.9(500.7)438.2(28.2)
1.5
411.5(88.7)
322.8

1,390.3(758.2)632.1(312.5)319.6(19.5)
0.5
300.6(72.4)
228.2–––(29.6)(29.6)(1.5)–(31.1)
4.5(26.6)

1,390.3(758.2)632.1(342.1)290.0(21.0)
0.5
269.5(67.9)
201.6

2.0
348.8
350.8

–
(28.0)(28.0)

2.0
320.8
322.8

–
228.2
228.2

–
(26.6)(26.6)

–
201.6
201.6

Adjustments relate to exceptional items, amortisation of intangible assets arising on acquisition and the tax thereon. Details are disclosed in note 3.

Earnings per 10.61p ordinary share

Pence

Pence

Pence

Pence

Basic

7

250.0

230.0

175.5

155.1

Diluted

7

249.5

229.5

175.3

154.8

Group Statement of Comprehensive Income
for the year ended 31 December 2021
Note

Profit after tax for the year

2021
£m

2020
£m

322.8

201.6

40.6
(8.3)
32.3

51.3
(9.7)
41.6

(61.1)
3.7
(6.0)
0.4
(63.0)(30.7)
292.1(15.0)–––(15.0)
26.6
228.2

2.1
290.0
292.1

0.1
228.1
228.2

292.1
292.1

228.2
228.2

Other comprehensive income/(expense):

Items that will not be reclassified
subsequently to profit or loss:
Remeasurements of post-retirement
benefit obligations
Tax on items that will not be reclassified

11
5

Items that may be reclassified
subsequently to profit or loss:
Currency translation
Cash flow hedging
Cost of hedging reserve
Tax on items that may be reclassified
Other comprehensive (expense)/income for the year
Total comprehensive income for the year
Attributable to:Non-controlling interests
Owners of the parent
Arising from:
Continuing operations

120
120

Croda International Plc
Crodareport
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Plc 2021
Annualand Accounts
Annual Report and Accounts 2021

20
20
5

at 31 December 2021
2021
£m

2020
£m

12
13
14
16
6
11

1,271.6
988.1
87.9
3.3
13.5
35.3
2,399.7

1,311.7
900.8
80.1
5.2
14.5
17.6
2,329.9

17
18
20

443.0
337.9
112.8
893.7

302.6
289.9
106.5
699.0

19
20
14
21

(358.0)(50.9)(12.2)(5.5)(33.3)(459.9)433.8(240.5)(49.1)(10.7)(6.7)(38.4)(345.4)
353.6

20
14
19
11
21
6

(794.6)(78.3)(12.3)(27.4)(3.6)(151.4)(1,067.6)
1,765.9(776.2)(71.0)(27.1)(49.9)(3.9)(160.3)(1,088.4)
1,595.1

22
24

15.1
1.1
16.2
707.7
1,029.2
1,753.1
12.8
1,765.9

15.1
1.1
16.2
707.7
861.9
1,585.8
9.3
1,595.1

Note

AssetsNon-current assets
Intangible assets
Property, plant and equipment
Right of use assets
Investments
Deferred tax assets
Retirement benefit assets

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Liabilities

Current liabilities
Trade and other payables
Borrowings and other financial liabilities
Lease liabilities
Provisions
Current tax liabilities
Net current assets

Non-current liabilities
Borrowings and other financial liabilities
Lease liabilities
Other payables
Retirement benefit liabilities
Provisions
Deferred tax liabilities
Net assets
EquityOrdinary share capitalPreference share capital
Share capital
Share premium accountReserves
Equity attributable to owners of the parent
Non-controlling interests in equity
Total equity

26

The financial statements on pages 120 to 161 were signed on behalf of the Board who approved the accounts on 28 February 2022.

Anita Frew
Chair

Jez Maiden
Group Finance Director

Croda International Plc
Croda
International
Plc
Annual reportandAccounts 2021
Annual Report and Accounts 2021

121
121

Financial statements

Group Balance SheetFinancial statements (continued)
Group Consolidated Statements (continued)

Group Statement of Cash Flowsfor the year ended 31 December 2021
2021
£m

2020
£m

ii

479.0
(19.8)(111.5)
347.7

375.2
(17.5)(70.7)
287.0

28
16
13
12

(58.1)–(153.0)
(5.7)
0.2
(1.1)
1.5
(216.2)(868.2)(1.5)(115.0)
(6.2)
0.2
(1.7)
0.5
(991.9)320.2(282.6)(14.4)
–
(0.7)
(2.4)
(132.5)(0.2)(112.6)438.7(201.4)
(7.6)
615.5
–
(6.9)
(115.9)
–
722.4

18.9
77.8
(2.4)
94.3

17.5
63.1
(2.8)
77.8

112.8
(18.5)
94.3

106.5(28.7)
77.8

Note

Cash generated from operating activities
Cash generated by operations
Interest paid
Tax paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired
Acquisition of associates and other investments
Purchase of property, plant and equipment
Purchase of other intangible assets
Proceeds from sale of property, plant and equipment
Cash paid against non-operating provisions
Interest received
Net cash used in investing activities
Cash flows from financing activities
New borrowings
Repayment of borrowings
Payment of lease liabilities
Issue of ordinary shares
Acquisition of non-controlling interests
Net transactions in own shares
Dividends paid to equity shareholders
Dividends paid to non-controlling interests
Net cash used in financing activities
Net movement in cash and cash equivalents
Cash and cash equivalents brought forward
Exchange differences
Cash and cash equivalents carried forward
Cash and cash equivalents carried forward comprise:Cash at bank and in handBank overdrafts

122
122

Croda International Plc
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Annualand Accounts
Annual Report and Accounts 2021

21

14

8

i,iii
iii

for the year ended 31 December 2021
(i) Reconciliation to net debt
2021
£m

2020
£m

iii

18.9
(23.2)(4.3)(5.7)(24.1)
11.4(22.7)(800.5)(823.2)17.5(229.7)(212.2)–(47.8)
7.2(252.8)(547.7)(800.5)

Note

2021
£m

2020
£m

468.6
3.9
(34.3)
438.2

319.6(16.0)(13.6)
290.0

113.3
(6.2)
1.1
5.8
1.6
29.1
–
0.7
(2.1)
(140.9)(53.2)
91.6
479.0

81.8
–
1.4
–
4.2
4.1
7.7
1.1
(7.8)
(7.0)
(15.6)
15.3
375.2

2020
£m

Note

Net movement in cash and cash equivalents
Net movement in borrowings and other financial liabilities
Change in net debt from cash flows
Loans in acquired businesses
Non-cash movement in lease liabilities
Exchange differences

iii
iii

Net debt brought forward
Net debt carried forward(ii) Cash generated by operations

Adjusted operating profit
Exceptional items
Amortisation of intangible assets arising on acquisition
Operating profit
Adjustments for:
Depreciation and amortisation
Fair value movement on contingent consideration
Impairments
Loss on disposal and write-offs of intangible assets and property, plant and equipment
Net provisions charged
Share-based payments
Non-cash pension expense
Share of loss of associate
Cash paid against operating provisions
Movement in inventories
Movement in receivables
Movement in payables
Cash generated by operations

iv

21

21

(iii) Analysis of net debt
2021£m

Cash and cash equivalents
Bank overdrafts
Movement in cash and cash equivalents
Borrowings repayable within one year
Borrowings repayable after more than one year
Lease liabilities
Movement in borrowings and other financial liabilities
Total net debt

112.8
(18.5)(32.4)(794.6)(90.5)(823.2)

Cash
flow
£m

Exchange
movements£m

Other
non-cash
£m

8.7
10.2
18.9
3.1
(40.7)
14.4(23.2)
(4.3)

(2.4)
–
(2.4)
(0.5)
13.4
0.9
13.8
11.4

–
–
–
(14.6)
8.9(24.1)(29.8)(29.8)

106.5(28.7)(20.4)(776.2)(81.7)(800.5)

Included within other non-cash movements are £17.7m of lease liabilities recognised in the year.
(iv) Cash flow on exceptional items
The total cash outflow during the year in respect of exceptional items, including those recognised in prior years’ income statements,was £16.0m (2020: £16.7m). Details of exceptional items can be found in note 3 on page 133.

Croda International Plc
Croda
International
Plc
Annual reportandAccounts 2021
Annual Report and Accounts 2021

123
123

Financial statements

Group Cash Flow Notes

Financial statements (continued)
Group Consolidated Statements (continued)

Group Statement of Changes in Equity
for the year ended 31 December 2021
Sharecapital£mSharepremium
account£m

Otherreserves£m

Retainedearnings£m

Noncontrollinginterests£m

Total
equity
£m

15.1

93.3

34.4

718.8

7.0

868.6

–
–
–

–
–
–

–
(15.1)(15.1)

201.6
41.6
243.2

–
0.1
0.1

201.6
26.6
228.2

–
–
1.1
–
1.1

–
–
614.4
–
614.4

–
–
–
–
–

(115.9)3.4–(6.9)(119.4)–––––(115.9)
3.4
615.5
(6.9)
496.1

–
–

–
–

–
–

–
–

2.2
2.2

2.2
2.2

Total equity at 31 December 2020

16.2

707.7

19.3

842.6

9.3

1,595.1

At 1 January 2021

16.2

707.7

19.3

842.6

9.3

1,595.1

–
–
–

–
–
–

–
(63.1)(63.1)

320.8
32.3
353.1

2.0
0.1
2.1

322.8
(30.7)
292.1

–
–
–
–

–
–
–
–

–
–
–
–

(132.5)12.7(2.4)(122.2)––––(132.5)12.7(2.4)(122.2)

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
(0.5)
–
–
(0.5)

1.6
(0.2)
0.2
(0.2)
1.4

1.6
(0.7)
0.2
(0.2)
0.9

16.2

707.7

(43.8)

1,073.0

12.8

1,765.9

Note

At 1 January 2020
Profit after tax for the year
Other comprehensive (expense)/income
Total comprehensive (expense)/income for the year
Transactions with owners:
Dividends on equity shares
Share-based payments
Issue of ordinary shares
Transactions in own shares
Total transactions with owners

8

Changes in ownership interests:
Acquisition of a subsidiary with a non-controlling interest
Total changes in ownership interests

Profit after tax for the year
Other comprehensive (expense)/income
Total comprehensive (expense)/income for the year
Transactions with owners:
Dividends on equity shares
Share-based payments
Transactions in own shares
Total transactions with owners
Changes in ownership interests:
Acquisition of a subsidiary with a non-controlling interest
Acquisition of a non-controlling interest
Issue of share capital
Dividends paid to non-controlling interests
Total changes in ownership interests
Total equity at 31 December 2021

8

Other reserves include the Capital Redemption Reserve of £0.9m (2020: £0.9m), the Hedging Reserve of £3.0m (2020: £Nil), the Cost of Hedging Reserve of £(4.9)m (2020: £Nil) and the Translation
Reserve of £(42.8)m (2020: £18.4m).

124
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Plc 2021
Annualand Accounts
Annual Report and Accounts 2021

Group Accounting Policies

Basis of preparation
The consolidated financial statements have been prepared under thehistorical cost convention, in accordance with applicable law and UKadopted international accounting standards. A summary of the more
important Group accounting policies is set out below.
Going concern
The ongoing impact of COVID-19 and the broader consequences on themarkets in which the Group operates have been considered in the
preparation of the financial statements including our evaluation of criticalaccounting estimates and judgements which are detailed below. The
financial statements on pages 120 to 161 have been prepared on agoing concern basis which the Directors believe to be appropriate forthe following reasons:
In 2021, the Group successfully extended the existing 2019 Club facility
by a further year, resetting its five-year term and resulting in a maturity
date of October 2026. At 31 December 2021 the Group had £1,226m
of committed debt facilities available from its banking group, USPP
bondholders and lease providers, with principal maturities between
2023 and 2030, of which £334.4m (2020: £378.3m) was undrawn,
together with cash balances of £112.8m (2020: £106.5m).
The Directors have reviewed the liquidity and covenant forecasts for theGroup’s going concern assessment period covering at least 12 months
from the date of approval of the financial statements. The Directors havealso considered sensitivities in respect of potential downside scenarios,
and the mitigating actions available, in concluding that the Group is able
to continue in operation for a period of at least 12 months from the dateof approving the financial statements. These sensitivities include asevere but plausible downside scenario, alongside an additional
scenario considered to be severe but remote. Relative to a base casescenario, the sensitivities assume increasingly pessimistic outlooks for
global demand, coupled with slower economic recoveries. In the severe
downside scenario, demand falls below average 2021 levels throughout
2022 and 2023. Furthermore, both downside scenarios also assume amaterial increase in working capital, due to inventory build and higher
customer receivables, and substantial margin erosion, predicated on afurther deterioration in the economic conditions.
Based on 2021 results, reverse stress testing assesses that adjusted
operating profit would need to fall by 69% to trigger an event of default,
before consideration of available actions to conserve cash. The
Directors do not consider this a plausible scenario. In considering thesuitability of these scenarios, the Directors have considered, among
other factors, the impact of the risk scenario combinations that form partof the viability statement.

Climate change
The Group has long recognised the scale of the climate emergency andconsiders this to offer both opportunities and risks in the future. The
Group’s current climate change strategy focuses on reducing its carbon
footprint and increasing its use of bio-based raw materials, whilst thebenefits in using its ingredients will enable more carbon to be saved thanwere emitted through operations and supply chain.
The impact of climate change has been considered in the preparation ofthese financial statements across a number of areas, including ourevaluation of critical accounting estimates and judgements which aredetailed below, consistent with the risks and opportunities set out on
page 43. None of these risks had a material effect on the consolidated
financial statements of the Group. The Group will continue developing its
assessment of the impact that climate change has on the assets andliabilities recognised and presented in its financial statements.
Critical accounting judgements and key sources of estimation
uncertainty
The Group’s significant accounting policies under UK-adopted
international accounting standards have been set by management withthe approval of the Audit Committee. The application of these policies
requires estimates and assumptions to be made concerning the futureand judgements to be made on the applicability of policies to particularsituations. Estimates and judgements are continually evaluated andare based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under
the circumstances.
Under UK-adopted international accounting standards an estimate or
judgement may be considered critical if it involves matters that are highly
uncertain or where different estimation methods could reasonably havebeen used, or if changes in the estimate that would have a material
impact on the Group’s results are likely to occur from period to period.
The critical accounting judgement required when preparing the Group’s
accounts is as follows:(i)

Business disposal – the Group has signed an agreement to sell the
majority of its Performance Technologies and Industrial Chemicals
businesses. Whilst completion of the sale is considered highly
probable, the Group’s assessment that the disposal group is notavailable for sale in its present condition is a key judgement indetermining that the disposal group is not classified as an asset held
for sale at 31 December 2021. The divested business, comprising
five manufacturing facilities, together with associated laboratory
facilities and sales operations, currently forms part of Croda’s
integrated operating model and work is ongoing to separate thedisposal group, with completion of the transaction expected insummer 2022.

In the downside scenarios, the Group continues to have significant
liquidity headroom and good financial covenant headroom under its debt
facilities. Excluded from the above scenario testing, the Directors havealso considered the impact on the Group from the agreement to sell the
majority of the Performance Technologies and Industrial Chemicals
businesses for total consideration of €915m. The disposal will have asignificant positive impact on Croda’s leverage and liquidity in the short
to medium term. The Directors are therefore satisfied that the Group has
sufficient resources to continue in operation for a period of not less than
12 months from the date of approval of the financial statements.
Accordingly, the consolidated financial statements have been preparedon a going concern basis.

125

Croda International Plc
Annual report and Accounts 2021

Croda International Plc
Annual Report and Accounts 2021

125

Financial statements

The principal accounting policies adopted in the preparation of thesefinancial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.

Financial statements (continued)
Group Accounting Policies (continued)

The critical accounting estimates and assumptions required when
preparing the Group’s accounts are as follows:(i)

Post-retirement benefits – as disclosed in note 11, the Group’s
principal retirement benefit schemes are of the defined benefit type.
Year end recognition of the liabilities under these schemes and thevaluation of assets held to fund these liabilities require a number ofsignificant assumptions to be made, relating to key financial market
indicators such as inflation and expectations on future salary growth
and asset returns. These assumptions are made by the Group in
conjunction with the schemes’ actuaries and the Directors are of theview that any estimation should be appropriate and in line withconsensus opinion.

(ii) Goodwill impairment – management are required to undertake anannual test for impairment of indefinite lived assets such as goodwill.
Accordingly, the Group tests annually whether goodwill has suffered
any impairment and the Group’s goodwill value has been supportedby the fair value less cost to sell or detailed value in use calculations
relating to the recoverable amounts of the underlying Cash
Generating Units (‘CGUs’). These value in use calculations require
the use of estimates to enable the calculation of the net present
value of cash flow projections of the relevant CGU. The criticalassumptions are as follows:• Terminal value growth in EBITDA (calculated as operating profit

before depreciation and amortisation) – estimated at 3% unlessthe profile of a particular CGU warrants a different treatment.
• Selection of appropriate market participant discount rates toreflect the risks specific to the CGU.
• Specific cash flow projections including key assumptions onrevenue growth and operating margins – generally over a fiveyear period unless the profile of a particular CGU warrants alonger period.
Recoverable amounts currently exceed carrying values including
goodwill; however, testing did identify that reasonable possible
changes in key assumptions would cause the recoverable amountof the Iberchem CGUs to be less than the carrying value. The
assumptions selected and associated sensitivity analysis aredisclosed in note 12. Due to the nature of the Iberchem business,
including its low carbon footprint, the key assumptions were notmaterially impacted by the climate change risks and opportunities
set out in the annual report on page 43.
Changes in accounting policy(i)

A number of new amendments to standards and interpretations are
effective for annual periods beginning on or after 1 January 2021
and have been applied in preparing these consolidated financial
statements. None of these had a significant effect on the
consolidated financial statements of the Group.

(ii) New standards and interpretations not yet adopted – a number of
new standards and amendments to standards and interpretations
are effective for annual periods beginning on or after 1 January 2022
and have not been applied in preparing these consolidated financial
statements. The Group is assessing the impact of these newstandards and the Group’s financial reporting will be presented inaccordance with these standards from 1 January 2022 or 1 January2023 as applicable.

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Group accounts
General information
Croda International Plc is a public limited company, which is listed on
the London Stock Exchange and incorporated and domiciled in the
United Kingdom. It is registered in England and Wales and the addressof its registered office can be found on page 172.
Subsidiaries
Subsidiaries are all entities over which the Parent Company has control.
The Parent controls an entity when it is exposed to, or has rights to,variable returns from its involvement with the entity and has the ability toaffect those returns through its power over the entity. Subsidiaries are
fully consolidated from the date on which control is transferred to theGroup. They are deconsolidated from the date that control ceases.
The Group uses the acquisition method of accounting to account forbusiness combinations. The consideration transferred for the acquisitionof a subsidiary is the fair value of the assets transferred, the liabilities
incurred and the equity interests issued by the Group. Acquisition costs
are expensed as incurred.
Identifiable assets acquired, and liabilities and contingent liabilities
assumed, in a business combination are measured initially at theirfair values at the acquisition date, irrespective of the extent of any
minority interest. The excess of the cost of acquisition over the Group’s
share of identifiable net assets acquired is recorded as goodwill.
Intra-Group transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are also
eliminated.
Accounting policies of subsidiaries have been changed where necessary
to ensure consistency with the policies adopted by the Group.
Transactions with non-controlling interests
The Group treats transactions with non-controlling interests astransactions with the equity owners of the Group. For purchases from
non-controlling interests, the difference between any consideration paid
and the relevant share acquired of the carrying value of net assets of thesubsidiary is recorded as equity. Gains or losses on disposals to noncontrolling interests are also recorded in equity.

Goodwill
On acquisition of a business, fair values are attributed to the net assets
acquired. Goodwill arises where the fair value of the consideration given
for a business exceeds such net assets. Goodwill arising on acquisitions
is capitalised and carried at cost less accumulated impairment losses.
Goodwill is subject to impairment review, both annually and when there
are indications that the carrying value may not be recoverable. For the
purpose of impairment testing, assets are grouped at the lowest levels
for which there are separately identifiable cash flows, known as CGUs.
Goodwill is allocated to the CGU that is expected to benefit from thesynergies of the acquisition. For goodwill balances where the relevantgroup of CGUs exceeds the size of the Group’s operating segments,
impairment testing is performed at the operating segment level.
If the recoverable amount of the CGU is less than the carrying value ofthe goodwill, an impairment loss is recognised immediately against the
goodwill value. The recoverable amount of the CGU is the higher of fairvalue less costs to sell and value in use. Fair value less costs to sell ismeasured on a market-based approach using prices and other relevant
information generated by market transactions. Value in use is estimatedwith reference to estimated future cash flows discounted to net present
value using a market participant discount rate that reflects the time valueof money and risks specific to the CGU. Typically, the Group’s weighted
average cost of capital is used as a starting point and then adjusted toreflect the risk profile of a particular CGU if warranted. The Group uses
growth estimates that track below the Group’s historical growth rates
unless the profile of a particular CGU warrants a different treatment.
Other intangible assets arising on acquisition
On acquisition, intangible assets other than goodwill are recognised ifthey can be identified through being separable from the acquired entity
or arising from specific contractual or legal rights.
Once recognised, such intangible assets will be initially valued using
an appropriate methodology. For acquisitions in 2021 the following
intangible asset types recognised and valuation methodologies
applied were:• Technology processes (relief-from-royalty and replacement cost)• Customer relationships (income approach)• Trade names and brands (relief-from-royalty)

Intangible assets relating to products in development are subject toimpairment testing at each balance sheet date or earlier upon
indication of impairment. Any impairment losses are written off to theincome statement.
Computer software
Computer software licences covering a period of greater than a year
are capitalised on the basis of the costs incurred to acquire and bring to
use the specific software. These costs are amortised over theirestimated useful lives which range from 3 to 7 years.

Revenue recognition
Revenue is measured based on the consideration specified in a contract
with a customer and excludes intra-Group sales. The Group recognises
revenue on completion of contractual performance obligations, generally
when it transfers control over a product or service to a customer.
Sale of goods
The principal activity from which the Group generates revenue is the
supply of products to customers from its various manufacturing sites
and warehouses, and in some limited instances from consignment
inventory held on customer sites. Products are supplied under a variety
of standard terms and conditions, and in each case, revenue isrecognised when contractual performance obligations between theGroup and the customer are satisfied. This will typically be on dispatchor delivery. When sales discount and rebate arrangements result in net
variable consideration, appropriate provisions are recognised as adeduction from revenue at the point of sale. The Group typically uses
the expected value method for estimating rebates, reflecting that suchcontracts have similar characteristics and a range of possible outcomes.
The Group recognises revenue to the extent that it is highly probablethat a significant reversal in the amount of cumulative revenue will not
be required.
Interest and dividend income
Interest income is recognised on a time-proportion basis using theeffective interest method.
Dividend income is recognised when the right to receive payment isestablished.

Following initial recognition, the asset will be written down on a straightline basis over its useful life, which range from 7 to 15 years fortechnology processes and from 6 to 20 years for trade names, brands
and customer relationships. Useful lives are regularly reviewed to ensure
their continuing relevance.
Research and development
Research expenditure, undertaken with the prospect of gaining newscientific or technical knowledge and understanding, is charged to theincome statement in the year in which it is incurred. Internal
development expenditure, whereby research findings are applied to aplan for the production of new or substantially improved products orprocesses, is charged to the income statement in the year in which it isincurred unless it meets the recognition criteria of IAS 38 ‘Intangible
Assets’. Development uncertainties typically mean that such criteria are
not met, most commonly because the Group can only demonstrate theexistence of a market at a late stage in the product development cycle,
at which point the material element of project spend has already been
incurred and charged to the income statement. Where, however, therecognition criteria are met, intangible assets are capitalised andamortised over their useful economic lives from product launch.

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Financial statements

Intangible assets

Financial statements (continued)
Group Accounting Policies (continued)

Segmental reporting

Share-based payments

An operating segment is a group of assets and operations engaged inproviding products and services that are subject to risks or returns thatare different from those of other segments. Operating segments
presented in the financial statements are consistent with the internalreporting provided to the Group’s Chief Operating Decision Maker,
which has been identified as the Group Executive Committee.

The Group operates a number of cash and equity settled, share-based
incentive schemes. These are accounted for in accordance with IFRS 2‘Share-based Payments’, which requires an expense to be recognisedin the income statement over the vesting period of the options. The
expense is based on the fair value of each instrument which is
calculated using the Black Scholes or binomial model as appropriate.
Any expense is adjusted to reflect expected and actual levels of options
vesting for non-market-based performance criteria.

Employee benefits
Pension obligations
The Group accounts for pensions and similar benefits under IAS 19‘Employee Benefits’ (revised). In respect of defined benefit plans(pension plans that define an amount of pension benefit that an
employee will receive on retirement, usually dependent on one or morefactors such as age, years of service and compensation), obligations aremeasured at discounted present value whilst plan assets are recorded
at fair value. The assets and liabilities recognised in the balance sheet inrespect of defined benefit pension plans are the net of plan obligations
and assets. A scheme surplus is only recognised as an asset in thebalance sheet when the Group has the unconditional right to future
economic benefits in the form of a refund or a reduction in futurecontributions. For those schemes where an accounting surplus iscurrently recognised, the Group expects to recover the value throughreduced future contributions. No allowance is made in the past service
liability in respect of either the future expenses of running the schemesor for non service-related death in service benefits which may arise in
the future. The operating costs of such plans are charged to operating
profit and the finance costs are recognised as financial income or an
expense as appropriate.
Service costs are spread systematically over the lives of employees andfinancing costs are recognised in the periods in which they arise.
Remeasurements are recognised in the statement of comprehensive
income. Payments to defined contribution schemes (pension plans
under which the Group pays fixed contributions into a separate entity)
are charged as an expense as they fall due.
Other post-retirement benefits
Some Group companies provide post-retirement healthcare benefits totheir retirees. The entitlement to these benefits is usually conditional on
the employee remaining in service up to retirement age and thecompletion of a minimum service period. The expected costs of thesebenefits are accrued over the period of employment using an accounting
methodology similar to that for defined benefit pension plans.
Remeasurements are recognised in the statement of comprehensive
income. These obligations are valued annually by independent
qualified actuaries.
Termination benefits
Termination benefits are payable when employment is terminated by theGroup before the normal retirement date, or whenever an employee
accepts voluntary redundancy in exchange for these benefits. The
Group recognises termination benefits when it is demonstrablycommitted to either (i) terminating the employment of current employees
according to a detailed formal plan without possibility of withdrawal or(ii) providing termination benefits as a result of an offer made toencourage voluntary redundancy.

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Currency translations
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities
are measured using the currency of the primary economic environment
in which the entity operates (‘the functional currency’). The consolidated
financial statements are presented in Sterling, which is the Company’sfunctional and presentation currency.
Transactions and balances
Monetary assets and liabilities are translated at the exchange rates rulingat the end of the financial period. Exchange profits or losses on tradingtransactions are included in the Group income statement except
when deferred in equity as qualifying cash flow hedges and qualifying
net investment hedges.
Group companies
The results and financial position of all the Group entities that have afunctional currency different from the presentation currency aretranslated into the presentation currency as follows:(i)

assets and liabilities for each balance sheet presented are translated
at the closing rate at the date of that balance sheet;(ii) income and expenses for each income statement are translated ataverage exchange rates (unless this average is not a reasonableapproximation of the cumulative effect of the rates prevailing on thetransaction dates, in which case income and expenses aretranslated at the dates of the transactions); and(iii) all resulting exchange differences are recognised as a separate
component of equity.
On consolidation, exchange differences arising from the translation of
the net investment in foreign entities, and of borrowings and othercurrency instruments designated as hedges of such investments, aretaken to shareholders’ equity.
When a foreign operation is sold, such exchange differences arerecognised in the income statement as part of the gain or loss on sale.

The charge for taxation is based on the profit for the year and takes into
account taxation deferred because of temporary differences between
the treatment of certain items for taxation and for accounting purposes.
Temporary differences arise on differences between the carrying valueof assets and liabilities in the financial statements and their tax baseand primarily relate to the difference between tax allowances ontangible fixed assets and the corresponding depreciation charge, andupon the net pension fund deficit. Full provision is made for the tax
effects of these differences. No provision is made for unremitted
earnings of foreign subsidiaries where there is no commitment to remit
such earnings.
Similarly, no provision is made for temporary differences relating toinvestments in subsidiaries since realisation of such differences can becontrolled and is not probable in the foreseeable future. Deferred tax
assets are recognised, using the balance sheet liability method, to theextent that it is probable that future taxable profit will be available against
which the temporary differences can be utilised.
All taxation is calculated on the basis of the tax rates and laws enacted
or substantively enacted at the balance sheet date.

Income statement presentation
The acquisition of Avanti Polar Lipids, LLC and Fragrance Spanish
Topco, S.L. (Iberchem) in 2020 increased acquisition costs andamortisation of acquired intangible assets. To avoid distorting theunderlying trend in profitability, the Group adopts the definitions‘Adjusted operating profit’, ‘Adjusted profit before tax’ and ‘Adjusted
earnings per share’. In each case amortisation of intangible assets
arising on acquisition and exceptional items, including the respective tax
effect, are excluded. The Group income statement has been produced
in a columnar format to further aid this analysis.
Exceptional items
Exceptional items are those items that in the Directors’ view are required
to be separately disclosed by virtue of their size or incidence to enable afull understanding of the Group’s financial performance. In the current
year exceptional items relate to discount unwind and fair value
adjustment in respect of contingent consideration, a pension curtailment
gain (arising from transfer of the Dutch scheme to a collective defined
contribution arrangement) and acquisition costs and fees incurred in
preparation of the disposal of part of the PTIC business. Exceptional
items in the prior year related to the delivery of cost saving actions
announced in the 2019 full year results, discount unwind in contingent
consideration and acquisition costs. Details can be found in note 3 onpage 133.

Property, plant and equipment
Property, plant and equipment is stated at historical cost lessdepreciation, with the exception of assets acquired as part of a businesscombination. Cost includes the original purchase price of the asset andthe costs attributable to bringing the asset to its working condition for its
intended use. The Group’s policy is to write off the difference between
the cost of all property, plant and equipment, except freehold land, andtheir residual value on a straight-line basis over their estimateduseful lives.

Reviews are made annually of the estimated remaining lives and residual
values of individual productive assets, taking account of commercial andtechnological obsolescence as well as normal wear and tear, andadjustments are made where appropriate. Under this policy it becomes
impractical to calculate average asset lives exactly. However, the total
lives range from approximately 15 to 40 years for land and buildings,
and 3 to 25 years for plant and equipment. All individual assets arereviewed for impairment when there are indications that the carrying
value may not be recoverable. The Group’s ‘plant and equipment’ asset
class predominantly relates to the value of plant and equipment at
the Group’s manufacturing facilities. Consequently, the Group does notseek to analyse out of this class other items such as motor vehicles andoffice equipment.

Impairment of non-financial assets
The Group assesses at each year end whether an asset may be
impaired. If any evidence exists of impairment, the estimatedrecoverable amount is compared to the carrying value of the asset andan impairment loss is recognised where appropriate. The recoverable
amount is the higher of an asset’s value in use and fair value lesscosts to sell. In addition to this, goodwill is tested for impairment at least
annually. Non-financial assets other than goodwill which have sufferedimpairment are reviewed for possible reversal of the impairment at eachreporting date.

LeasesWhen entering into a new contract, the Group assesses whether it is, or
contains, a lease. A lease conveys a right to control the use of an
identified asset for a period of time in exchange for consideration.
The Group recognises a right of use asset and a lease liability at thelease commencement date. The right of use asset is initially measured atcost, and subsequently at cost less any accumulated depreciation andimpairment losses, adjusted for certain remeasurementsof the lease liability.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date and discounted
using the interest rate implicit in the lease or, more typically, the Group’s
incremental borrowing rate (when the implicit rate cannot be readily
determined).
The lease liability is subsequently increased by the interest cost on thelease liability and decreased by lease payments made. It is remeasured
when there is a change in future lease payments arising from a change
in an index or rate, a change in the estimate of the amount expected tobe payable under a residual value guarantee or changes in the Group’s
assessment of whether a purchase, extension or termination option isreasonably certain to be exercised.
The Group adopts recognition exemptions for short-term (less than
12 months) and low value leases and elects not to separate lease
components from any associated fixed non-lease components.
The Group classifies payments of lease liabilities (principal and interest
portions) as part of financing activities. Payments of short-term, lowvalue and variable lease components are classified within operating
activities.

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Financial statements

Taxation

Financial statements (continued)
Group Accounting Policies (continued)

Derivative financial instruments

Borrowings

The Group uses derivative financial instruments where deemed
appropriate to hedge its exposure to interest rates and short-termcurrency rate fluctuations. The Group’s accounting policy is set out below.

Borrowings are recognised initially at fair value, net of transaction costs
incurred. Any difference between the proceeds (net of transaction costs)
and the redemption value is recognised in the income statement overthe period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12
months after the balance sheet date.

Derivative financial instruments are recorded initially at cost. Subsequent
measurement depends on the designation of the instrument as either: (i)a hedge of the fair value of recognised assets or liabilities or a firm
commitment (fair value hedge); or (ii) a hedge of highly probable forecast
transactions (cash flow hedge).
(i) Fair value hedge
Changes in the fair value of derivatives, for example interest rate swaps
and foreign exchange contracts, that are designated and qualify as fairvalue hedges are recorded in the income statement, together with any
changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk.
(ii) Cash flow hedge
The Group designates the spot element of forward foreign exchange
contracts to hedge its currency risk and applies a hedge ratio of 1:1.
The forward elements of the forward exchange contracts are excluded
from the designation of the hedging instrument and are separately
accounted for as a cost of hedging, which is recognised in equity in acost of hedging reserve. The Group’s policy is for the critical terms of
the forward exchange contracts to align with the hedged item.
The Group determines the existence of an economic relationshipbetween the hedging instrument and the hedged item based on thecurrent, amount and timing of the respective cash flows. The Groupassesses whether the derivative designated in each hedging relationshipis expected to be and has been effective in offsetting changes in the
cash flows of the hedged item using the hypothetical derivative method.
In these hedge relationships, the main sources of ineffectiveness arechanges in the time or amount of the hedged transactions.
The effective portion of changes in the fair value of derivatives that aredesignated and qualify as cash flow hedges are recognised in equity.
The gain or loss relating to the ineffective portion is recognised
immediately in the income statement. Amounts accumulated in equity
are recycled in the income statement in the periods when the hedged
item will affect profit or loss (for instance when the forecast sale that ishedged takes place). However, when the forecast transaction that ishedged results in the recognition of a non-financial asset (for example
inventory) or a liability, the gains and losses previously deferred in equity
are transferred from equity and included in the initial measurement of thecost of the asset or liability.
When a hedging instrument expires or is sold, or when a hedge nolonger meets the criteria for hedge accounting, any cumulative gain orloss existing in equity at that time remains in equity and is recognised
when the forecast transaction is ultimately recognised in the income
statement.
When a forecast transaction is no longer expected to occur, thecumulative gain or loss that was reported in equity is immediatelytransferred to the income statement.
Certain derivative instruments do not qualify for hedge accounting.
Changes in the fair value of any derivative instruments that do not qualify
for hedge accounting are recognised immediately in the income
statement.

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Borrowing costs
General and specific borrowing costs directly attributable to theacquisition, construction or production of qualifying assets, which areassets that necessarily take a substantial period of time to get ready for
their intended use or sale, are added to the cost of those assets, until
such time as the assets are substantially ready for their intended use
or sale.

Trade and other payables
Trade and other payables are recognised initially at fair value. With the
exception of contingent consideration and forward foreign exchange
contracts, trade and other payables are subsequently measured atamortised cost using the effective interest method. Contingent
consideration is measured at fair value based on the present value of the
expected future payments, discounted using a risk-adjusted discountrate. Continent consideration is remeasured at fair value at eachreporting date and subsequent changes in fair value and associateddiscount unwind are recognised in the income statement. Forward
foreign exchange contracts are initially recognised at cost andsubsequently measured at fair value on a mark-to-market basis.

Inventories
Inventories are stated at the lower of cost and net realisable amount on
a first in first out basis. Cost comprises all expenditure, including related
production overheads, incurred in the normal course of businessin bringing the inventory to its location and condition at the balance
sheet date. Net realisable amount is the estimated selling price in theordinary course of business less any applicable variable selling costs.
Provision is made for obsolete, slow moving and defective inventory
where appropriate. Profits arising on intra-group sales are eliminated inso far as the product remains in Group inventory at the year end.

Trade and other receivables
Trade and other receivables are recognised initially at fair value andsubsequently measured at amortised cost, using the effective interest
method, less impairment losses. A provision for impairment of tradereceivables is recognised based on lifetime expected losses, but
principally comprises balances where objective evidence exists that theamount will not be collectible. Such amounts are written down to theirestimated recoverable amounts, with the charge being made tooperating expenses.

Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short-term
deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Group’s cash management are included as acomponent of cash and cash equivalents for the purpose of thestatement of cash flows. Cash and bank overdrafts are offset and the
net amount reported in the balance sheet when there is a legally
enforceable right to offset the recognised amounts, there is an intention
to settle on a net basis and interest is charged on a net basis.

Financial statements

Environmental, restructuring and other provisions
The Group is exposed to environmental liabilities relating to its
operations and liabilities following the acquisition of Uniqema. Provisions
are made immediately where a legal obligation is identified, can bequantified and it is regarded as more likely than not that an outflow ofresources will be required to settle the obligation. The Group doesconsider the impact of discounting when establishing provisions andprovisions are discounted when the impact is material and the timing of
cash flows can be estimated with reasonable certainty.

Share capital
Investment in own shares(i) Employee share ownership trusts – shares acquired by the trusteesof the employee share ownership trust (the Trustees), funded by theCompany and held for the continuing benefit of the Company are
shown as a reduction in equity attributable to owners of the parent.
Movements in the year arising from additional purchases by theTrustees of shares or the receipt of funds due to the exercise of
options by employees are accounted for within reserves and shown
as a movement in equity attributable to owners of the parent in theyear. Administration expenses of the trusts are charged
to the Company’s income statement as incurred.
(ii) Treasury shares – where any Group company purchases theCompany’s equity share capital as treasury shares, theconsideration paid, including any directly attributable incremental
costs (net of income taxes), is deducted from equity attributable to
the Company’s equity holders until the shares are cancelled,
reissued or disposed of. Where such shares are subsequently
sold or reissued, any consideration received, net of any directly
attributable incremental transaction costs and the related income
tax effects, is included in equity attributable to the Company’s
equity holders.
Dividends
Dividends on ordinary share capital are recognised as a liability when theliability is irrevocable. Accordingly, final dividends are recognised whenapproved by shareholders and interim dividends
are recognised when paid.

Investments
Investments in equity securities are measured at fair value, withmovements in the fair value being recognised in the income statement or
equity on an instrument by instrument basis. Investments in associates are
initially recorded at cost and subsequently adjusted for the Group’s shareof results. Investments are subject to impairment testing at each balance
sheet date or earlier upon indication of impairment.

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Financial statements (continued)
Notes to the Group Accounts

1. Segmental analysis
The Group’s sales, marketing and research activities are organised into four global market sectors, being Consumer Care, Life Sciences,
Performance Technologies and Industrial Chemicals. These are the segments for which summary management information is presented to
the Group’s Executive Committee, which is deemed to be the Group’s Chief Operating Decision Maker. A review of each sector can be found within
the Strategic Report on pages 24 to 29.
There is no material trade between segments. Segmental results include items directly attributable to a specific segment as well as those that can beallocated on a reasonable basis.

Income statement
Revenue
Consumer Care
Life Sciences
Performance Technologies
Industrial Chemicals
Total Group revenue
Adjusted operating profit
Consumer Care
Life Sciences
Performance Technologies
Industrial Chemicals
Total Group operating profit (before exceptional items and amortisation of intangible assets arising on acquisition)
Exceptional items and amortisation of intangible assets arising on acquisition1
Total Group operating profit

2021
£m

Restated
2020
£m

763.0
572.3
439.5
114.8
1,889.6

527.8
392.5
373.6
96.4
1,390.3

188.5
208.5
64.5
7.1
468.6
(30.4)
438.2

146.5
124.5
48.9
(0.3)
319.6
(29.6)
290.0

1 Relates to Consumer Care £20.5m (2020: £13.5m), Life Sciences £7.5m (2020: £12.2m), Performance Technologies £1.8m (2020: £3.6m) and Industrial Chemicals £0.6m (2020: £0.3m)

As announced in the 2020 Annual Report the Group has revised the composition of its operating segments. Accordingly, the Group has restated thepreviously reported segment information for the year ended 31 December 2020 and aligned this with the information that is regularly presented to
the Group’s Executive Committee.
In the following table, revenue has been disaggregated by sector and destination. This is the primary management information that is presented to
the Group’s Executive Committee.
Europe, Middle
East & Africa
£m

North
America£m

Latin
America
£m

Asia

Total

£m

£m

Revenue 2021
Consumer Care
Life Sciences
Performance Technologies
Industrial Chemicals
Total Group revenue

300.3
266.3
209.8
48.9
825.3

210.9
167.2
102.1
13.0
493.2

68.6
60.9
22.4
2.4
154.3

183.2
77.9
105.2
50.5
416.8

763.0
572.3
439.5
114.8
1,889.6

Revenue 2020 (restated)
Consumer Care
Life Sciences
Performance Technologies
Industrial Chemicals
Total Group revenue

178.1
164.7
177.0
42.6
562.4

172.0
113.2
90.1
11.7
387.0

55.0
54.5
20.1
2.0
131.6

122.7
60.1
86.4
40.1
309.3

527.8
392.5
373.6
96.4
1,390.3

2021£m

Restated
2020
£m

31.7
22.1
19.4
5.8
79.0

24.7
19.9
18.8
4.8
68.2

Depreciation and amortisation (before amortisation of intangible assets arising on acquisition)
Consumer Care
Life Sciences
Performance Technologies
Industrial Chemicals
Total Group

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Annualand Accounts
Annual Report and Accounts 2021

The Group’s revenue from external customers in the UK is £52.3m (2020: £46.2m), in Germany is £196.0m (2020: £104.7m), in China is £161.4m(2020: £105.2m), in the US is £455.3m (2020: £355.4m) and the total revenue from external customers from other countries is £1,024.6m (2020:£778.8m). No single external customer represents more than 4% of the total revenue of the Group. The total of non-current assets other thanfinancial instruments, retirement benefit assets and deferred tax assets located in the UK is £208.2m (2020: £178.9m) and in other countries is£1,290.7m (2020: £1,252.2m). Goodwill has not been split by geography as this asset is not attributable to a geographical area.

2. Operating costs
Analysis of net operating expenses by function:
Distribution costs
Administrative expenses

2021
£m

2020
£m

93.0
407.7
500.7

71.7
270.4
342.1

2021
£m

2020
£m

113.3
–
1.1
411.9
0.8
–
950.7
6.7
58.7
0.8
0.4

81.8
1.4
–
295.5
0.2
1.8
758.2
3.8
38.2
2.1
0.5

2021
£m

2020
£m

(13.5)–
11.2
6.2(11.7)
(4.3)
–
–

(3.3)
0.6
(34.3)(33.7)(1.5)(17.5)(13.6)(31.1)

Additional information on the nature of operating expenses, including depreciation and employee costs, is provided in note 3.

3. Profit for the year
The Group profit for the year is stated after charging:
Depreciation and amortisation (notes 12, 13 & 14)
Impairments (exceptional)
Impairments (non-exceptional)
Staff costs (note 9)
Redundancy costs (non-exceptional)
Redundancy costs (exceptional)
Inventories – cost recognised as expense in cost of sales
Inventories – provision movement in the year
Research and development
Net foreign exchange
Bad debt charge (note 18)

Adjustments:
Exceptional items – operating profit
Business acquisitions and disposal costs
Redundancy, restructuring and impairments
Pension curtailment gain
Fair value movement on contingent consideration
Exceptional items – financial costs
Unwind of discount on contingent consideration
Exceptional items
Amortisation of intangible assets arising on acquisition
Total adjustments

The exceptional items in the current year reflects discount unwind and fair value adjustment both in respect of contingent consideration, a pension
curtailment gain (arising from transfer of the Dutch scheme to a collective defined contribution arrangement) and acquisition costs and fees incurredin preparation of the disposal of part of the PTIC business. Movements in contingent consideration have been presented as exceptional as they are
not directly representative of the underlying business performance in the period, and therefore this presentation provides a meaningful basis to makecomparisons between reporting periods. The pension curtailment gain and business acquisition and disposal costs have been presented as
exceptional due to their size and one-off nature. The exceptional items in the prior year related to the delivery of cost saving actions announced in
the 2019 full year results, discount unwind in contingent consideration and acquisition costs.

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Annual report
Accounts 2021
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Plc
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133
133

Financial statements

The Group manages its business segments on a global basis. The operations are based in the following geographical areas: Europe, with
manufacturing sites in the UK, France, the Netherlands, Italy, Spain, Finland and Denmark; North America, with manufacturing sites in the US;
Latin America, with manufacturing sites in Brazil, Argentina, Colombia and Mexico; Asia, with manufacturing sites in Singapore, Japan, India, China,
Indonesia, Malaysia and Australia; and South Africa and Tunisia.

Financial statements (continued)
Notes to the Group Accounts (continued)

3. Profit for the year continued
Services provided by the Group’s auditors
Audit services
Fees payable to the Group auditors for the audit of Parent Company and consolidated financial statements
Fees payable to the Group auditors and its associates for the audit of the Company’s subsidiaries
Other audit services
Other audit-related assurance services including fees payable in relation to the Group’s interim review

2021
£m

2020
£m

0.2
1.4

0.1
1.4

0.1
1.7

0.1
1.6

2021
£m

2020
£m

–
2.7
7.0
0.3
0.3
0.9
0.8
2.0
0.5
1.6
1.6
0.3
2.5
2.2
2.2
3.3
28.2

0.4
2.7
4.5
0.2
0.3
0.9
0.8
2.0
0.5
1.6
1.7
1.2
–
1.5
1.2
1.5
21.0

(1.5)
26.7

(0.5)
20.5

4. Net financial costs
Financial costs
US$100m 5.94% fixed rate 10 year note
US$100m 3.75% fixed rate 10 year note2019 Club facility due 2026
US$200m 3 year term loan due 2023
€30m 1.08% fixed rate 7 year note
€70m 1.43% fixed rate 10 year note
£30m 2.54% fixed rate 7 year note
£70m 2.80% fixed rate 10 year note
€50m 1.18% fixed rate 8 year note
£65m 2.46% fixed rate 8 year note
US$60m 3.70% fixed rate 10 year note
Net interest on retirement benefit liabilities
Provision against non-operating loan
Interest on lease liabilities
Other bank loans and overdrafts
Unwind of discount on contingent consideration
Financial income
Bank interest receivable and similar income
Net financial costs

134
134

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Annualand Accounts
Crodareport
International
Plc 2021
Annual Report and Accounts 2021

(a) Analysis of tax charge for the year
UK current corporate tax
Overseas current corporate taxes
Current tax
Deferred tax (note 6)(b) Tax on items charged/(credited) to other comprehensive income or equity
Deferred tax on remeasurement of post-retirement benefits (OCI)
Deferred tax on share-based payments (equity)
Deferred tax on provisions (OCI)(c) Factors affecting the tax charge for the year
Profit before tax
Tax at the standard rate of corporation tax in the UK, 19.0% (2020: 19.0%)
Effect of:Tax rate changes
Prior year over-provisions
Tax cost of remitting overseas income to the UK
Expenses and write-offs not deductible for tax purposes
Utilisation of unrecognised tax losses
Net effect of higher overseas tax rates

2021
£m

2020
£m

11.5
95.0
106.5
(17.8)
88.7

13.2
52.1
65.3
2.6
67.9

8.3
(2.4)
(0.2)
5.7

9.7
(0.9)
0.3
9.1

411.5
78.2

269.5
51.2

7.1
(16.3)
2.2
7.3
–
10.2
88.7

(1.5)
(3.2)
1.5
1.8
(1.4)
19.5
67.9

The adjusted effective corporate tax rate before exceptional items of 21.2% (2020: 24.1%) is higher than the UK's standard tax rate of 19.0%. The
reported effective corporate tax rate after exceptional items is 21.6% (2020: 25.2%). This year's tax charge benefitted from a one-off settlement of aprevious uncertain tax position.
Croda operates in many tax jurisdictions other than the UK, both as a manufacturer and distributor, with the majority of those jurisdictions having
rates higher than the UK; considerably so in some cases. It is the exposure to these different tax rates that increases the effective tax rate above the
UK standard rate and also makes it difficult to forecast the Group’s future tax rate with any certainty given the unpredictable nature of exchange
rates, individual economies and tax legislators. Other than the exposure to higher overseas tax rates, there are no significant adjustments between
the Group’s expected and reported tax charge based on its accounting profit. Given the global nature of the Group, and the number of associatedcross-border transactions between connected parties, we are exposed to potential adjustments to the price charged for those transactions by tax
authorities. However, the Group carries appropriate provisions relating to the level of risk.
Legislation to increase the UK standard rate of corporation tax from 19% to 25% was substantively enacted on 24 May 2021, effective from 1 April
2023. The calculation of deferred tax balances in the UK have been revised accordingly. Overseas tax is calculated at the rates prevailing in therespective jurisdictions.

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Annual report
Accounts 2021
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Plc
Annual Report and Accounts 2021

135
135

Financial statements

5. TaxFinancial statements (continued)
Notes to the Group Accounts (continued)

6. Deferred tax
The deferred tax balances included in these accounts are attributable to the following:
Deferred tax assets
Retirement benefit liabilities
Provisions
Gross deferred tax asset
Offset with deferred tax liabilities
Net deferred tax asset
Deferred tax liabilities
Accelerated capital allowances
Revaluation gains
Acquired intangibles
Retirement benefit assets
Other
Gross deferred tax liability
Offset with deferred tax assets
Net deferred tax liability
The movement on deferred tax balances during the year is summarised as follows:
Deferred tax credited/(charged) through the income statement
Continuing operations before adjustments
Adjustments and exceptional items
Deferred tax charged directly to other comprehensive income or equity (note 5(b))
Acquisitions
Exchange differences
Net balance brought forward
Net balance carried forward
Deferred tax (charged)/credited through the income statement relates to the following:
Retirement benefit obligations
Accelerated capital allowances
Provisions
Other

2021
£m

2020
£m

6.1
42.1
48.2
(34.7)
13.5

11.1
25.5
36.6
(22.1)
14.5

97.1
1.9
77.9
8.2
1.0
186.1
(34.7)
151.4

93.1
1.9
82.3
4.1
1.0
182.4
(22.1)
160.3

13.9
3.9
(5.7)
(8.9)
4.7
7.9
(145.8)(137.9)

(3.6)
1.0
(9.1)
(64.8)
1.3(75.2)(70.6)(145.8)

(0.7)
(2.1)
13.9
6.7
17.8

1.5
(10.3)
4.1
2.1
(2.6)

Deferred tax is calculated in full on temporary differences under the balance sheet liability method at rates appropriate to each subsidiary. Deferred
tax expected to reverse in the year to 31 December 2022 and beyond has been measured using the rate due to prevail in the year of reversal.
Deferred tax assets have been recognised in all material cases where such assets arise, as it is probable the assets will be recovered. At
31 December 2021, no deferred tax asset has been recognised in respect of £32.6m of losses across the Group as it is not considered probablethat there will be future taxable profits against which these losses can be offset.
Deferred tax is only recognised on the unremitted earnings of overseas subsidiaries to the extent that remittance is expected in the foreseeable
future. If all earnings were remitted, an additional £9.3m (2020: £6.6m) of tax would be payable.
All movements on deferred tax balances have been recognised in the income statement with the exception of the items shown in note 5(b).
Of the gross deferred tax assets, £10.4m are expected to reverse within 12 months of the balance sheet date. No material reversal of any of thedeferred tax liability is expected within 12 months of the balance sheet date based on the Group’s current capital expenditure programme.

136
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Annualand Accounts
Crodareport
International
Plc 2021
Annual Report and Accounts 2021

2021
£m

2020
£m

348.8
(33.7)
5.7
320.8

228.2
(31.1)
4.5
201.6

Numberm

Number
m

139.5
0.3
139.8

130.0
0.2
130.2

Adjusted profit after tax for the year attributable to owners of the parent
Exceptional items and amortisation of intangible assets
Tax impact of exceptional items and amortisation of intangible assets
Profit after tax for the year attributable to owners of the parent

Weighted average number of 10.61p (2020: 10.61p) ordinary shares in issue for basic calculation
Deemed issue of potentially dilutive shares
Average number of 10.61p (2020: 10.61p) ordinary shares for diluted calculation

Pence

Pence

Basic earnings per share
Adjusted basic earnings per share

230.0
250.0

155.1
175.5

Diluted earnings per share
Adjusted diluted earnings per share

229.5
249.5

154.8
175.3

Basic earnings per share is calculated by dividing the profit after tax attributable to owners of the parent by the weighted average number of ordinary
shares in issue during the year, excluding those shares held in treasury or employee share trusts (note 25). Shares held in employee share trusts aretreated as cancelled because, except for a nominal amount, dividends have been waived.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive
ordinary shares.
Additional earnings per share calculations are included above to give a better indication of the Group’s underlying performance.

8. Dividends
Ordinary
Interim2020 interim, paid October 20202021 interim, paid October 2021
Final
2019 final, paid May 2020
2020 final, paid June 2021
Preference (paid June and December)

Pence per
share

2021
£m

Pence per
share

2020
£m

–
43.5

–
60.6

39.5
–

50.8
–

–
51.5
95.0

–
71.8
132.4
0.1
132.5

50.5
–
90.0

65.0
–
115.8
0.1
115.9

The Directors are recommending a final dividend of 56.5p per share, amounting to a total of £78.8m, in respect of the financial year ended
31 December 2021.
Subject to shareholder approval, the dividend will be paid on 6 June 2022 to shareholders registered on 6 May 2022 and has not been accrued inthese financial statements. The total dividend for the year ended 31 December 2021 will be 100.0p per share amounting to a total of £139.4m.

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Annual report
Accounts 2021
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Plc
Annual Report and Accounts 2021

137
137

Financial statements

7. Earnings per share

Financial statements (continued)
Notes to the Group Accounts (continued)

9. Employees
Group employment costs including Directors
Wages and salaries
Share-based payment charges (note 23)
Social security costs
Post-retirement benefit costs
Redundancy costs

Average employee numbers by function
Production
Selling and distribution
Administration

2021
£m

2020
£m

288.0
41.3
49.7
32.9
0.8
412.7

215.7
13.6
36.6
29.6
2.0
297.5

2021
Number

2020
Number

3,766
1,342
929
6,037

3,044
1,189
689
4,922

As required by the Companies Act 2006, the figures disclosed above are the weighted averages based on the number of employees including
Executive Directors. At 31 December 2021, the Group had 6,135 (2020: 5,684) employees in total.

10. Directors’ and key management compensation
Detailed information concerning Directors’ remuneration, interests and options is shown in section D of the Directors’ Remuneration Report,
which is subject to audit, on pages 97 to 105 forming part of the Annual Report and Accounts.
Aggregate compensation for key management, being the Directors and members of the Group Executive Committee, was as follows:

Key management compensation including Directors
Short-term employee benefits
Post-retirement benefit costs
Share-based payment charge

138
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Annualand Accounts
Crodareport
International
Plc 2021
Annual Report and Accounts 2021

2021
£m

2020
£m

8.1
0.1
6.6
14.8

4.8
0.1
1.2
6.1

The table below summarises the Group’s net year end post-retirement benefits balance sheet positions and activity for the year.

Balance sheet:
Retirement benefit assets
Retirement benefit liabilities
Net asset/(liability) in Group balance sheet
Net balance sheet assets/(liabilities) for:
Defined pension benefits
Post-employment medical benefits

Income statement charge included in profit before tax for:
Defined pension benefits
Post-employment medical benefits

Remeasurements included in other comprehensive income for:
Defined pension benefits
Post-employment medical benefits

2021
£m

2020
£m

35.3
(27.4)
7.9

17.6(49.9)(32.3)

21.4(13.5)
7.9(17.2)(15.1)(32.3)

13.5
0.7
14.2

23.9
0.8
24.7

(38.5)(2.1)(40.6)(52.5)
1.2(51.3)

Defined benefit pension schemes
The Group operates defined benefit pension schemes in the UK, US, Netherlands and several other territories under broadly similar regulatory
frameworks. All of the Group’s final salary type pension schemes (which provide benefits to members in the form of a guaranteed level of pension
payable for life based on salary in the final years leading up to retirement) are closed to future service accrual with the exception of a small number of‘grandfathered’ employees in the US scheme.
The UK scheme operated on a final salary basis until 5 April 2016, following which the scheme changed to a Career Average Revalued Earnings(CARE) defined benefit scheme, with annual pensionable earnings capped and pensions in payment indexed based on CPI (previously RPI) for
service accrued from 6 April 2016. This change is expected to reduce the future comparable cost and risk attached to the UK scheme. The US
scheme operates a cash balance pension scheme that provides a guaranteed rate of return on pension contributions until retirement (other than for‘grandfathered’ employees). From 1 October 2017 the US scheme was closed to new joiners, who will receive defined contribution benefits. The USplans also do not generally receive inflationary increases once in payment. With the exception of this difference in inflationary risk, the Group’s main
defined benefit pension schemes continue to face materially similar risks, as described on pages 142 and 143.
The majority of benefit payments are from trustee administered funds; however, there are also a number of unfunded plans where the relevant Group
company meets the benefit payment obligation as it falls due.
Plan assets held in trusts are governed by local regulations and practice in each country, as is the nature of the relationship between the Group andthe trustees (or equivalent) and their composition. Responsibility for governance of the schemes, including investment decisions and contribution
schedules, predominantly lies with the particular scheme’s board of trustees with appropriate input from the relevant Group company. The board oftrustees must be composed of representatives in accordance with each scheme’s regulations and any relevant legislation.
During the period the Group's primary Netherlands scheme was converted into a collective defined contribution scheme for both past and futureservice, as allowed under local regulations and as agreed with the representative trade unions. This change resulted in the settlement of the defined
benefit scheme's assets and liabilities and a corresponding curtailment gain of £11.2m on cessation of defined benefit accrual, which has beenrecognised in the Group income statement. All parties had formally agreed to the settlement by 30 November 2021, therefore the settlement
accounting is based on the valuation of the scheme assets and liabilities at this date. Under the new scheme, employer contributions have been
fixed for the next two years initially, and the level thereafter will be subject to agreement with employees and the trade unions. The employer is not
exposed to demographic and financial risks, as the benefits provided will be those that can be afforded by the scheme only, without recourse to theemployer, therefore this scheme is accounted for as a defined contribution scheme.

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Annual report
Accounts 2021
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Plc
Annual Report and Accounts 2021

139
139

Financial statements

11. Post-retirement benefits

Financial statements (continued)
Notes to the Group Accounts (continued)

11. Post-retirement benefits continued
The amounts recognised in the balance sheet in respect of these schemes are as follows:
Present value of funded obligations
UK pension scheme
US pension scheme
Netherlands pension scheme
Rest of world
Fair value of schemes’ assets
UK pension scheme
US pension scheme
Netherlands pension scheme
Rest of world
Net asset/(liability) in respect of funded schemes
Present value of unfunded obligations
Net asset/(liability) in Group balance sheet (excluding post-employment medical benefits)

Movement in present value of retirement benefit obligations in the year:
Opening balance
Current service cost
Past service cost – curtailments
Settlements
Acquisitions
Interest costRemeasurements
Change in demographic assumptions
Change in financial assumptions
Experience losses/(gains)
Contributions paid in
Employee
Benefits paid
Exchange differences on overseas schemes
Movement in fair value of schemes’ assets in the year:
Opening balance
Interest income
Remeasurements
Return on scheme assets, excluding amounts included in financial expenses
Contributions paid in
Employee
Employer
Settlements
Benefits paid out
Exchange differences on overseas schemes

2021
£m

2020
£m

(1,162.6)(126.8)–(19.6)(1,309.0)(1,178.5)(133.9)(212.3)(19.7)(1,544.4)

1,178.3
145.4
–
16.4
1,340.1
31.1
(9.7)
21.4

1,163.7
150.4
205.7
17.0
1,536.8(7.6)(9.6)(17.2)

2021
£m

2020
£m

1,554.0
24.7(11.2)(207.1)0.9
20.1

1,451.7
23.1
–
–
–
27.3

8.2
(46.7)
26.9(56.4)
149.3
(1.9)

3.0
(46.8)(7.3)
1,318.7

2.9(46.2)
4.2
1,554.0

1,536.8
20.1

1,390.8
26.5

26.9

143.5

3.0
13.6
(207.1)(46.8)(6.4)
1,340.1

2.9
15.4–(46.2)
3.9
1,536.8

As at the balance sheet date, the present value of retirement benefit obligations comprised approximately £351m in respect of active employees,£367m in respect of deferred members and £601m in relation to members in retirement.
Total employer contributions to the schemes in 2022 are expected to be £10.7m.

140
140

Croda International Plc
Annualand Accounts
Crodareport
International
Plc 2021
Annual Report and Accounts 2021

Discount rate
Inflation rate – RPI
Inflation rate – CPI
Rate of increase in salaries
Rate of increase for pensions in payment
Duration of liabilities (i.e. life expectancy) (years)
Remaining working life

2021
UK

2021
2021
US Netherlands*

2020
UK

2020
US

2020
Netherlands

1.8%
3.2%
2.8%
4.8%
3.1%
18.9
9.6

2.8%
2.5%
n/a
3.5%
n/a
11.0
10.6

1.3%
2.8%
2.4%
4.4%
2.7%
19.6
9.6

2.4%
2.5%
n/a
3.5%
n/a
11.2
10.6

0.8%
1.8%
n/a
2.4%
1.3%
22.3
12.4

1.1%
2.0%
n/a
2.4%
1.8%
n/a
n/a

* Actuarial assumptions as at the settlement date

Mortality assumptions are based on country-specific mortality tables and where appropriate allow for future improvements in life expectancy. Where
credible data exists, actual plan experience is taken into account. No adjustments have been made to mortality assumptions as at 31 December
2021 to reflect the potential effects of COVID-19 as the actual plan experience is not yet available and as it is too soon to make a judgement on theimpact of the pandemic on future mortality improvements. The mortality experience analysis for the scheme will be carried out in the future as part ofthe 30 September 2023 funding valuation for the UK Croda Pension Scheme. Applying the mortality tables adopted, the expected future average
lifetime of members currently at age 65 and members at age 65 in 20 years' time is as follows:
UK

Male
Female20.1
23.3

Current age 65
US
Netherlands

20.9
22.8

21.1
25.0

UK

US

Age 65 in
20 years
Netherlands

21.4
24.7

22.1
23.9

22.6
26.4

The sensitivity of the defined benefit obligation to changes in the significant assumptions is as follows:
Impact on retirement benefit obligation
Sensitivity
Of increase
Of decrease

Discount rate
Inflation rate
Mortality (assumes a one-year change in life expectancy)

0.5%
0.5%
1 year

-8.5%
6.5%
4.9%

9.7%
-6.0%
-4.8%

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely tooccur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant
actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the endof the reporting year) has been applied as when calculating the retirement benefit obligation recognised in the Group balance sheet. The weighted
average duration of the defined benefit obligation is 18.1 years (2020: 19.2 years).
The assets in the schemes comprised:
QuotedEquities
Government bonds
Corporate bonds
Other quoted securities
Unquoted
Cash and cash equivalents
Real estate (pooled investment vehicles)
Derivatives
Other

2021
£m

2021
%

2020
£m

2020
%

188.2
590.8
70.6
28.7

14%
44%
5%
2%

277.9
674.0
124.2
31.3

18%
44%
8%
2%

73.1
61.6
10.0
317.1
1,340.1

5%
5%
1%
24%
100%

77.5
56.7
6.4
288.8
1,536.8

5%
4%
0%
19%
100%

Derivatives presented above represent the scheme’s net position on Government bond repurchase agreements and other swap contracts (valued
on a mark-to-market basis) which form part of the scheme’s liability driven investment (LDI) portfolio. The non-derivative assets in the LDI portfolio
have been presented in the relevant asset category. Other investments include; a fund of hedge funds, which consists of a fund of multiple
investment managers across both traditional markets such as equities and credit and also more specialist diversified strategies; infrastructure type
investments that hold assets linked to the value and income from UK and overseas infrastructure.

Croda International Plc
Annual report
Accounts 2021
CrodaandInternational
Plc
Annual Report and Accounts 2021

141
141

Financial statements

The actuarial assumptions were as follows:Financial statements (continued)
Notes to the Group Accounts (continued)

11. Post-retirement benefits continued
Post-employment medical benefits
The Group operates an unfunded post-employment medical benefit scheme in the US. The method of accounting, significant assumptions and thefrequency of valuations are similar to those used for defined benefit pension schemes set out above with the addition of actuarial assumptions
relating to the long-term increase in health care costs of 5.0% a year (2020: 5.0%).
The amounts recognised in the balance sheet in respect of this scheme are as follows:
Present value of unfunded obligations
US scheme

Movement in present value of retirement benefit obligations in the year:
Opening balance
Current service cost
Interest costRemeasurements – change in demographic assumptions
Remeasurements – change in financial assumptions
Remeasurements – experience gains
Benefits paid
Exchange differences on overseas schemes

2021
£m

2020
£m

13.5

15.1

2021
£m

2020
£m

15.1
0.4
0.3
–
(1.2)
(0.9)
(0.3)
0.1
13.5

14.1
0.4
0.4
(0.2)
1.7
(0.3)
(0.4)
(0.6)
15.1

Pension and medical benefits – risks and volatility
Through its defined benefit pension schemes and post-employment medical schemes, the Group is exposed to a number of risks, the mostsignificant of which are detailed below:
Asset volatility
The schemes’ liabilities are calculated using a discount rate set with reference to corporate bond yields; if scheme assets underperform this yield, a
deficit will be created. The schemes hold a significant proportion of equities, which are expected to outperform corporate bonds in the long term
while providing volatility and risk in the short term. As the schemes mature, the Group intends to reduce the level of investment risk by investing
more in assets that better match the liabilities. However, the Group and the pension trustees (Trustees) believe that due to the long term nature of
the scheme liabilities and the strength of the supporting Group, a level of continuing equity investment is an appropriate element of the Group’s longterm strategy to manage the schemes efficiently. See below for more details on the Group’s asset-liability matching strategy.
Changes in bond yields
A decrease in corporate bond yields will increase scheme liabilities, although this will be partially offset by an increase in the value of the schemes’bond holdings.
Inflation risk
Some of the Group’s pension obligations are linked to inflation, and higher inflation will lead to higher liabilities. However, the level of inflationary
increases are usually capped to protect the scheme against extreme inflation. The majority of the schemes’ assets are either unaffected by inflationin the case of fixed interest bonds or loosely correlated in the case of equities, meaning that an increase in inflation will thus increase the deficit. In
the US schemes, the pensions in payment are not linked to inflation, so this is a less material risk.
Life expectancy
The majority of the schemes’ obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increasein the schemes’ liabilities. This is particularly significant in the UK scheme, where inflationary increases result in higher sensitivity to changes in life
expectancy. In the case of the funded schemes, the Group ensures that the investment positions are managed within an asset-liability matching(ALM) framework that has been developed to achieve long-term investments that are cognisant of the obligations under the pension schemes.
Within this framework, the Group’s ALM objective is to match a portion of assets to the pension obligations by investing in long-term fixed interest
securities with maturities that match the benefit payments as they fall due and in the appropriate currency. The Group and Trustees actively monitor
how the duration and the expected yield of the investments are matching the expected cash outflows arising from the pension obligations. The
Group has not changed the processes used to manage its risks from previous years.
Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. A
significant portion of assets in 2021 consists of equities and bonds, although the schemes also invest in property, cash and infrastructure funds.
The Group believes that equities offer the best returns over the long term with an acceptable level of risk. The UK scheme makes use of a portfolio
of derivative instruments to mitigate interest rate and inflation risk.
The latest triennial valuation of the UK scheme was completed as at 30 September 2020. As a result, no deficit funding payments to this scheme are
required prior to completion of the next triennial valuation (as at 30 September 2023). The funding review of our US scheme is undertaken annually.
As at 1 December 2020 the scheme was 142.8% funded.

142
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Pension benefits
Post-employment medical benefits

Less thana year£m

Between
1–2 years£m

Between
2–5 years£m

Beyond5 years
£m

Total
£m

40.4
0.5
40.9

40.7
0.5
41.2

133.5
1.6
135.1

1,104.1
10.9
1,115.0

1,318.7
13.5
1,332.2

2021
£m

2020
£m

7.8

6.1

Defined contribution schemes
Contributions paid charged to operating profit

12. Intangible assets
Goodwill£m

Software£m

Technology
processes£m

Customer
relationships£mTrade names
and brands
£m

Other
intangibles
£m

Total
£m

Cost
At 1 January 2020
Exchange differences
Additions
Acquisitions
Reclassifications
At 31 December 2020

348.5
3.1
–
515.1
–
866.7

29.5
(0.1)
5.3
0.8
0.2
35.7

61.7
1.8
–
90.8
–
154.3

36.1
(1.0)
–
183.5
–
218.6

6.8
(0.3)
0.1
82.8
–
89.4

2.9
(0.2)
0.9
0.3
–
3.9

485.5
3.3
6.3
873.3
0.2
1,368.6

At 1 January 2021
Exchange differences
Additions
Acquisitions
Disposals and write-offs
Reclassifications
At 31 December 2021

866.7
(34.7)
–
20.0
–
–
852.0

35.7
(0.7)
5.5
0.2
(4.0)
(0.3)
36.4

154.3
(7.6)
–
6.0
–
(0.1)
152.6

218.6
(10.2)
–
18.0
–
–
226.4

89.4
(4.5)
–
4.2
–
–
89.1

3.9
(0.1)
0.2
–
–
0.9
4.9

1,368.6(57.8)
5.7
48.4
(4.0)
0.5
1,361.4

Accumulated amortisation
At 1 January 2020
Exchange differences
Charge for the year (note 3)
Reclassifications
At 31 December 2020

–
–
–
–
–

17.5
0.1
2.0
–
19.6

13.6
0.7
7.8
0.1
22.2

6.4
0.1
4.4
–
10.9

1.3
0.1
1.2
–
2.6

1.4
–
0.3
(0.1)
1.6

40.2
1.0
15.7
–
56.9

At 1 January 2021
Exchange differences
Charge for the year (note 3)
Disposals and write-offs
Reclassifications
At 31 December 2021

–
–
–
–
–
–

19.6
(0.8)
2.7
(0.9)
(0.2)
20.4

22.2
(1.6)
15.8
–
–
36.4

10.9
(0.7)
12.9
–
–
23.1

2.6
(0.1)
5.0
–
–
7.5

1.6
–
0.6
–
0.2
2.4

56.9
(3.2)
37.0
(0.9)
–
89.8

852.0
866.7
348.5

16.0
16.1
12.0

116.2
132.1
48.1

203.3
207.7
29.7

81.6
86.8
5.5

2.5
2.3
1.5

1,271.6
1,311.7
445.3

Net carrying amountAt 31 December 2021
At 31 December 2020
At 1 January 2020

Intangible asset amortisation is recorded in operating costs within the income statement on page 120.

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Financial statements

The expected distribution of the timing of discounted benefit payments is as follows:Financial statements (continued)
Notes to the Group Accounts (continued)

12. Intangible assets continued
Impairment testing for CGUs containing goodwill
The Group’s goodwill balance predominantly relates to the value of commercial and other synergies arising from the combination of acquired
businesses with Croda’s established global sales, marketing and R&D networks. This goodwill is allocated to the Group’s Cash Generating Units(CGUs) expected to benefit from that combination based on the smallest identifiable group of assets that generate independent cash inflows.
As discussed in the accounting policies note on page 127, goodwill is tested at each year end for impairment with reference to the relevant CGU's
recoverable amount compared to the unit's carrying value including goodwill. Assets are grouped at the lowest level for which there are separately
identifiable cash flows relevant to the acquisition generating the goodwill. The recoverable amount is based on the higher of fair value less cost to selland value in use calculations using discounted cash flow projections with the following key assumptions:• Terminal value growth rates – set for each CGU with reference to the long-term growth rate for the market and territory in which the CGU operates• Discount rate – set using a weighted average cost of capital adjusted for the specific risk profile of each CGU• Cash flow projections – based on key assumptions including revenue growth, operating margins and forecast period.
The carrying amount of goodwill is allocated to CGUs as follows:
2021

Consumer Care
Life Sciences
Performance Technologies
Industrial Chemicals

Standalone
CGUs£m

Allocated
goodwill
£m

385.4
151.2
24.3
6.6
567.5

210.6
69.5
4.4
–
284.5

2020

Standalone
Total
CGUs
£m
£m

596.0
220.7
28.7
6.6
852.0

390.4
156.6
24.3
6.4
577.7

Allocated
goodwill
£m

Total
£m

214.7
69.8
4.5
–
289.0

605.1
226.4
28.8
6.4
866.7

The allocated goodwill primarily relates to £59m (2020: £63m) associated with the 2020 acquisition of Iberchem as it relates to revenue synergies
with Croda’s existing Consumer Care business and £192m (2020: £192m) associated with the 2006 acquisition of Uniqema (with all other balancesindividually less than £10m). Due to the geographical and operational scale of the Uniqema acquisition, this goodwill balance is tested for impairment
at an operating segment level. Standalone CGUs operate independently of the Group’s core regional operating assets, are capable of generatinglargely independent cash inflows and are therefore annually tested separately for impairment.
For impairment testing performed at an operating segment level, cash flow projections are based on the Group's current year results and a growthrate of 3% (an appropriate view based on past experience reflecting the market and territories in which the Group operates), discounted using aweighted average cost of capital, which for these purposes has been calculated to be approximately 8.5% pre-tax (2020: 8.3%). No reasonably
possible changes in key assumptions would cause the recoverable amount of the operating segments to be less than their carrying value. Based on
the testing performed, no impairment has been recognised for the year ended 31 December 2021.
Standalone CGUs
The carrying amount of goodwill is allocated to Standalone CGUs as follows:

Incotec
Biosector
Sipo
Ionphase
Rewitec
Avanti
Iberchem – Fragrances
Iberchem – Flavours
Alban Muller
Parfex144
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2021
£m

2020
£m

67.6
24.6
22.1
6.5
2.3
59.0
242.2
123.6
6.3
13.3
567.5

72.1
26.2
21.3
7.0
2.4
58.3
258.5
131.9
–
–
577.7

Incotec
Biosector
Avanti
Iberchem – Fragrances
Iberchem – Flavours

2021

Terminal value
growth rate
2020

2021

Pre-tax
discount rate
2020

3.0%
3.0%
3.0%
3.0%
3.0%

3.0%
3.0%
n/a
n/a
n/a

8.9%
11.9%
11.0%
10.5%
10.4%

8.5%
11.0%
n/a
n/a
n/a

Based on the annual impairment testing performed, no impairment has been recognised for the year ended 31 December 2021, and all Standalone
CGUs remain on track to perform to our long-term expectations. In forming this conclusion, the Directors have reviewed sensitivity analysis which
considered all reasonably possible downsides on key assumptions, both individually and in combination, and considered whether these would giverise to an impairment. This analysis concluded that no reasonably possible changes in key assumptions would cause the recoverable amount of theStandalone CGUs to be less than the carrying value, other than for the Iberchem CGUs.
For the Iberchem CGUs, the assumptions underpinning the cash flow projections used in the value in use calculation reflect delivery of theacquisition business plan, which the business remains on track to achieve in the medium to long term. These projections use an appropriate view ofpast experience, specifically that operating margins will improve and sales growth targets will be achieved resulting in approximately 10% compound
average growth rates ('CAGR') at a sales level and operating profit level over the period. The estimated recoverable amount of the CGUs exceeded
their carrying value by approximately £27m (Fragrances: £17m, Flavours: £10m) and therefore the Directors concluded that no impairment was
required; however, the calculations are sensitive to changes in key assumptions. The key assumptions considered by the Directors, where areasonably possible change could give rise to an impairment, were the projection period operating profit CAGR, terminal value growth rate anddiscount rate. If the Fragrances/Flavours operating profit CAGR assumptions were reduced by 0.4%/0.6% or the pre-tax discount rates increased
by 0.2%/0.3%, then the CGUs' recoverable amount would be reduced to a level comparable with the carrying value. A 1% decrease in the terminal
value growth rate, which, although not management's current expectation, is considered to be reasonably possible, would lead to an impairment
charge of £45m (Fragrances: £32m, Flavours: £13m).
Goodwill arising in the year was assessed for impairment with reference to the consideration paid and no impairment has been recognised. This
goodwill will be subject to the same annual review process commencing the year after initial recognition. Parfex goodwill will be tested alongside the
Iberchem – Fragrances CGU in line with the level at which goodwill is monitored.

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Financial statements

For impairment testing performed at a Standalone CGU level, the recoverable amount for Sipo, Ionphase and Rewitec CGUs was based on fair valueless cost to sell as they form part of the Performance Technologies and Industrial Chemicals business disposal. For other Standalone CGUs therecoverable amount was based on value in use calculations. Incotec and Avanti cash flow projections have been based on specific estimates for five
years, with Biosector and Iberchem CGUs using 10-year projections to better reflect the industry and territory in which they operate and the period
through to when they are expected to reach a steady state of operation. Unless otherwise stated, these cash flow projections assume an
appropriate view of past experience, specifically that the market share will not change significantly and that gross and operating margins will remainbroadly constant. The terminal value growth rates and discount rates applied in these CGU level calculations are set out below:

Financial statements (continued)
Notes to the Group Accounts (continued)

13. Property, plant and equipment
Land andbuildings£mPlant andequipment
£m

Total
£m

Cost
At 1 January 2020
Exchange differences
Additions
Acquisitions
Other disposals and write-offs
Reclassifications to intangible assets
At 31 December 2020

198.6
(0.6)
20.2
32.5
(0.1)
6.3
256.9

1,107.8(11.5)
94.8
18.4
(3.3)
(6.5)
1,199.7

1,306.4(12.1)
115.0
50.9
(3.4)
(0.2)
1,456.6

At 1 January 2021
Exchange differences
Additions
Acquisitions
Other disposals and write-offs
Reclassifications to intangible assets
At 31 December 2021

256.9
(6.9)
40.2
9.9
(0.6)
(2.6)
296.9

1,199.7(24.6)
112.8
3.1
(8.8)
2.1
1,284.3

1,456.6(31.5)
153.0
13.0
(9.4)
(0.5)
1,581.2

Accumulated depreciation and impairment losses
At 1 January 2020
Exchange differences
Charge for the year (note 3)
Other disposals and write-offs
Reclassifications
Impairments
At 31 December 2020

76.0
0.5
6.9
(0.1)
(0.1)
0.7
83.9

425.2
0.5
48.6
(2.9)
0.1
0.4
471.9

501.2
1.0
55.5
(3.0)
–
1.1
555.8

At 1 January 2021
Exchange differences
Charge for the year (note 3)
Other disposals and write-offs
Reclassifications
At 31 December 2021

83.9
(3.1)
8.5
(0.6)
(0.9)
87.8

471.9
(16.0)
54.6
(6.1)
0.9
505.3

555.8
(19.1)
63.1
(6.7)
–
593.1

Net book amountAt 31 December 2021
At 31 December 2020
At 1 January 2020

209.1
173.0
122.6

779.0
727.8
682.6

988.1
900.8
805.2

2021
£m

2020
£m

42.8
178.6
221.4

16.9
153.7
170.6

The value of assets under construction not yet subject to depreciation at 31 December was as follows:

Assets under construction
Land and buildings
Plant and equipment

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Right of use assets
Land andbuildings£mPlant andequipment
£m

Total
£m

Cost
At 1 January 2020
Exchange differences
AdditionsRemeasurements
Acquisitions
Other disposals and write-offs
At 31 December 2020

48.4
(2.0)
42.6
0.2
2.4
(0.5)
91.1

9.3
(0.3)
1.2
0.2
0.1
(0.5)
10.0

57.7
(2.3)
43.8
0.4
2.5
(1.0)
101.1

At 1 January 2021
Exchange differences
AdditionsRemeasurements
Acquisitions
Other disposals and write-offs
At 31 December 2021

91.1
(0.9)
10.1
3.4
0.8
(2.8)
101.7

10.0
(0.4)
7.6
0.1
0.5
(0.6)
17.2

101.1
(1.3)
17.7
3.5
1.3
(3.4)
118.9

Accumulated depreciation and impairment losses
At 1 January 2020
Exchange differences
Charge for the year (note 3)
Other disposals and write-offs
Impairments
At 31 December 2020

9.1
(0.5)
9.0
(0.4)
0.3
17.5

2.4
(0.1)
1.6
(0.4)
–
3.5

11.5
(0.6)
10.6
(0.8)
0.3
21.0

At 1 January 2021
Exchange differences
Charge for the year (note 3)
Other disposals and write-offs
At 31 December 2021

17.5
(0.2)
10.9
(2.3)
25.9

3.5
(0.2)
2.3
(0.5)
5.1

21.0
(0.4)
13.2
(2.8)
31.0

Net book amountAt 31 December 2021
At 31 December 2020
At 1 January 2020

75.8
73.6
39.3

12.1
6.5
6.9

87.9
80.1
46.2

2021
£m

2020
£m

12.2
78.3
90.5

10.7
71.0
81.7

Lease liabilities
Lease liabilities included in the Group balance sheet
Current
Non-current

A maturity analysis of contractual undiscounted cash flows relating to lease liabilities is presented within note 20.
In addition to the lease liabilities recognised at 31 December 2021 the Group has committed to new lease contracts, commencing in 2022, with a
total discounted value of £0.8m.

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147

Financial statements

14. Leases

Financial statements (continued)
Notes to the Group Accounts (continued)

14. Leases continued
Amounts recognised in the Group income statement
Interest on lease liabilities
Expenses relating to short-term leases
Expenses relating to low value leases, excluding short-term leases of low value assets
Expenses relating to variable lease components
Depreciation of right of use assets
Impairment of right of use assets
Profit on disposal of right of use assets

2021
£m

2020
£m

2.2
0.3
0.6
0.5
13.2
–
(0.1)
16.7

1.5
0.5
0.1
0.4
10.6
0.3
(0.1)
13.3

2021
£m

2020
£m

14.4
1.4
15.8

7.6
1.0
8.6

2021
£m

2020
£m

19.3
0.8

41.1
1.8

106.4
3.7
130.2

72.3
3.6
118.8

2021
£m

2020
£m

–
3.3
3.3

1.8
3.4
5.2

Total cash outflow for leases
Payment of lease liabilities
Payment of short-term, low value and variable lease components

15. Future commitments
Group capital projects
At 31 December the Directors had authorised the following expenditure on capital projects:
Contracted, but not provided for
Property, plant and equipment
Intangible assets
Authorised, but not contracted for
Property, plant and equipment
Intangible assets

16. Investments
The amounts recognised in the balance sheet are as follows:

Associate
Other investments

During the year, the Group impaired the carrying value of its minority shareholding in Cutitronics Limited resulting in a charge to the income
statement of £1.1m. There have been no material changes in other investments during the year. All assets recognised as other investments on theGroup balance sheet are non-quoted equity securities measured at fair value.
The amounts recognised within administrative expenses in the income statement are as follows:

Share of loss of associate
Impairment of associate

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2021
£m

2020
£m

0.7
1.1
1.8

1.1
–
1.1

Raw materials
Work in progress
Finished goods

2021
£m

2020
£m

121.8
56.0
265.2
443.0

63.9
39.8
198.9
302.6

2021
£m

2020
£m

280.3
(2.9)
277.4
45.9
14.6
337.9

241.0
(2.5)
238.5
41.6
9.8
289.9

2021
£m

2020
£m

39.1
6.3
1.1
46.5

29.5
5.2
4.4
39.1

The Group consumed £950.7m (2020: £758.2m) of inventories during the year.

18. Trade and other receivables
Amounts falling due within one year
Trade receivables
Less: provision for impairment of receivables
Trade receivables – net
Other receivables
Prepayments

The ageing of the Group’s year end overdue receivables against which no provision has been made is as follows:

Not impaired
Less than three months
Three to six months
Over six months

The provision for impairment of receivables principally relates to customers in unexpectedly difficult economic circumstances. The overdue receivables
against which no provision has been made relate to a number of customers for whom there is no recent history of default, nor any other indication that
settlement will not be forthcoming. The other classes within trade and other receivables do not contain impaired assets and are considered to be fully
recoverable. Overall, the impact from COVID-19 on the Group's provision for impairment of trade receivables has been immaterial.
The carrying amounts of the Group’s receivables are denominated in the following currencies:

Sterling
US Dollar
Euro
Other

2021
£m

2020
£m

17.2
112.0
106.4
102.3
337.9

11.9
75.5
105.4
97.1
289.9

2021
£m

2020
£m

2.5
0.4
–
2.9

2.2
0.5
(0.2)
2.5

Movements on the Group’s provision for impairment of trade receivables are as follows:

At 1 January
Charged to income statement
Net write-off of uncollectible receivables
At 31 December
Amounts charged to the income statement are included within administrative expenses.

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149

Financial statements

17. Inventories

Financial statements (continued)
Notes to the Group Accounts (continued)

19. Trade and other payables
Trade payables
Taxation and social security
Other payables
Accruals and deferred income
Contingent consideration

2021
£m

2020
£m

133.2
15.7
62.8
132.5
26.1
370.3

97.8
10.3
37.6
83.8
38.1
267.6

All trade payables are payable within one year. Included in the above are balances payable after one year of £8.5m (2020: £26.1m) contingent
consideration and £3.8m (2020: £1.0m) other payables. During the period, contingent consideration has decreased by £6.2m due to fair value
movements and £9.2m due to payments, increasing by £3.3m for the unwind of discounting and £0.1m for foreign exchange. Fair value movementsin the year reflect the latest estimate of future revenue forecasts for applicable products. As at 31 December 2021, the undiscounted fair value ofcontingent consideration in respect of the Avanti acquisition was £26.9m, capped at a maximum remaining amount of £35.2m.

20. Borrowings, other financial liabilities and other financial assets
This note should be read in conjunction with the further liquidity disclosures in our accounting policies note and the Finance Review on pages 46 to 49.

AssetsNon-current assets – Investments
Current assets – Trade and other receivables (excluding prepayments)
Current liabilities
Trade and other payables (excluding taxation, social security, contingent consideration, accruals and deferred income)
US$200m 3 year term loan due 2023
Unsecured bank loans and overdrafts due within one year or on demand
Other loans
Lease liabilities
Non-current liabilities
2019 Club facility due 2026
US$200m 3 year term loan due 2023
US$100m 3.75% fixed rate 10 year note
€30m 1.08% fixed rate 7 year note
€70m 1.43% fixed rate 10 year note
£30m 2.54% fixed rate 7 year note
£70m 2.80% fixed rate 10 year note
€50m 1.18% fixed rate 8 year note
£65m 2.46% fixed rate 8 year note
US$60m 3.70% fixed rate 10 year note
Other secured bank loans
Other unsecured bank loans
Lease liabilities

2021
£m

2020
£m

3.3
323.3
326.6

5.2
280.1
285.3

192.2
14.5
21.9
14.5
12.2
255.3

134.4
7.0
30.8
11.3
10.7
194.2

262.2
110.9
74.1
25.2
58.7
30.0
70.0
41.9
65.0
44.5
9.8
2.3
78.3
872.9

218.1
138.5
73.2
26.9
62.7
30.0
70.0
44.8
65.0
43.9
1.8
1.3
71.0
847.2

During October 2021, the Group extended the existing 2019 Club facility by a further year, resetting its five-year term and resulting in a maturity dateof October 2026. Interest is charged on this agreement at a floating rate based on ICE GBP LIBOR, ICE LIBOR or EURIBOR, depending upon thedrawdown currency, plus a variable margin. Due to the cessation of ICE GBP LIBOR at the end of 2021, the Group updated the existing 2019 Club
facility to include SONIA (Risk Free Rate) for GBP based borrowings. Until 31 December 2021, GBP borrowings were drawn using ICE GBP LIBOR.
In July 2020 the Group arranged a three-year amortising Term Loan for US$200m. Interest is charged on this agreement at a floating rate based on
ICE LIBOR plus a variable margin. The margin the Group pays on this borrowing over and above standard rates is determined by the Group's net
debt to EBITDA ratio.

150
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Plc 2021
Annual Report and Accounts 2021

Lease liabilities
After more than one year
Loans repayable
Within one to two years
Within two to five years
Five years and over
Lease liabilities

The minimum lease payments under lease liabilities fall due as follows:
Within one year
Within one to two years
Within two to five years
Five years and overFuture finance charges on lease liabilities
Present value of lease liabilities

Undiscounted maturity analysis of financial liabilities
Within one year
Bank loans and overdrafts
Other loans
Lease liabilities
After more than one year
Loans repayable
Within one to two years
Within two to five years
Five years and over
Lease liabilities
Within one to two years
Within two to five years
Five years and over

2020
£m

36.4
14.5
50.9
12.2
63.1

37.8
11.3
49.1
10.7
59.8

171.2
397.9
225.5
794.6
78.3
872.9

30.8
385.4
360.0
776.2
71.0
847.2

14.4
13.0
24.9
54.6
106.9
(16.4)
90.5

12.7
11.8
19.2
55.0
98.7
(17.0)
81.7

2021
£m

2020
£m

36.8
15.1
14.4
66.3

38.3
11.8
12.7
62.8

187.6
437.0
245.5

45.3
423.9
391.4

13.0
24.9
54.6
962.6

11.8
19.2
55.0
946.6

The analysis above includes estimated interest payable to maturity on the underlying loans. For the loans due after more than one year £14.9m(2020: £14.3m) of the interest falls due within one year of the balance sheet date, £13.4m (2020: £14.0m) within one to two years, £33.7m (2020:£34.0m) within two to five years and £13.5m (2020: £22.1m) beyond five years.

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Annual report
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Plc
Annual Report and Accounts 2021

151
151

Financial statements

Maturity profile of financial liabilities
Repayments fall due as follows:
Within one year
Bank loans and overdrafts
Other loans

2021
£m

Financial statements (continued)
Notes to the Group Accounts (continued)

20. Borrowings, other financial liabilities and other financial assets continued
Interest rate and currency profile of Group financial liabilities
Fixed rate
weighted average
Interest rate
Fixed period
%
Years

Total
£m

Fixed
£m

Floating£m

Sterling
US Dollar
Euro
Other
At 31 December 2021

336.4
299.0
241.4
59.2
936.0

165.0
118.6
125.8
–
409.4

171.4
180.4
115.6
59.2
526.6

2.62
3.73
1.28
–
2.53

4.3
7.9
4.2
–
5.3

Sterling
US Dollar
Euro
Other
At 31 December 2020

254.3
287.0
270.2
95.5
907.0

165.0
117.1
134.4
–
416.5

89.3
169.9
135.8
95.5
490.5

2.62
3.73
1.28
–
2.50

5.3
8.9
5.2
–
6.3

Fair values
Prior to 2016, the Group did not typically utilise complex financial instruments and accordingly the only element of Group borrowings where fair value
differed from book value was the US$100m fixed rate 10-year note that was issued in 2010. In January 2020 the existing US$100m fixed rate 10year note matured and was repaid, this was replaced with a new US$100m fixed rate 10-year note (27 January 2020). On 27 June 2016, the Groupissued £100m and €100m of fixed rate notes. On 6 June 2019, the Group issued a further £65m, €50m and US$60m of fixed rate notes.
The table below details a comparison of the book and fair values of the Group’s financial assets and liabilities. Where there are no readily available
market values to determine fair values, cash flows relating to the various instruments have been discounted at prevailing interest and exchange rates
to give an estimate of fair value.

Cash deposits
Other investments
2019 Club facility due 2026
US$200m 3 year term loan due 2023
US$100m 3.75% fixed rate 10 year note
€30m 1.08% fixed rate 7 year note
€70m 1.43% fixed rate 10 year note
£30m 2.54% fixed rate 7 year note
£70m 2.80% fixed rate 10 year note
€50m 1.18% fixed rate 8 year note
£65m 2.46% fixed rate 8 year note
US$60m 3.70% fixed rate 10 year note
Other bank borrowings
Other loans
Contingent consideration
Lease liabilities
Forward foreign currency contracts

Book
value
2021
£m

Fair
value
2021
£m

Book
value
2020
£m

Fair
value
2020
£m

112.8
3.3
(262.2)(125.4)(74.1)(25.2)(58.7)(30.0)(70.0)(41.9)(65.0)(44.5)(34.0)(14.5)(26.1)(90.5)
(2.3)

112.8
3.3
(262.2)(125.4)(78.2)(25.5)(61.5)(30.3)(71.9)(43.5)(65.7)(47.4)(34.0)(14.5)(26.1)(90.5)
(2.3)

106.5
5.2
(218.1)(145.5)(73.2)(26.9)(62.7)(30.0)(70.0)(44.8)(65.0)(43.9)(33.9)(11.3)(38.1)(81.7)–

106.5
5.2(218.1)(145.5)(82.9)(27.5)(67.0)(30.9)(75.2)(47.5)(68.9)(49.9)(33.9)(11.3)(38.1)(81.7)–For financial instruments with a remaining life of greater than one-year, fair values are based on cash flows discounted at prevailing interest rates.
Accordingly, the fair value of cash deposits and short-term borrowings approximates to the book value due to the short maturity of these
instruments. The same applies to trade and other receivables and payables excluded from the above analysis.
Financial instruments
Financial instruments measured at fair value use the following hierarchy:• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly(that is, derived from prices) (level 2)• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
All of the Group’s financial instruments are classed as level 2 with the exception of contingent consideration, other investments and lease liabilities,
which are classed as level 3.

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Annual Report and Accounts 2021

As at 31 December 2021, the Group had undrawn committed facilities of £334.4m (2020: £378.3m). In addition, the Group had other undrawn
facilities of £40.1m (2020: £50.1m) available. Of the Group's total committed facilities of £1,225.8m, £1,211.0m expire after 2022. New and repaid
borrowings disclosed in the Group Statement of Cash Flows reflect routine short-term cash management, comprising regular monthly drawdowns
and repayments on the Group's revolving credit facilities.
Financial risk factors
The Group’s activities expose it to a variety of financial risks: currency risk, interest rate risk, liquidity risk, and credit risk. The Group’s overall risk
management strategy is approved by the Board and implemented and reviewed by the Risk Management Committee. Detailed financial risk
management is then delegated to the Group Finance department which has a specific policy manual that sets out guidelines to manage financial
risk. Regular reports are received from all sectors and regional operating units to enable prompt identification of financial risks so that appropriate
action may be taken. In the management definition of capital the Group includes ordinary and preference share capital and net debt.
Currency risk
The Group operates internationally and is exposed to currency risk arising from various currency exposures, primarily with respect to the US Dollar
and the Euro. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign
operations. Entities in the Group use foreign currency bank balances to manage their foreign exchange risk arising from future commercial
transactions, recognised assets and liabilities. The Group’s risk management policy is to manage transactional risk up to three months forward. The
Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arisingfrom the net assets of the Group’s foreign operations is not specifically hedged but is reduced primarily through borrowings denominated in therelevant foreign currencies where it is efficient to do so. Currency exposure arising from significant one-off transactions (for example acquisitions or
disposals) is reviewed and hedged through forward contracts if required.
For 2021, had the Group’s basket of reporting currencies been 10% weaker/stronger than the actual rates experienced, post-tax profit for the year
would have been £29.4m (2020: £18.9m) lower/higher than reported, primarily as a result of the translation of the profits of the Group’s overseas
entities, and equity would have been £156.5m (2020: £141.5m) lower/higher.
Cash flow hedging
At 31 December 2021, the Group held two instruments to hedge exposures to changes in foreign currency on a highly probable future businessdisposal and debt repayment (hedged items), with a maturity profile of less than one year. The combined nominal value of the contracts was£601.9m and the average forward contract rates were 0.85 (EUR:GBP) and 1.12 (EUR:USD). These contracts are contingent on the successful
completion of the business disposal and were designated as cash flow hedges. These hedging activities provide the Group with certainty overapproximately 85% of its estimated FX exposure on these forecast future transactions.
The combined carrying amount of the contracts was a £2.3m liability at 31 December 2021, reported within trade and other payables. At 31
December 2021, the cash flow hedging reserve was £3.0m credit (2020: £nil), net of £0.7m tax, and the costs of hedging reserve was £4.9m debit(2020: £nil), net of £1.1m tax. There was no hedge ineffectiveness or reclassifications recognised in the income statement during the year ended 31
December 2021.
A 10% strengthening/weakening of GBP, Euro or USD at 31 December 2021 would have affected the measurement of the forward contracts andtherefore equity by approximately £56m. This analysis assumes that all other variables remain constant and ignores any impact of forecast futuretransactions.
Interest rate risk
The Group has both interest bearing assets and liabilities. In 2016, the Group had a policy of maintaining no more than 60% of its gross borrowings
at fixed interest rates in normal circumstances. During 2016, the Group increased its amount of fixed rate debt following payment of the £136m
special dividend and consequent increase in core debt requirements. Notes were issued in the amounts of £100m and €100m with an average
maturity of 3.6 years and interest rate of 2.08%. During 2017, the policy formally increased the upper limit for fixed rate debt to 75% of grossborrowings. During 2019, the Group increased its amount of fixed rate debt following payment of the £151.5m special dividend. Notes were issued
in the amounts of £65m, €50m and US$60m with an average maturity of 6.1 years and interest rate of 2.47%. In January 2020 the Group repaid its
US$100m 10-year loan note carrying a fixed rate of 5.94% and replaced it with a US$100m 10-year loan note carrying a fixed rate of 3.75%. At 31
December 2021, approximately 45% of Group borrowings were at fixed rates.
At 31 December 2021, aside from the loan notes referred to above, all Group debt and cash was exposed to repricing within 12 months of thebalance sheet date.
At 31 December 2021, the Group’s fixed rate debt was at a weighted average rate of 2.53% (2020: 2.50%). The Group’s floating rate liabilities are
predominantly based on LIBOR and its overseas equivalents.
Based on the above, had interest rates moved by 10 basis points in the territories where the Group has substantial borrowings, post-tax profits
would have moved by £0.5m (2020: £0.4m) due to a change in interest expense on the Group’s floating rate borrowings.

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Annual report
Accounts 2021
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Plc
Annual Report and Accounts 2021

153
153

Financial statements

Borrowing facilities

Financial statements (continued)
Notes to the Group Accounts (continued)

20. Borrowings, other financial liabilities and other financial assets continued
Liquidity risk
The Group actively maintains a mixture of long-term and short-term committed facilities designed to ensure that the Group has sufficient funds
available for operations and planned investments.
On a regular basis, management monitors forecasts of the Group’s cash flows against both internal targets and those targets imposed byexternal lenders. The Group has substantial committed, unused facilities and the Directors are confident this situation will remain the case for theforeseeable future.
Credit risk
The Group has no significant concentrations of credit risk. It has policies in place to ensure that sales of products are made to customers with anappropriate credit history. Derivative counterparties and cash transactions are limited to high-credit quality financial institutions. The Group has
policies that limit the amount of credit exposure to any individual financial institution.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns forshareholders and benefits for other stakeholders, as well as maintaining an optimal capital structure to reduce overall cost of capital.
In order to maintain this optimal structure, the Group may adjust the amount of dividends paid, issue new shares, return capital to shareholders or
dispose of assets to reduce net debt. Given the Group’s strong balance sheet and sustained trading growth, the Group announced a dividend
policy in 2011 of paying a dividend of between 40% and 50% of sustainable earnings. Further details can be found in the Finance Review on pages
46 to 49.
Underlying growth coupled to Return on Invested Capital (ROIC) is the key perceived driver of shareholder value within the Group. The Group’s ROIC
now stands at 14.2% against a post-tax Weighted Average Cost of Capital (WACC) of 6.4%, thus hitting the Group’s target of maintaining ROIC at
two to three times WACC. In addition, the Group employs two widely used ratios to measure its ability to service its debt. Both net debt/EBITDA andEBITDA interest cover were well ahead of target in 2021. Further details can be found in the Finance Review on pages 46 to 49. The Group was incompliance with its covenant requirements throughout the year. Additional information on progress against Key Performance Indicators can befound on pages 44 and 45.

21. Provisions
At 1 January 2021
Exchange differences
Released to the income statement
Charged to the income statement
Cash paid against provisions and utilised
At 31 December 2021

Environmental£m

Restructuring
£m

Other
£m

Total
£m

6.3
0.1
(0.4)
0.8
(1.1)
5.7

2.7
–
(0.8)
–
(1.9)
–

1.6
–
(0.8)
2.8
(0.2)
3.4

10.6
0.1
(2.0)
3.6
(3.2)
9.1

2021
£m

2020
£m

5.5
3.6
9.1

6.7
3.9
10.6

Analysis of total provisions
Current
Non-current

Provisions are made where a constructive or legal obligation has arisen from a past event, can be quantified and where the timing of the transfer of
economic benefits relating to the provisions cannot be ascertained with any degree of certainty.
The environmental provision relates to soil and potential groundwater contamination on a number of sites, both currently in use and previously
occupied, in Europe and the Americas.
In relation to the environmental provision, the Directors expect that the balance will be utilised within 10 years. Provisions for remediation costs are
made when there is a present obligation, it is probable that expenditures for remediation work will be required and the cost can be estimated withina reasonable range of possible outcomes. The costs are based on currently available facts and prior experience. Environmental liabilities arerecorded at the estimated amount at which the liability could be settled at the balance sheet date. Remediation of environmental damage typicallytakes a long time to complete due to the substantial amount of planning and regulatory approvals normally required before remediation activities canbegin. In addition, increases in or releases of environmental provisions may be necessary whenever new developments occur or additional
information becomes available. Consequently, environmental provisions can change significantly and the timing and quantum of costs are inherently
uncertain. The level of environmental provision is based on management’s best estimate of the most likely outcome for each individual exposure.
The Group has also considered the impact of discounting on its provisions and has concluded that, as a consequence of the significant utilisation
expected in a relatively short timescale, the impact is not material.

154
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Annual Report and Accounts 2021

Ordinary shares of 10.61p (2020: 10.61p)
Allotted, called up and fully paid
At 1 January – 142,536,884 (2020: 131,906,881) ordinary shares
Issued in the year
At 31 December – 142,536,884 (2020: 142,536,884) ordinary shares

2021
£m

2020
£m

15.1
–
15.1

14.0
1.1
15.1

On 20 November 2020, following consultation with shareholders, the Company issued 10,630,003 ordinary shares at a price of 5900p per share,raising £615.5m net of fees resulting in a share premium of £614.4m.
During 2021, options were granted to employees under the Croda International Plc Sharesave Scheme to subscribe for 55,474 ordinary shares at
an option price of 7327p per share and under the Croda International Plc International Sharesave Plan to subscribe for 202,071 ordinary shares at
an option price of 7327p per share. Conditional awards over 130,131 ordinary shares were granted under the Performance Share Plan during theyear and 52,370 under the Free Share Plan. Also granted in the year were 8,621 shares under the Restricted Share Plan.
During the year consideration of £2.6m was received on the exercise of options over 62,581 shares. The options were satisfied with sharestransferred from the Group's employee share trusts. Since the year end a further 999 shares have been transferred from the trusts. During the year,
the Group purchased 78,744 of its own ordinary shares to satisfy awards under various share-based payment schemes for consideration of £4.9m.
The outstanding options to subscribe for ordinary shares were as follows at the balance sheet date:

Croda International Plc Sharesave Scheme

Croda International Plc International Sharesave Plan (2009)

Croda International Plc Performance Share Plan (2014)

Croda International Plc Deferred Bonus Share Plan
Croda International Plc Restricted Share Plan

Croda International Plc Free Share PlanYear
optiongrantedNumber ofshares

Price

2018
2019
2020
2021
2019
2020
2021
2019
2020
2020
2021
2019
2019
2019
2020
2021
2021

4,434
83,46370,01954,505249,158
205,219
198,868
135,111
113,353
48,447
129,389
8,913
4,821
582
7,134
8,421
51,580

4144p
3898p
4804p
7327p
3898p
4804p
7327p
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil

Options exercisable from

1 Nov 2021 to 30 Apr 2022
1 Nov 2022 to 30 Apr 2023
1 Nov 2023 to 30 Apr 2024
1 Nov 2024 to 30 Apr 2025
1 Nov 2022 to 30 Nov 2022
1 Nov 2023 to 30 Nov 2023
1 Nov 2024 to 30 Nov 2024
12 Mar 2022
25 Mar 2023
29 Apr 2023
24 Mar 2024
12 Mar 2022
26 Mar 2022
9 Aug 2022
25 Mar 2023
17 Mar 2024
25 Apr 2022

23. Share-based payments
The impact of share-based payment transactions on the Group’s financial position is as follows:

Analysis of amounts recognised in the income statement:
Charged in respect of equity settled share-based payment transactions
Charged in respect of cash settled share-based payment transactions

Analysis of amounts recognised in the balance sheet:
Liability in respect of cash settled share-based payment transactions

2021
£m

2020
£m

10.3
31.0
41.3

2.5
11.1
13.6

28.0

9.2

The key elements of each scheme along with the assumptions employed to arrive at the charge in the income statement are set out below. Where
appropriate the expected volatility has been based on historical volatility considering daily share price movements over periods equal to the expected
future life of the awards and the risk free rate is based on the Bank of England’s projected nominal yield curve with appropriate duration.

Croda International Plc
Annual report
Accounts 2021
CrodaandInternational
Plc
Annual Report and Accounts 2021

155
155

Financial statements

22. Ordinary share capitalFinancial statements (continued)
Notes to the Group Accounts (continued)

23. Share-based payments continued
Croda International Plc Sharesave Scheme (‘Sharesave’)
The Sharesave Scheme, established in 1983 and renewed in 2013, grants options annually in September to employees of the Group at a
fixed exercise price, being the market price of the Company’s shares at the grant date discounted by up to 20%. Employees then enter intoa savings contract over three years and, subject to continued employment, purchase options at the end of the period based on the amount saved.
Options are then exercisable for a six month period following completion of the savings contract. For options granted in the year, the fair value per
option granted and the assumptions used in the calculation of the value are as follows:

Grant date
Share price at grant date
Exercise price
Number of employees
Shares under option
Vesting period
Expected volatility
Option life
Risk free rate
Dividend yield
Possibility of forfeiture
Fair value per option at grant date
Option pricing model
A reconciliation of option movements over the year is as follows:

NumberOutstanding at 1 January
GrantedForfeited
Exercised
Outstanding at 31 December
Exercisable at 31 December
For options exercised in year, weighted average share price at date of exercise
Weighted average remaining life at 31 December (years)

230,705
55,474(11,177)(62,581)
212,421
4,434

2021

2020

16 Sep
2021
9144p
7327p
727
55,474Three years
20%
Six months
0.3%
1.0%
7.5% p.a.
2094.0pBlack Scholes

10 Sep
2020
6078p
4804p
692
74,578Three years
20%
Six months
-0.1%
1.5%
7.5% p.a.
1337.2pBlack Scholes

2021
Weighted
average
exercise
price

4243p
7327p
4524p
4081p
5082p
4144p
9206p

Number241,91274,578(6,659)(79,126)
230,705
3,745

2.4

2020
Weighted
average
exercise
price

3681p
4804p
3895p
3081p
4243p
3092p
5969p

2.4

Croda International Plc International Sharesave Plan 2009 (‘International’)
The International scheme, established in 1999 and renewed in 2009, has the same option pricing model, savings contract and vesting period as the
Sharesave scheme. At exercise, employees are paid a cash equivalent for each option purchased, being the difference between the exercise priceand market price at the exercise date. For options granted in the year, the fair value per option granted and the assumptions used in the calculationof the value are as follows:

Grant date
Share price at grant date
Exercise price
Number of employees
Shares under option
Vesting period
Expected volatility
Option life
Risk free rate
Dividend yield
Possibility of forfeiture
Fair value per option at 31 December
Option pricing model

156
156

Croda International Plc
Annualand Accounts
Crodareport
International
Plc 2021
Annual Report and Accounts 2021

2021

2020

16 Sep
2021
9144p
7327p
2,973
202,071
Three years
20%
One month
0.3%
0.9%
7.5% p.a.
2934.8pBlack Scholes

10 Sep
2020
6078p
4804p
2,287
226,138
Three years
20%
One month
-0.2%
1.4%
7.5% p.a.
1741.3pBlack Scholes

Number

Outstanding at 1 January
GrantedForfeited
Exercised
Outstanding at 31 December
For options exercised in year, weighted average share price at date of exercise
Weighted average remaining life at 31 December (years)

681,756
202,071(57,397)(173,185)
653,2452021
Weighted
average
exercise
price

4262p
7327p
4519p
4141p
5227p
9378p

1.8

Number

2020
Weighted
average
exercise
price726,941
226,138(48,929)(222,394)
681,756

3704p
4804p
3725p
3106p
4262p
6063p

1.9

Croda International Plc Performance Share Plan 2014 (‘PSP’)The PSP scheme was established in 2014 and replaced the Company’s previous Executive long-term incentive plans. The PSP provides for awardsof free shares (i.e. either conditional shares or nil-cost options) normally made annually which vest after three years dependent upon an EPS
performance related sliding scale (non-market condition), an NPP growth measure (non-market condition), sustainability conditions in relation to
decarbonisation roadmaps and emissions (non-market conditions) and the Group’s total shareholder return (market condition). The PSP is
discussed in detail in the Directors’ Remuneration Report (pages 84 to 108). Shares (on an after-tax basis) are subject to a two-year post vestingholding period. For options granted in the year, the fair value per option granted and the assumptions used in the calculation of the value areas follows:

Grant date
Share price at grant date
Number of employees
Shares under conditional award
Vesting period
Expected volatility
Dividend yield
Possibility of forfeiture
Fair value per option at grant date
Option pricing model

Marketcondition

2021
Non-market
condition

Marketcondition

Non-market
condition

Marketcondition

2020
Non-market
condition

24 Mar
2021
6401p
68
45,546
Three
years
20%
1.4%
3.45% p.a.
2420p
Closed form
valuation

24 Mar
2021
6401p
68
84,585
Three
years
20%
1.4%
3.45% p.a.
6136p
Closed form
valuation

29 Apr2020
4936p
2
16,956
Three
years
20%
1.8%
3.45% p.a.
3352p
Closed form
valuation

29 Apr
2020
4936p
2
31,491
Three
years
20%
1.8%
3.45% p.a.
4676p
Closed form
valuation

25 Mar
2020
4280p
57
44,053
Three
years
20%
2.1%
3.45% p.a.
3022p
Closed form
valuation

25 Mar
2020
4280p
57
81,812
Three
years
20%
2.1%
3.45% p.a.
4021p
Closed form
valuation

A reconciliation of option movements over the year is as follows:

NumberOutstanding at 1 January
GrantedForfeited
Exercised
Outstanding at 31 December
For options exercised in year, weighted average share price at date of exercise
Weighted average remaining life at 31 December (years)

461,005
130,131(108,077)(56,759)
426,300
1.3

2021
Weighted
average
exercise
price

–
–
–
–
–
6205p

Number

2020
Weighted
average
exercise
price513,956
174,312(112,018)(115,245)
461,005

–
–
–
–
–
4259p

1.3

Croda International Plc Deferred Bonus Share Plan (‘DBSP’)
The DBSP scheme was established in 2014. Under the DBSP, one third of any annual bonuses due to certain senior executives are deferred. The
size of award is determined by the amount of the total bonus divided by one third and converted into a number of Croda shares using the market
value of shares at the time the award is granted. Awards are increased by the number of shares equating to the equivalent value of any dividend
paid during the option period. The awards vest on the third anniversary of the date of grant unless the recipient has been dismissed for cause. No
further awards were granted after 2019. There are no performance conditions applied to the award. The DBSP is also discussed in the Directors’
Remuneration Report (pages 84 to 108).

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Annual report
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157
157

Financial statements

A reconciliation of option movements over the year is as follows:Financial statements (continued)
Notes to the Group Accounts (continued)

23. Share-based payments continued
A reconciliation of option movements over the year is as follows:

NumberOutstanding at 1 January
Dividend enhancement
Exercised
Outstanding at 31 December
For options exercised in year, weighted average share price at date of exercise
Weighted average remaining life at 31 December (years)

28,127
101(19,315)
8,913

2021
Weighted
average
exercise
price

–
–
–
–
6205p

Number127,588422(99,883)
28,1270.2

2020
Weighted
average
exercise
price

–
–
–
–
4259p

0.5

Croda International Plc Restricted Share Plan (‘RSP’)The RSP scheme was established in 2018 and provides for awards of free shares or cash equivalent to a limited number of employees not eligible
for the PSP scheme, based on a percentage of salary. The awards vest on the third anniversary of the date of grant, subject to the condition that theemployee remains employed by the Group. There are no performance conditions applied to the award. On the vesting date, UK employees will beawarded free shares and non-UK employees will be paid a cash equivalent based on the market price.
Grant date
Share price at grant date
Number of employees
Shares under conditional award
Vesting period
Expected volatility
Dividend yield
Possibility of forfeiture
Fair value per option at grant date
Option pricing model

A reconciliation of option movements over the year is as follows:

NumberOutstanding at 1 January
GrantedForfeited
Exercised
Outstanding at 31 December
For options exercised in year, weighted average share price at date of exercise
Weighted average remaining life at 31 December (years)

158
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Annual Report and Accounts 2021

19,288
8,621(693)(6,258)
20,958
1.5

2021

2020

17 Mar 2021
6314p
66
8,621
Three years
20%
1.4%
3.45% p.a.
6049p
Closed form
valuation

25 Mar 2020
4280p
35
7,134
Three years
20%
2.1%
3.45% p.a.
4021p
Closed form
valuation

2021
Weighted
average
exercise
price

–
–
–
–
–
6257p

Number12,393
7,134
(239)
–
19,2881.3

2020
Weighted
average
exercise
price

–
–
–
–
–
–

The FSP scheme was established in 2021 and provides for awards of free shares or cash equivalent to eligible employees. The Company has
discretion to set the number of shares awarded. The awards will vest provided that the employee remains employed by the Group and that a bonus
payment is paid under the terms of the Company's Group Profit Incentive Bonus Scheme in respect of the financial year concerned. Subject to thetwo conditions being met, on the vesting date, UK employees (and certain other identified jurisdictions) will be awarded free shares and non-UK
employees will be paid a cash equivalent based on the market price.
Grant date
Share price at grant date
Number of employees
Shares under conditional award
Vesting period
Expected volatility
Dividend yield
Possibility of forfeiture
Fair value per option at grant date
Option pricing model

A reconciliation of option movements over the year is as follows:

NumberOutstanding at 1 January
GrantedForfeited
Exercised
Outstanding at 31 December
For options exercised in year, weighted average share price at date of exercise
Weighted average remaining life at 31 December (years)–
52,370(790)–
51,580
0.3

2021

2020

3 Nov 2021
9597p
5,237
52,370One year20%
1.0%
7.5% p.a.
9503p
Closed form
valuation

–
–
–
–
–
–
–
–
–

2021
Weighted
average
exercise
price

–
–
–
–
–
–

–

Number

–
–
–
–
–

2020
Weighted
average
exercise
price

–
–
–
–
–
–

–

Croda International Plc Share Incentive Plan (‘SIP’)The SIP was established in 2003 and has similar objectives to the Sharesave Scheme in terms of increasing employee retention and shareownership. Under the SIP scheme, employees enter into an agreement to purchase shares in the Company each month. For each share purchasedby an employee, the Company awards a matching share which passes to the employee after three years’ service. The matching shares areallocated each month at market value with this fair value charge being recognised in the income statement in full in the year of allocation.

24. Preference share capital
The authorised, issued and fully paid preference share capital comprises:
615,562 5.9% preference shares of £1 (2020: 615,562)
498,434 6.6% preference shares of £1 (2020: 498,434)
21,900 7.5% preference shares of £1 (2020: 21,900)

2021
£m

2020
£m

0.6
0.5
–
1.1

0.6
0.5
–
1.1

The preference shares have no redemption rights and carry no voting rights other than in certain circumstances affecting the rights of the preference
shareholders, details of which are set out in the Company’s Articles of Association. The three classes of preference shares rank pari passu with eachother but ahead of the ordinary shares on a winding up. Rights on a winding up are limited to repayment of capital and any arrears of dividends.

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Annual report
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Plc
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159

Financial statements

Croda International Plc Free Share Plan (‘FSP’)Financial statements (continued)
Notes to the Group Accounts (continued)

25. Shareholders’ equity
Croda International Plc Qualifying Share Ownership Trust (QUEST), Croda International Plc Employee Benefit Trust (CIPEBT) and Croda
International Plc AESOP Trust (AESOP) each hold shares purchased on the open market or transferred from treasury shares to satisfy the futureissue of shares under the Group's share option schemes. As at 31 December 2021 the QUEST had a net amount due from the Company of£16.1m (2020: £13.6m) and held 30,640 (2020: 93,221) shares transferred at a nil cost (2020: nil cost) with a market value of £3.1m (2020: £6.1m).
As at 31 December 2021 the CIPEBT was financed by a repayable on demand loan to the Company of £26.9m (2020: £21.9m) and held 910(2020: 910) shares transferred at a nil cost (2020: nil cost) with a market value of £0.1m (2020: £0.1m).
As at 31 December 2021 the AESOP had issued all its previously held shares, as financed by the Company, and thus had no residual loan balancewith the Company. All of the shares held by the QUEST and CIPEBT were under option at 31 December 2021 and, except for a nominal amount,the right to receive dividends has been waived.
As at 31 December 2021 the total number of treasury shares held was 3,018,203 (2020: 3,018,203) with a market value of £303.2m(2020: £199.1m).

26. Non-controlling interests in equity
At 1 January
Exchange differences
Profit for the year
Acquisition of a subsidiary with non-controlling interest
Acquisition of a non-controlling interest in an existing subsidiary
Issue of share capital
Dividends paid to non-controlling interests
At 31 December

2021
£m

2020
£m

9.3
0.1
2.0
1.6
(0.2)
0.2
(0.2)
12.8

7.0
0.1
–
2.2
–
–
–
9.3

27. Related party transactions
The Group has no related party transactions, with the exception of remuneration paid to key management and Directors which is included
in note 10.

28. Business combinations
2021 Acquisitions
On 2 March 2021, the Group acquired the worldwide business activities of Alban Muller including 100% of the shares and voting interests of Acallmi
for a total consideration of £15.2m. Established in France and employing 90 people, Alban Muller specialises in eco-responsible solutions todeveloping innovative botanical extracts, natural formulation ingredients and natural organic cosmetics. The company is an excellent fit for Croda’s
Beauty Actives business (part of the Consumer Care sector) and provides Croda with access to innovative technology in the botanicals market.
On 1 June 2021, the Group acquired a 96% majority shareholding in Parfex S.A. ('Parfex'), a fine fragrance business based in Grasse, France for a
total consideration of £35.4m. Employing 75 people, Parfex creates fragrances principally for premium personal care and fine perfumery markets,leveraging the natural raw materials that are available in the region. The company will form part of the newly created Fragrances & Flavours business(part of the Consumer Care sector) alongside Iberchem acquired in November 2020.

160
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Cash consideration
Fair value of assets and liabilities acquired
Intangible assets
Property, plant and equipment
Right of use assets
Lease liabilities
Cash/(overdrafts)
Borrowings
Working capital
Retirement benefit liabilities
Deferred tax
Total identifiable net assets
Fair value of NCI
Goodwill

Alban Muller£mParfex
£m

15.2

35.4

8.9
7.1
1.2
(1.2)
1.8
(5.7)
–
(0.4)
(3.0)
8.7
–
6.5

19.5
5.9
0.1
(0.1)
(0.1)
–
4.6
(0.5)
(5.9)
23.5
(1.6)
13.5

Total cash consideration paid in the period of £58.1m includes the above acquisitions (net of cash) of £48.9m and £9.2m of payment on contingent
consideration in respect of previous acquisitions. Acquisition-related costs of £1.5m have been charged to administration expenses in the income
statement for the year ended 31 December 2021 (2020: £11.7m). Post-acquisition, Alban Muller and Parfex contributed combined revenue of£23.3m and a small adjusted operating profit. Had the acquisitions been made on 1 January 2021, the Group’s revenue would have been
£1,924.7m with adjusted operating profit of £469.8m.
2020 Acquisitions
On 12 August 2020, the Group acquired 100% of the shares and voting interests of Avanti Polar Lipids, LLC (‘Avanti’), a knowledge-intensive leader
in lipid-based drug delivery technologies for next generation pharmaceuticals. Based in Alabama in the US, Avanti creates and makes high-purity
polar lipids that are increasingly being used as delivery systems for complex therapeutic drugs and in next-generation mRNA vaccines. The
acquisition will continue to operate under its existing brand, led by the current management team, and will form part of our Health Care business(Life Sciences sector). The acquisition will more than double Croda's research and development (R&D) capability in drug delivery and also provide a
new channel to market for Croda's ingredients for early-stage pharmaceutical research. Avanti was acquired for total consideration of £173.9m, withidentifiable net assets of £112.8m, generating goodwill of £61.1m. Total consideration for Avanti is inclusive of £35.5m contingent consideration,
representing the gross fair value at the date of acquisition of £42.1m before discounting. The additional consideration is payable semi-annually overthree years based on the revenue from near-term commercial opportunities using Avanti’s lipid-based solutions which were not included in thevaluation for payment of the initial consideration.
On 24 November 2020, the Group acquired 100% of the shares and voting interests of Fragrance Spanish Topco, S.L. trading as Iberchem('Iberchem'), a leading global fragrances and flavours ('F&F') company. Headquartered in Murcia, Spain, Iberchem has approximately 850
employees, 14 manufacturing facilities, 10 R&D centres and a commercial presence in 120 countries. The acquisition will form part of the newConsumer Care sector from 2021. The acquisition will create a new full service formulation and fragrance offering for Personal Care and Home Careas well as providing access to a high growth adjacency in the global F&F market with significant exposure to emerging markets. Iberchem was
acquired for consideration of £756.5m, with identifiable net assets of £304.7m, generating goodwill of £454.0m.
During 2021, the Group completed the fair value review relating to its 2020 acquisitions. This review did not identify any changes to the asset baseor goodwill.

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Annual report
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Plc
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161
161

Financial statements

The following table summarises the Directors’ assessment of the consideration paid in respect of the acquisitions, and the fair value of assets
acquired and liabilities assumed.

Financial statements (continued)
Company Financial Statements

Company Balance Sheetat 31 December 2021
Note

2021
£m

2020
£m

D
E

0.8
1.3

0.8
1.5

F
K

1,385.6
0.8
1,388.5

1,369.5–
1,371.8

GH

1,373.2
0.4
15.9
1,389.5

1,479.5
0.1–
1,479.6

I
J

Net current assets(76.1)–(76.1)
1,313.4(64.9)(0.4)(65.3)
1,414.3

Total assets less current liabilities

2,701.9

2,786.1(0.2)(525.2)–(525.4)–(495.4)(0.7)(496.1)

Net assets

2,176.5

2,290.0

Capital and reserves
Ordinary share capitalPreference share capital
Called up share capital
Share premium accountReserves1
Total shareholders’ funds

15.1
1.1
16.2
707.7
1,452.6
2,176.5

15.1
1.1
16.2
707.7
1,566.1
2,290.0

Fixed assets
Intangible assets
Tangible assets
Investments
Shares in Group undertakings
Retirement benefit assets

Current assets
Debtors
Deferred tax asset
Cash and cash equivalents

Current liabilities
Creditors: Amounts falling due within one year
Borrowings

Non-current liabilities
Deferred tax liability
Borrowings
Retirement benefit liabilities

HJ
K

1 Included within Reserves is profit after tax of £2.2m (2020: £43.0m)

The financial statements on pages 162 to 167 were approved by the Board on 28 February 2022 and signed
on its behalf by

Anita Frew
Chair

Jez Maiden
Group Finance Director

Registered in England number 206132

168
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Crodareport
International
Plc 2021
Annual Report and Accounts 2021

for the year ended 31 December 2021

Note

At 1 January 2020

Sharecapital£m

Share
Capitalpremium redemption Revaluation
reserveaccount
reserve
£m
£m
£m

Other
reserves£m

Retainedearnings
£m

Total
£m

15.1

93.3

0.9

2.1

–

1,630.7

1,742.1

–
–

–
–

–
–

–
–

–
–

43.0
9.7

43.0
9.7

–
–
1.1
–
1.1

–
–
614.4
–
614.4

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

(115.9)2.5–(6.9)(120.3)(115.9)
2.5
615.5
(6.9)
495.2

Total equity at 31 December 2020

16.2

707.7

0.9

2.1

–

1,563.1

2,290.0

At 1 January 2021

16.2

707.7

0.9

2.1

–

1,563.1

2,290.0

–
–

–
–

–
–

–
–

–
(0.2)

2.2
9.1

2.2
8.9

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

(132.5)10.3(2.4)(124.6)(132.5)10.3(2.4)(124.6)

16.2

707.7

0.9

2.1

(0.2)

1,449.8

2,176.5

Profit for the year attributable to equity shareholders
Other comprehensive income
Transactions with owners:
Dividends on equity shares
Share-based payments
Issue of ordinary shares
Transactions in own shares
Total transactions with owners

Profit for the year attributable to equity shareholders
Other comprehensive (expense)/income
Transactions with owners:
Dividends on equity shares
Share-based payments
Transactions in own shares
Total transactions with owners
Total equity at 31 December 2021

8

8

Other reserves include the Hedging Reserve of £4.0m (2020: £Nil) and the Cost of Hedging Reserve of £(4.2)m (2020: £Nil).
Of the retained earnings, £852.7m (2020: £720.0m) are realised and £597.1m (2020: £843.1m) are unrealised. Details of investments in own sharesare disclosed in note 25 of the Group financial statements.

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Annual report
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Plc
Annual Report and Accounts 2021

169
163

Financial statements

Company Statement of Changes in Equity

Financial statements (continued)
Notes to the Company Financial Statements

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been appliedconsistently to all years presented, unless otherwise stated.

A. Accounting policies
Basis of accounting
The Company meets the definition of a qualifying entity under Financial Reporting Standard 100 (FRS 100) issued by the Financial Reporting Council.
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”). In
preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of UK-adopted international
accounting standards, but makes amendments where necessary in order to comply with the Companies Act 2006 and has set out below where
advantage of the FRS 101 disclosure exemptions has been taken. The financial statements have been prepared under the historical cost convention,in compliance with the provisions of the Act and the requirements of the Listing Rules of the Financial Conduct Authority.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under the standard in relation toshare-based payments, financial instruments, capital management, presentation of comparative information in respect of certain assets,
presentation of a cash flow statement, standards not yet effective, impairment of assets and related party transactions. Where required, equivalent
disclosures are provided in the Group financial statements of Croda International Plc.
Going concern
The financial statements which appear on pages 162 to 167 have been prepared on a going concern basis as, after making appropriate enquiries,
including a review of forecasts, budgets and banking facilities, the Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence.
Principal accounting policies
The accounting policies which have been applied by the Company when preparing the financial statements are in accordance with FRS 101. FRS
101 is based on the recognition and measurement requirements of Adopted IFRSs, under which the Group financial statements have been
prepared. As a result, the accounting policies of the Company are consistent with those used by the Group as presented on pages 125 to 131,
except for those relating to the recognition and measurement of goodwill and the recognition of revenue, which are not directly relevant to theCompany financial statements. Investments are held at cost less accumulated impairment. Investments are subject to impairment testing upon
indication of impairment, at which point the carrying value is reviewed against the underlying net assets or forecast cash generation of the entity.
The Group accounting policy for financial risk factors is also relevant to the preparation of the Company financial statements and is disclosed on
pages 153 and 154.

B. Profit and loss accountOf the Group’s profit for the year, £2.2m (2020: £43.0m) is included in the profit and loss account of the Company which was approved by the
Board on 28 February 2022 but which is not presented as permitted by Section 408 Companies Act 2006.
Included in the Company profit and loss account is a charge of £0.2m (2020: £0.1m) in respect of the Company’s audit fee.

C. Employees
Company employment costs including Directors
Wages and salaries
Share-based payment charges (note L)
Social security costs
Post-retirement benefit costs

Average employee numbers by function
Production
Administration

2021
£m

2020
£m

13.1
5.9
1.9
0.8
21.7

6.7
1.2
1.1
0.7
9.7

2021
Number

2020
Number

21
41
62

15
39
54

As required by the Companies Act 2006, the figures disclosed above are weighted averages based on the number of employees including Executive
Directors. At 31 December 2021, the Company had 69 (2020: 54) employees in total.
Detailed information concerning Directors’ remuneration, interests and options is shown in section D of the Directors’ Remuneration Report, which is
subject to audit, on pages 97 to 105 which forms part of the Annual Report and Accounts.

170
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Annualand Accounts
Annual Report and Accounts 2021

Computersoftware£m

Cost
At 1 January 2021
Additions
At 31 December 2021

1.6
0.2
1.8

Accumulated amortisation
At 1 January 2021
Charge for the year
At 31 December 2021

0.8
0.2
1.0

Net carrying amountAt 31 December 2021
At 31 December 2020

0.8
0.8

E. Tangible assets
Land andbuildings£mPlant andequipment
£m

Total
£m

Cost
At 1 January 2021
Disposals
At 31 December 2021

2.2
–
2.2

1.8
(0.2)
1.6

4.0
(0.2)
3.8

Accumulated depreciation
At 1 January 2021
Charge for the year
Disposals
At 31 December 2021

1.5
–
–
1.5

1.0
0.2
(0.2)
1.0

2.5
0.2
(0.2)
2.5

Net book amountAt 31 December 2021
At 31 December 2020

0.7
0.7

0.6
0.8

1.3
1.5

Shares
£m

Loans
£m

Total
£m

Cost
At 1 January 2021
Exchange differences
Additions
Amounts repaid
At 31 December 2021

1,111.3–
4.9(0.3)
1,115.9

287.5
(6.3)
148.2
(130.4)299.0

1,398.8(6.3)
153.1(130.7)
1,414.9

Impairment
At 1 January 2021
Impairment in the year
At 31 December 2021

27.8
–
27.8

1.5
–
1.5

29.3
–
29.3

Net book value
At 31 December 2021
At 31 December 2020

1,088.1
1,083.5

297.5
286.0

1,385.6
1,369.5

F. Shares in Group undertakings

The undertakings which affect the financial statements are listed on pages 168 to 170.
Additions to shares in the year of £0.5m relate to the continued investment in Cowick Insurance Services Ltd and £4.4m of capital contributions inrelation to share-based payments.
The Directors believe that the carrying value of the investments is supported by their underlying net assets or forecast cash generation.

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Annual report
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Plc
Annual Report and Accounts 2021

171
165

Financial statements

D. Intangible assets

Financial statements (continued)
Notes to the Company Financial Statements (continued)

G. Debtors
Amounts owed by Group undertakings
Corporation tax
Other receivables
Prepayments

2021
£m

2020
£m

1,325.2
46.4–
1.6
1,373.2

1,452.2
27.0
0.1
0.2
1,479.5

Although the amounts owed by Group undertakings have no fixed date of repayment, £1,324.6m (2020: £1,450.2m) is expected to be collected
after one year. Of the amount at 31 December 2021, £1,324.1m will continue to attract interest from 1 January 2022 at a floating rate based on themain facility agreement. The remainder will continue to be interest free.

H. Deferred tax
The deferred tax (liabilities)/assets included in the balance sheet are attributable to the following:

Retirement benefit obligations
Cash flow hedging

The movement on deferred tax balances during the year is summarised as follows:
At 1 January
Deferred tax credited/(charged) through the profit and loss accountDeferred tax charged to other comprehensive income
At 31 December

2021
£m

2020
£m

(0.2)
0.4
0.2

0.1
–
0.1

0.1
0.3
(0.2)
0.2

0.4
(0.2)
(0.1)
0.1

Deferred tax assets were recognised in all cases where such assets arose, as it was probable that the assets would be recovered.

I. Creditors: Amounts falling due within one year
Amounts falling due within one year
Trade payables
Taxation and social security
Amounts owed to Group undertakings
Other payables
Accruals and deferred income

The amounts owed to Group undertakings are interest free, unsecured and have no fixed date of repayment.

172
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Annualand Accounts
Annual Report and Accounts 2021

2021
£m

2020
£m

0.5
2.2
54.6
3.3
15.5
76.1

2.3
1.5
51.0
3.3
6.8
64.9

The Company’s objectives, policies and strategies in respect of financial instruments are outlined in the accounting policies note on page 130 whichforms part of the Annual Report and Accounts. Short-term receivables and payables have been excluded from all of the following disclosures.

Maturity profile of financial liabilities
2019 Club facility due 2026
€30m 1.08% fixed rate 7 year note
€70m 1.43% fixed rate 10 year note
£30m 2.54% fixed rate 7 year note
£70m 2.80% fixed rate 10 year note
€50m 1.18% fixed rate 8 year note
£65m 2.46% fixed rate 8 year note
Bank loans and overdrafts repayable on demand

2021
£m

2020
£m

234.4
25.2
58.7
30.0
70.0
41.9
65.0
–
525.2

196.1
26.8
62.7
30.0
70.0
44.8
65.0
0.4
495.8

–
–

0.4
0.4

418.3
106.9
525.2

252.9
242.5
495.4

Repayments fall due as follows:
Within one year
Bank loans and overdrafts
After more than one year
Loans repayable
Within one to five years
After five years

K. Post-retirement benefits
In line with the requirements of FRS 101, the Company recognises its share of the UK pension scheme assets and liabilities based on the number ofscheme members. A full reconciliation of the Group retirement benefit obligation can be found in note 11 of the Group financial statements on pages
139 to 143. The table below shows the movement in the obligation during the year.

Opening balance:
AssetsLiabilities
Net opening retirement benefit liability
Movements in the year:
Service cost – current
Contributions
Remeasurements
Closing balance

2021
£m

2020
£m

56.0
(56.7)(0.7)

53.2(55.2)
(2.0)

(0.8)
0.8
1.5
0.8

(0.7)
1.4
0.6
(0.7)

L. Share-based payments
The total charge for the year in respect of share-based remuneration schemes was £5.9m (2020: £1.2m). The grant by the Company of options overits equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee
services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in
subsidiary undertakings, with a corresponding credit to equity.
The key elements of each scheme along with the assumptions employed to arrive at the charge in the profit and loss account are set
out in note 23 to the Group financial statements.

M. Contingent liabilities
The Company has guaranteed loan capital and bank overdrafts of subsidiary undertakings amounting to £272.3m (2020: £285.3m).

N. Dividends
Details of dividends are disclosed in note 8 of the Group financial statements.

O. Related party transactions
The Company has taken advantage of the exemption available under FRS 101 from disclosing transactions with other Group undertakings.
There were no other related party transactions during the year. Information on the Group can be found in note 27 on page 160 of the Groupfinancial statements.

Croda International Plc
Annual report
Accounts 2021
CrodaandInternational
Plc
Annual Report and Accounts 2021

173
167

Financial statements

J. Borrowings

Other information
Related Undertakings

Related undertakings of Croda International Plc
All companies listed below are owned by the Group and all interests are in ordinary share capital, except where otherwise indicated.
All subsidiaries have been consolidated. All companies operate principally in their country of incorporation. Unless otherwise indicated,
all shareholdings represent 100% of the issued share capital of the subsidiary.

Wholly owned subsidiaries:
Incorporated in the UK

Incorporated in China

Cowick Hall, Snaith, Goole, East Yorkshire, DN14 9AA

Unit BCD, 19 Floor, Urban City Center, No.45,
Nanchang Road, Shanghai
Croda China Trading Company Ltd (vii)

Bio Futures Limited (vii)
Brookstone Chemicals Limited (viii)
Cowick Hall Trustees Limited (xi)
Croda (Goole) Limited (viii)
Croda Application Chemicals Limited (viii)
Croda Bakery Services Limited (viii)
Croda Bowmans Chemicals Limited (v) (viii)
Croda CE Limited (viii)
Croda Chemicals Limited (viii)
Croda Colloids Limited (viii)
Croda Cosmetics & Toiletries Limited (i) (v) (viii)
Croda Cosmetics (Europe) Limited (iii) (viii)
Croda Distillates Limited (i) (x)Croda Enterprises Limited (viii)
Croda Europe Limited (i) (vii)
Croda Fire Fighting Chemicals Limited (viii)
Croda Food Services Limited (viii)
Croda Foundation (xiv)
Croda Hydrocarbons Limited (viii)
Croda Investments Limited (ix)
Croda Investments No 2 Limited (ix)
Croda Investments No 3 Limited (ix)
Croda JDH Limited (viii)
Croda Leek Limited (viii)
Croda Limited (viii)
Croda Overseas Holdings Limited (i) (ix)
Croda Pension Trustees Limited (viii)
Croda Polymers International Limited (i) (ix)
Croda Resins Limited (viii)
Croda Solvents Limited (iii) (iv) (viii)
Croda Trustees Limited (viii)
Croda Universal Limited (viii)
Croda World Traders Limited (i) (v) (viii)
Equus UK Holding Limited (vii)
Equus UK Topco Limited (i) (vii)
P.I. Bioscience Limited (vii)
Plant Impact Limited (ix)John L Seaton & Co Limited (viii)
Southerton Investments Limited (i) (viii)
Sowerby & Co Limited (viii)
Technical and Analytical Services Limited (i) (viii)
Uniqema Limited (i) (viii)
Uniqema UK Limited (i) (viii)
c/o Cutitronics Limited, Torus Building, Rankine Avenue,
Scottish Enterprise Technology Park, East Kilbride, G75 0QF
Croda (CPI) Limited (ix)

174
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Croda International Plc
Crodareport
International
Plc 2021
Annualand Accounts
Annual Report and Accounts 2021

No. 2 Xiang Shan Avenue, Ning Xi Street, Zeng Cheng District,
Guangzhou, China
Croda Iberchem (Guangzhou) Fragrance and Flavour Manufacturing Co.,Ltd (vi) (viii)
Unit 501, 5th floor (actual 4th floor), Nominal floor, Block B (No.1
Building), No.3 Linhong Road, Changning District, Shanghai
Croda (Shanghai) Specialty Materials Co., Ltd (vii)
191 Dong Jiang Street, GET Development Zone, 510730 Guangzhou
Guangzhou Iberchem, Co. Ltd (vii)
2nd Floor, No. 21, Eastern of Yonyou Industrial Park, No. 9 YongfengRoad, Haidian District, Beijing

Incotec (Beijing) Agricultural Technology Co. Ltd (vii)
No.3 Plant, No.202, Huashan Road, Modern Industrial Zone, Tianjin
Development Zone, Tianjin

Incotec (Tianjin) Agricultural Science & Technology Co. Ltd (vii)
No.656 East Tangxun Road, Economic-Technological Development
Zone, Mianyang, Sichuan 621000
Sichuan Xihe Rape Seed Industry Co., Ltd (vii)
No.139, Jianqing Road, Pu'an Town, Jiange County Guangyuan,
Sichuan, 628300
Sichuan Xiyuan Grease Chemical Co., Ltd (vii)

Incorporated in France
9, rue Jean Monnet, 28630 Fontenay Sur Eure
Alban Muller International (vii)
1, rue de Lapugnoy, 62920 Chocques
Croda Chocques SAS (vii)
Futura III, 1, avenue de Westphalie, 78180 Montigny-le-Bretonneux
Croda France SAS (vii)
Croda Holdings France SAS (ix)Zone artisanale, 48230 Chanac
Crodarom SAS (vii)
29 rue du Chemin Vert, 78610, Le Perray en Yvelines
Sederma SAS (vii)

Incorporated in the Netherlands
Buurtje 1, 2802 BE Gouda
AM Coatings BV (v) (viii)
Croda EU BV (ix)
Croda Nederland B.V. (vii)
Westeinde 107, 1601 BL Enkhuizen
Incotec Europe B.V. (vii)
Incotec Group B.V. (i) (ix)
Incotec Holding B.V. (ix)

700 Industrial Park Drive, Alabaster, AL 35007
Avanti Polar Lipids, LLC (vii)
777 Scudders Mill Road, Building 2, Suite 200, Plainsboro,
NJ 08536

Croda Americas LLC (viii)
Croda Finance Inc (viii)
Croda Inc. (vii)
Croda Inks Corp (viii)
Croda Investments Inc (ix)
Croda Storage Inc (viii)
Croda Synthetic Chemicals Inc (ix)Mona Industries Inc (viii)
Sederma Inc (vii)

Croda Hong Kong Company Ltd (vii)
Hong Kong – Kreston CAC CPA Ltd, Rooms 2702-3, 27th Floor, Bankof East Asia Harbour View Centre, 56 Gloucester Road, Wan Chai

IonPhaseE (H.K.) Limited (vii)
Hungary – 1117 Budapest XI, Bölcso utca 6. 1. emelet 4.

Croda Magyarorszag Kft (i) (vii)
India – Plot No. 1/1, Part TTC Industrial Area, Thane Belapur Road,
Koparkhairne, Navi Mumbai 400710, Maharashtra

Croda India Company Private Ltd (i) (vii)1293 Harkins Road, Salinas, CA 93901

Incotec Integrated Coating and Seed Technology, Inc. (vii)
Incorporated in other overseas countries
Argentina – Office Dardo Rocha 2044, 1640, Martinez, Buenos Aires

Croda Argentina SA (vii)
Australia – Suite 2, Level 6, 111 Phillip Street, Parramatta, NSW 2150

Croda Australia Pty Ltd (vii)
Brazil – Rua Croda, 580, Distrito Industrial, Campinas, São Paulo,
CEP 13.074-710

Croda do Brasil Ltda (vii)
Brazil – AFAS Adviser Consultores Associados Ltda, Rua Manuel deNóbrega, 1.280, 10º andar, Paraíso, São Paulo, CEP 04001-902

Iberchem Brazil Participaçoes Ltda

Hong Kong – Room 908, East Ocean Centre, No.9 Science Museum
Road, Tsim Sha Tsui, East Kowloon(viii)

Canada – 1700 Langstaff Road, Suite 1000, Vaughan,Ontario, L4K 3S3
Croda Canada Ltd (vii)
Chile – Los Militares 4611, 17th Floor – 7560968, Las Condes,
Santiago

India – 38/A, Radhe Industrial Estate, Tajpur Road, Changodar
382213, Ahmedabad

Iberchem India Ltd (vii)
India – 47, Mahagujarat Industrial Estate, Opp. Pharma Lab, SarkhejBavla Highway, At. Moraiya, Ta. Sanand, Ahmedabad-382213,
Gujarat

Integrated Coating and Seed Technology India Pvt. Ltd (vii)
Indonesia – Kawasan Industri Jababeka, Jl. Jababeka IV Blok V Kav
74-75, Cikarang Bekasi 17530
PT Croda Indonesia (iii) (iv) (vii)
Indonesia – Palma Tower , 17th Floor, Jl. RA Kartini II-S Kav.6 ,Jakarta 12310
PT Croda Trading Indonesia (vii)
Indonesia – Pusat Niaga Terpadu, JI. Daan Mogot Raya Km 19, 6
Blok GG8N, 15122 Tangerang

PT Scentium Flavours (vii)
Iran – Apt. 305, 3rd Floor, No 14 Golestan Avenue, Alikhani Avenue,
Southern Shiraz Street, Tehran

Croda Pars Trading Co (vii)
Italy – Via P. Grocco 915, 27036 Mortara

Croda Italiana S.p.A. (vii)
Italy – Via del Commercio, 2, Desio (MB)Croda Chile Ltda (vi) (vii)

Iberchem Italia SRL (vii)

Colombia – Calle 90 # 19-41 Office 601, Bogotá

Japan – 7-1 Nishi-shinjuku 3-chome, Shinjuku-ku, Tokyo 163-1001

Croda Colombia (ii) (vii)

Croda Japan KK (i) (vii)

Colombia – Aut. Medellín km. 7, Bodega 88-02, Celta Trade Park,
Funza, Cundinamarca

Malaysia – 6 Jalan Anggerik Mokara 31/54, Kota Kemuning, Section
31, 40460 Shah Alam, Selangor Darul Ehsan

Iberchem Colombia SAS(vii)
Czech Republic – Praha 5, Pekarˇská 603/12, 150 00

Croda Spol. s.r.o (vii)
Denmark – Elsenbakken 23, 3600 Frederikssund

Croda Denmark A/S (vii)
Finland – Hepolamminkatu 29, 33720 Tampere

IonPhasE Oy (vii)
Germany – Herrenpfad Süd 33, 41334 Nettetal

Croda GmbH (vii)
Sederma GmbH (vii)
Germany – Dr.-Hans-Wilhelmi-Weg 1, 35633 Lahnau

Rewitec GmbH (vii)
Guernsey – PO Box 33, Dorey Court, Admiral Park, St Peter Port, GY1
4AT

Cowick Insurance Services Ltd (i) (xii)

Flavor Inn Corporation Sdn Bhd (vii)
Mexico – Hamburgo 213, Piso 10, Colonia Juárez, Delegacion
Cuauhtémoc, D.F., C.P. 06600

Croda México SA de CV (vii)
Mexico – Alfredo Nobel No. 3, 3 y 4, Col. Fraccionamiento Industrial
Los Reyes, Estado de México, 54073 Tlalnepantla

Iberchem Mexico SA de CV (vii)
Nigeria – Landmark Towers, 5B, Water Corporation Road, Victoria
Island, Lagos

Croda SI&T Nigeria Limited (vii)
Peru – Av. Juan de Aliaga 425 Of. 401, Magdalena del Mar

Croda Peruana S.A.C (vii)
Poland – ul. Wadowicka 6, 30-415 Kraków

Croda Poland Sp. z o.o. (i) (vii)
Republic of Korea – Rm. 1201, 12th Floor, 42, Hwang Sae UI-Ro 360
Beon-Gil, Bun Dang-Gu, Seong Nam-Si, Gyeong Gi-Do, 13591

Croda Korea (ii) (vii)

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Croda International Plc
Croda
AnnualreportInternationaland AccountsPlc
2021
Annual Report and Accounts 2021

Other information

Incorporated in the USA

Other information (continued)
Related Undertakings (continued)

Incorporated in other overseas countries continued
Russian Federation – Office 1333, 16 Raketnyi bulvar, Moscow,
129164

Croda RUS LLC (vii)
Singapore – 30 Seraya Avenue, Singapore 627884

Croda Singapore Pte Ltd (i) (v) (vii)
Singapore – 2 International Business Park, #04-06 The Strategy(Tower 1)

Iberchem Far East Pte Ltd (vii)South Africa – Clearwater Estate Office Park, Block G, Corner ofAtlas & Park Road, Parkhaven Ext 8, Boksburg 1459

Croda (SA) (Pty) Ltd (vii)
Incotec South Africa (Pty.) Ltd (vii)South Africa – 5 Marconi Nook, Hennopspark, Centurion, 0157

Non-wholly owned subsidiaries, associates andinvestments:
Incorporated in the UK
3 Huxley Road, Surrey Research Park, Guildford, GU2 7RE

SiSaf Ltd

3.89%

Incorporated in other overseas countries
Brazil – Rua das Sementes nr. 291, Holambra, State of São Paulo

Incotec America do Sul Tecnologia em Sementes Ltda. (vii) 99.99%
China – No 656 East Tangxun Road Economic and Technological
Development Zone Miangyang Sichuan

Croda Sipo (Sichuan) Co., Ltd (vii)

65.00%

China – 2nd Industrial Road (E), Changleng Foreign Investment
Industrial Park II, Xinjian County, Nanchang City, Jiangxi, 330100

Iberchem South Africa (Pty) Ltd (vii)

Nanchang Xinduomei Bio-Technology Co.,Ltd (vii)

70.00%

Spain – Plaza. Francesc Macià, 7, 7ºB, 08029 Barcelona

Croda Ibérica SA (vii)

France – 51 avenue Louison Bobet, 06130 Grasse
Parfex (vii)

99.47%

Spain – Avenida del Descubrimiento, Parcela 9/9, Polígono I, 30820
Alcantarilla, Murcia

Indonesia – Pusat Niaga Terpadu, JI. Daan Mogot Raya Km 19, 6
Blok GG8N, 15122 TangerangFragrance Spanish Topco, S.L. (ix)
Iberchem SA (vii)
Sweden – Geijersgatan 2B, 216 18 Limhamn

Croda Nordica AB
MX Adjuvac AB (xiii)(vii)

Vietnam – Room # 606A, Floor 6th, Centre Point Building 106 Nguyen
Van Troi Street, Ward 8, Phu Nhuan District,
Ho Chi Minh CityPT Iberchem Indonesia Fragrances (vii)

98.00%

Indonesia – Pusat Niaga Terpadu, Blok EE 8A, Jl, Daan Mogot, Raya,
Km.19, Tangerang, 15122, Jakarta West Java, Indonesia

PT Inti Berkah Chemindo (viii)

51.00%

Spain – Avenida de Holanda, Parcela 12/14, Polígono Industrial Las
Salinas, 30840 Alhama de Murcia, Murcia

Scentium Flavours, S.L. (vii)

98.60%The Representative Office of Croda Singapore Pte Ltd in
Ho Chi Minh City (ii) (vii)

Sweden – Scheelevägen 22, 22363 Lund

Thailand – 319 Chamchuri Square Building, 16th Floor, Unit 1314, Payathai Road, Patumwan, Bangkok 10330
Croda (Thailand) Co., Ltd (i) (vii)

Tunisia – 39, rue Jamel Abdennaceur, Z.I. Borj Cédria, Bir El Bey, BP
69, 2055 Ben Arous

Thailand – No. 41/87 Moo 6 Bangna Trad Road Km. 16.5, Bangcha
long-Sub District, Bangplee District, 10540 Bangkok, Samutprakarn
Province

Turkey – Yeşiltepe Mahallesi İsmetinönü-2 Cad. No:2/57 Tepebaşi,Eskişehir

Iberchem Thailand Ltd (vii)
Turkey – Nidakule Göztepe Is¸ Merkezi, Merdivenköy Mahallesi, Bora
Sokak, No: 1 Kat:2/5 Kadıköy 34732, Istanbul

Croda Kimya Ticaret Limited Şirketi (vii)

United Arab Emirates – P. O. BOX 17916, Office 1209, 1210 & 1211,
12th Floor, Jafza One, Tower B, Jebel Ali Free Zone, Dubai

Croda Middle East FZE (vii)
Zimbabwe – 4a Knightsbridge Crescent, Highlands, Harare

Croda Chemicals Zimbabwe Pvt Ltd (viii)
Classifications Key(i).
Companies owned directly by Croda International Plc(ii).
Branch office(iii).
A Ordinary(iv).
B Ordinary(v).
Preference including cumulative, non-cumulative and redeemable shares(vi).
No share capital, share of profits(vii). Manufacture, sales or distribution of speciality chemicals, or of seed treatment
services and products, or fragrances and flavours compositions(viii). Dormant(ix).
Holding company(x).
Property holding company(xi).
Trustee(xii). Captive insurance company(xiii). Research enterprise(xiv). Not consolidated; Company limited by Guarantee and not having a Share Capital

176
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Croda International Plc
Crodareport
International
Plc 2021
Annualand Accounts
Annual Report and Accounts 2021

Enza Biotech AB (xiii)

Iberchem Tunisie S.A.R.L. (vii)

88.00%

63.70%

Entekno Industrial, Technological and Nano Materials Corp. 9.00%
United Arab Emirates – Units 2601 & 2602, Al Manara Tower, Al Abraj
St., Business Bay, P.O. Box 191160, Dubai

The Essence of Nature F&F Trading LLC (vii)

49.00%

Shareholder Information

20 May 2022
6 June 2022

2022 Half year results announcement

26 July 2022

Overseas shareholders – choose
to receive your next dividend inyour local currency

2022 Interim ordinary dividend payment
2022 Preference dividend payments

4 October 2022
30 June 2022
31 December 2022

2022 Full year results announcement

7 March 2023

If you live outside the UK, Link has partneredwith Deutsche Bank to provide you with aservice that will convert Sterling dividends
into your local currency at a competitive rate.

Investor relations

Dividend reinvestment plan (‘DRIP’)

Shareholders can now get up todate information on Stock Exchangeannouncements, key dates in the corporate
calendar, the Croda share price and brokers’
estimates by visiting our corporate website atwww.croda.com and clicking on the section
called ‘Investors’.

Ordinary shareholders may wish to know
about this plan, which allows you to use
your dividends to buy further shares in
Croda. The DRIP is offered to UK
shareholders only by Link Group which isauthorised and regulated by the Financial
Conduct Authority.

Shareholders can receive shareholder
communications electronically byregistering on the Registrars’ website,www.signalshares.com and following the
instructions. To register, shareholders will
require their investor code (IVC): this is an
11 digit number starting with five or six zeros
and can be found on your dividend tax
voucher or your share certificate. Receiving
corporate communications by email has
a number of benefits including being
more environmentally friendly, reducing
unnecessary waste, faster notification of
information to shareholders and eventuallyleading to a reduction in company costs.

For information and an application packplease call 0371 664 0381. Calls are charged
at the standard geographic rate and will varyby provider. Calls outside the United
Kingdom will be charged at the applicableinternational rate. Lines are open 9.00am to
5.30pm, Monday to Friday, excluding public
holidays in England and Wales. From outside
the UK dial +44 (0)208 639 3402).
Alternatively you can email
shares@linkgroup.co.uk or log on towww.signalshares.com.

Shareholders who register on the above
website can also check their shareholding,view their dividend history, choose theirdividend options, register changes ofaddress and dividend mandate instructions.

Share price information
The latest ordinary share price is available on
our website at www.croda.com.
The middle market values of the listed sharecapital at 31 December 2021, or last datetraded*, were as follows:
Ordinary shares

10045p

5.9% preference shares
6.6% preference shares

105.5p*106.5p*

Payment of dividends
You can arrange to have your dividends paid
direct to your bank account. This means that:• your dividend reaches your bank accounton the payment date;• it is more secure – cheques cansometimes get lost in the post;• you don’t have the inconvenience of
depositing a cheque; and• helps reduce cheque fraud.
If you have a UK bank account you cansign up to this service on Signal Shares(www.signalshares.com by clicking on‘your dividend options’ and following theon-screen instructions) or by contacting
the Customer Support Centre.

You can choose to receive payment directly
to your local bank account or alternatively
you can be sent a currency draft. You cansign up to this service on Signal Shares(www.signalshares.com by clicking on‘your dividend options’ and following theon-screen instructions) or by contacting
the Customer Support Centre. For further
information contact Link:
By phone – UK 0371 664 0300, fromoverseas +44 (0)371 664 0300. Calls arecharged at the standard geographic rate andwill vary by provider. Calls outside the United
Kingdom will be charged at the applicableinternational rate. Lines are open 9.00am to
5.30pm, Monday to Friday, excluding public
holidays in England and Wales.
By email – ips@linkgroup.co.uk

Relating to beneficial owners ofshares with ‘information rights’
Please note that beneficial owners ofshares who have been nominated by theregistered holder of those shares toreceive information rights under section
146 of the Companies Act 2006 arerequired to direct all communications to
the registered holder of their shares rather
than to the Company’s registrar, Link
Group, or to the Company directly.

Share fraud warning
Fraudsters use persuasive and high-pressure
tactics to lure investors into scams. They
may offer to sell shares that turn out to be
worthless or non-existent, or to buy shares at
an inflated price in return for an upfront
payment. While high profits are promised, if
you buy or sell shares in this way you willprobably lose your money.
5,000 people contact the Financial Conduct
Authority (‘FCA’) about share fraud eachyear, with victims losing an averageof £20,000.

177
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Croda International Plc
Croda
AnnualreportInternationaland AccountsPlc
2021
Annual Report and Accounts 2021

Other information

2022 Annual General Meeting
2021 Final ordinary dividend payment

Other information (continued)
Shareholder Information (continued)

How to avoid share fraud• Keep in mind that firms authorised by the

FCA are unlikely to contact you out of theblue with an offer to buy or sell shares.

• Do not get into a conversation, note thename of the person and firm contacting
you and then end the call.

• Check the Financial Services Registerat www.fca.org.uk to see if the person
and firm contacting you is authorised by
the FCA.

• Beware of fraudsters claiming to be froman authorised firm, copying its website orgiving you false contact details.

• Use the firm’s contact details listed on theRegister if you want to call it back.

• Call the FCA on 0800 111 6768 if the firm
does not have contact details on theRegister or you are told they are outof date.

• Search the list of unauthorised firms to
avoid at www.fca.org.uk/scams.

• Consider that if you buy or sell shares froman unauthorised firm you will not haveaccess to the Financial Ombudsman
Service or Financial Services
Compensation Scheme.

• Think about getting independent financial
and professional advice before you handover any money.

• Remember: if it sounds too good to betrue, it probably is!

Report a scam

If you are approached by fraudsters pleasetell the FCA using the share fraud reporting
form at www.fca.org.uk/scams, where you
can find out more about investment scams.
You can also call the FCA Consumer
Helpline on 0800 111 6768.
If you have already paid money to share
fraudsters you should contact Action Fraud
on 0300 123 2040.

178
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Croda International Plc
Crodareport
International
Plc 2021
Annualand Accounts
Annual Report and Accounts 2021

Secretary and Registered Office
Tom Brophy (Company Secretary)
Cowick Hall, Snaith, Goole, East Yorkshire
DN14 9AA
Tel: +44 (0)1405 860551
Fax: +44 (0)1405 861767
Website: www.croda.com
Registered in England number 206132

Registrars
Link Group
10th Floor, Central Square, 29 Wellington
Street, Leeds, LS1 4DL
Tel:0371 664 0300 (from UK)+44 (0)371 664 0300 (from overseas)
Calls are charged at the standard geographic
rate and will vary by provider. Calls outside
the United Kingdom will be charged at theapplicable international rate; lines are open
9.00am to 5.30pm, Monday to Friday
excluding public holidays in Englandand Wales.
Fax:+ 44 (0)1484 601512
Website: www.linkgroup.eu
Email:
enquiries@linkgroup.co.uk

Independent Auditors
KPMG LLP
15 Canada Square, London, E14 5GL

Principal Financial Advisers
Morgan Stanley & Co. International plc

Principal Solicitors
Freshfields Bruckhaus Deringer LLP

Stockbrokers
Morgan Stanley & Co. International plc
HSBC Bank plc

Financial PR Advisers
TeneoOther Information
Five Year Record

TurnoverCovenant EBITDA4
Adjusted operating profit1
Adjusted profit before tax1
Profit after tax
Profit attributable to owners of the parent

2021
£m

2020
£m

2019
£m

2018
£m

2017
£m

1,889.6
591.4
468.6
445.2
322.8
320.8

1,390.3
433.4
319.6
300.6
201.6
201.6

1,377.7
402.9
339.7
322.1
223.8
223.9

1,386.9
408.6
342.5
331.5
238.3
238.5

1,373.1
398.1
332.2
320.3
236.7
237.0

24.8
21.2

23.0
24.1

24.7
25.6

24.7
24.6

24.2
26.8

Return on sales1 (%)
Effective tax rate1 (%)

Pence

Pence

Pence

Pence

Pence

250.0
100.0

175.5
91.0

185.0
90.0

190.2
87.0

179.0
81.0

Times

Times

Times

Times

Times

1.4
22.4

1.8
22.5

1.4
23.3

1.0
29.8

1.0
29.9

2021
£m

2020
£m

2019
£m

2018
£m

2017
£m

2,350.9443.0
337.9(370.3)2,761.5(180.3)7.9
2,589.1
1,753.1
12.8
1,765.9
823.2
2,589.1

2,297.8
302.6
289.9(267.6)2,622.7(194.8)(32.3)
2,395.6
1,585.8
9.3
1,595.1
800.5
2,395.6

1,301.4
268.9
216.8(164.7)
1,622.4(131.1)(75.0)
1,416.3
861.6
7.0
868.6
547.7
1,416.3

1,240.0
287.2
233.6(191.3)
1,569.5(127.5)(18.5)
1,423.5
990.5
7.5
998.0
425.5
1,423.5

1,072.5
258.5
202.2(202.5)1,330.7(88.8)(30.5)
1,211.4
822.3
7.6
829.9
381.5
1,211.4

2021
£m

2020
£m

2019
£m

2018
£m

2017
£m

369.2

242.6

252.8

258.2

243.2

Invested capital
Adjustments for:Goodwill previously written off to reserves
Accumulated amortisation of acquired intangible assets
Adjusted invested capital
Average adjusted invested capital3
Return on invested capital (ROIC) (%)

2,589.1

2,395.6

1,416.3

1,423.5

1,211.4

50.2
70.6
2,709.9
2,596.0
14.2

50.2
36.3
2,482.1
1,665.6
14.6

50.2
22.7
1,489.2
1,488.9
17.0

50.2
14.8
1,488.5
1,343.6
19.2

50.2
8.2
1,269.8
1,148.6
21.2

Post-tax cost of capital (%)
Charge for invested capital
Economic value added1

6.4(166.1)203.1

6.2(103.3)
139.3

6.2(92.3)
160.5

5.1(68.5)
189.7

4.8(55.1)
188.1

Adjusted earnings per share1
Ordinary dividends per share

Net debt/Covenant EBITDA
Covenant EBITDA interest cover2

Summarised Balance Sheet
Intangible assets, property, plant and equipment and investments
Inventories
Trade and other receivables
Trade and other payables
Capital employedTax, provisions and other
Retirement benefit assets/(liabilities)
Shareholders’ funds
Non-controlling interests
Net assets
Net debt
Invested capital

Return on capital
Adjusted operating profit net of tax1

1 Before exceptional items, amortisation of intangible assets arising on acquisition and the tax thereon where applicable
2 Interest excludes net interest on retirement benefit liabilities
3 The Group acquired Avanti Polar Lipids, LLC on 12 August 2020 and Fragrance Spanish Topco, S.L. (‘Iberchem’) on 24 November 2020. Given the value of the acquisitions, the Group’s measureof average adjusted invested capital for 2020 has been adjusted for the related weighted average impact. The Group acquired Brenntag Biosector A/S on 28 December 2018. Given the value ofthe acquisition and its proximity to the balance sheet date, the Group’s measure of average adjusted invested capital for 2018 has been adjusted for the related impact
4 Covenant EBITDA is EBITDA as defined in the Finance Review but before share-based payment charges and the loss on associates. Covenant EBITDA is also adjusted to reflect the annualised
impact of acquisitions in the period.
The five year record is presented based on the applicable accounting standards at the relevant reporting date.

Croda International Plc
Annual report
Accounts 2021
CrodaandInternational
Plc
Annual Report and Accounts 2021

179
173

Other information

Earnings

Glossary

Before exceptional items, amortisation of intangible
assets arising on acquisition and the tax thereon
where applicable

IFRS

International Financial Reporting Standards

IIRC

International Integrated Reporting Council

Annual General Meeting

IPIntellectual Property

ALM

Asset-Liability Matching

ISO

International Organization for Standardization

Bio-based

Carbon containing, from renewable, non-fossil sources

ISSB

International Sustainability Standards Board

CARE

Career Average Revalued Earnings

IT

Information Technology

CDP

Carbon Disclosure Project

KPI

Key Performance Indicator

CEO

Chief Executive Officer

LDI

Liability driven investment

CGU

Cash Generating Unit

M&A

Mergers and acquisitions

CIPEBT

Croda International Plc Employee Benefit Trust

Code

Financial Reporting Council’s 2018 UK Corporate
Governance CodeMarketsectors

Consumer Care, Life Sciences, Performance
Technologies, Industrial Chemicals

NCI

Non-controlling interest

CO2

Carbon dioxide

Net debt

CO2e

Carbon dioxide equivalent

Borrowings and other financial liabilities less cash
and cash equivalents

Constant
currency

Current year results for existing business translated at
the prior year’s average exchange rates and include theimpact of acquisitions

NGO

Non-governmental Organisation

NPP

New and protected productsPSP

Performance Share Plan

CPI

Consumer Price Index

QUEST

Croda International Plc Qualifying Share Ownership Trust

CPS

Croda Pension Scheme

R&D

Research and Development

DRIP

Dividend Reinvestment Plan

Adjusted operating profit divided by revenue

DBSP

Deferred Bonus Share Plan

Return on
sales

EBITDA

Earnings Before Interest, Taxation, Depreciation
and Amortisation

RFT

Right first time

ROIC

Return on Invested Capital

EBT

Employee Benefit Trust

RPI

Retail Price Index

EPS

Earnings per share

RSP

Restricted Share Plan

EU

European Union

RSPO

Roundtable on Sustainable Palm Oil

EVA

Economic Value Added

SASB

Sustainability Accounting Standards Board

F&F

Fragrances and Flavours

SBT

Science Based Targets

FCA

Financial Conduct Authority

SDGs

United Nations Sustainable Development Goals

FRC

Financial Reporting Council

SHE

Safety, health, environment

FRS

Financial Reporting Standard

SHEQ

Safety, health, environment, quality

FSP

Free Share Plan

SIP

Share Incentive Plan

FTSE

Financial Times Stock Exchange

SMEs

Small and Medium Enterprises

GDPR

General Data Protection Regulation

STEM

Science, technology, engineering and mathematics

GHG

Greenhouse gas

TCFD

Task Force on Climate-related Financial Disclosure

Scope 1emissions

Direct emissions from our own, or controlled sourcesTe

TonnesScope 2emissionsIndirect emissions from the generation of purchased
electricity, steam, heating and cooling

TeCO2eTonnes carbon dioxide equivalent

TRIR

Total Recordable Injury Rate

Scope 3emissions

All other indirect emissions that occur in ourvalue chain

TSR

Total shareholder return

UV

Ultraviolet

GMP

Good Manufacturing Practice

VRF

Value Reporting Foundation

HMRC

HM Revenue & Customs

WACC

Weighted Average Cost of Capital

IASB

International Accounting Standards Board

WHO

World Health Organization

Adjusted

AGM

174

Croda International Plc
Annual Report and Accounts 2021

Cautionary Statement
The information in this publication is believed to be accurate at the dateof its publication and is given in good faith but no representation or
warranty as to its completeness or accuracy is made. Suggestions inthis publication are merely opinions. Some statements and in particularforward-looking statements, by their nature, involve risks and uncertainties
because they relate to events and depend on circumstances that will or
may occur in the future and actual results may differ from thoseexpressed in such statements as they depend on a variety of factors
outside the control of Croda International Plc. No part of this publication
should be treated as an invitation or inducement to invest in the sharesof Croda International Plc and should not be relied upon when making
investment decisions.

Designed and produced byBlack Sun Plc.
This Report is printed on UPM
Fine Offset which has been
independently certified according
to the rules of the Forest
Stewardship Council® (FSC®).
Printed in the UK by Pureprint,a CarbonNeutral® company.
Both manufacturing paper mill andthe printer are registered to theEnvironmental Management System
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Registered office
Croda International Plc
Cowick Hall
SnaithGoole
East Yorkshire
DN14 9AA
England
T +44 (0)1405 860551
www.croda.com