Annual Financial Report

RNS Number : 7022A

Croda International PLC

22 March 2013

 



Croda International Plc - Annual Financial Report

Croda International Plc (the "Company") confirms that its Annual General Meeting will be held at 12 noon on 25 April 2013 at Carlton Towers, Carlton, Goole, East Yorkshire, DN14 9LZ.

In accordance with Listing Rule 9.6.1, the Company has submitted to the National Storage Mechanism copies of the following documents which will shortly be available for inspection at http://www.morningstar.co.uk/uk/NSM:

- Annual Report for the year ended 31 December 2012

- Notice of Annual General Meeting

- Form of Proxy

- Letter advising shareholders of publication of documents on Company's website

- Sustainability Report

The Annual Report and Accounts for the year ended 31 December 2012 are available on the Company's website at:

www.croda.com

_______________________________________________________________

IMPORTANT: EXPLANATORY NOTE AND WARNING

The primary purpose of this announcement is to inform the market about the publication of the Company's Annual Report for the year ended 31 December 2012 (the "2012 Annual Report").

The information below, which is extracted from the 2012 Annual Report, is included solely for the purpose of complying with DTR 6.3.5 and the requirements it imposes on issuers as to how to make public annual financial reports.  It should be read in conjunction with the Company's Preliminary Announcement issued on 26 February 2013.  Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service.  This material is not a substitute for reading the full 2012 Annual Report.  Page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the 2012 Annual Report.

ADDITIONAL INFORMATION REQUIRED BY DISCLOSURE AND TRANSPARENCY RULE 6.3.5

Statement of Directors' Responsibilities for Preparing the Financial Statements

The following statement which was prepared for the purposes of the 2012 Annual Report is set out on page 60 of that document.  As set out above, this statement is repeated here solely for the purpose of complying with DTR 6.3.5. This statement relates to and is extracted from the 2012 Annual Report. It is not connected to the extracted and summarised information presented in this announcement and in the Company's Preliminary Announcement that was published on 26 February 2013.

Each of the directors, whose details are set out on pages 28 to 29 confirms that, to the best of their knowledge:

i        the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

i        the Business review contained in this report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

Related Party Transactions

There are no related party transactions disclosed in the 2012 Annual Report.

Principal Risks and Uncertainties

The following description of principal risks and uncertainties is set out on pages 16 and 19 of the 2012 Annual Report.  As set out above, this description is repeated here solely for the purpose of complying with DTR 6.3.5.

Risk Management

Effective management of risks and opportunities is essential to the delivery of the Group's strategic, sustainability and financial objectives, ensuring that the Group delivers value to the shareholders, protects its reputation and meets the requirements of good corporate governance.  Croda is committed to the effective management of key business risks throughout the organisation.

Our Risk Management Approach

The Group co-ordinates its global approach through the Risk Management Committee which meets quarterly and reports directly to the Board via the Audit Committee.  The Risk Management Committee is chaired by the Group Finance Director and comprises the regional Presidents, the President of Global Operations, the Chief Technology Officer, the Group Financial Controller and the Group General Counsel and Company Secretary, with the Group Risk and Control Manager in attendance.

The responsibility for risk identification, analysis, evaluation and mitigation rests with management at:

i         Manufacturing sites and sales offices (review at least annually)

i         Regional and functional level (review at least half yearly)

i         Executive level (review quarterly)

These registers are reviewed and consolidated to ensure there is a comprehensive view of the material risks facing the Group, along with the controls in place to mitigate these risks.

Our Risk Framework

The risk register format, risk scoring and risk categories (which cover strategic, external environment, business systems, people and processes and financial) are defined centrally in the Risk Management Framework.  Each risk at every level must have an owner who is responsible for monitoring and managing the risk.

Activities During the Year and Priorities for 2013

The Audit Committee received a report from the Risk Management Committee at each meeting.  The Group's highest risks were discussed and the adequacy and assurance over mitigating controls were reviewed.  The Audit Committee received a summary of the findings from internal audit at each meeting, and of the key issues arising.  More information on the activities undertaken by the Audit Committee is contained in the Corporate Governance section on page 36.

The Risk Management Committee undertook a full review of the bottom up risks from all risk registers against the identified key risks, as it does at least annually.  Emerging risks were considered at each meeting, and a nominated member of the Committee is responsible for ensuring that best practice is followed in monitoring and addressing each of the key risks.  Risk presentations were received by the Committee relating to IT security, innovation, implementation of new IT systems and the management of risks in the Acrylic Polymer plant project.  In 2012 two risks have risen up the Executive Risk Register as a result of these reviews and are now included in the summary of key risks below.

Internal audit have visited sites based on an audit plan agreed with the Audit Committee to provide assurance over key controls in operation.  Each site performs an annual self-assessment of their control environment against Group defined key controls.  Our own in house Group SHE audit team have undertaken safety health and environmental related audits throughout the year.

An integrated assurance mapping exercise is currently in development which clearly links the three levels of assurance and the origin of that assurance against controls over the key business risks, as well as identifying in one document the work of all the assurance providers operating throughout the Group.  This will be used to ensure that assurance is neither duplicated nor are there gaps in assurance provision.

Key Risks Identified by the Group

The nature of the industry in which we operate and our chosen strategy, expose the Group to a number of risks.  The Board has considered the nature and extent of the key risks and these are summarised in the table below.

Risk	Description and Impact	Mitigation
Strategic
Product and technology innovation	Croda operates in competitive markets in which product innovation is key to our success.  Failing to deliver innovation could result in a lack of competitive products and erosion of margins and/or loss of market share.	We operate an open innovation model where we look to complement internal innovation with customer and market driven external innovation.  This is achieved through a global network of relationships with academic and industrial centres of excellence.
Merger and acquisition strategy	The Group has experienced growth through acquisitions and continues to pursue acquisitions to meet its strategic objectives.  Whether the Group realises the anticipated benefits from these acquisitions depends on the integration of the acquired businesses and their performance in relation to the Group's acquisition expectations.	The Group has established policies and processes in place to manage the acquisition process, integrate acquired businesses and monitor performance.
Loss of market share to competitors	Croda's core markets are subject to increasing competition.  Loss of business to competitors resulting from failure to consider changes in established markets could have an adverse effect on Croda's financial position.	The Group has specialised commercial sales teams globally and a commitment to protect existing business with competitive and considered pricing policies.
Failure to grow position in emerging markets	One of our key strategic aims is for rapid growth in emerging markets.  Failure to deliver on this objective may have an adverse effect on Croda's growth.	Resource levels in sales, marketing and research are being increased in the fastest growing regions.  We are also committed to moving manufacturing closer to our target customers in these regions.
External Environment
Product liability	Croda sells into a number of highly regulated markets.  Non-compliance with quality regulations could expose the Group to liability and reputational damage.	Quality management procedures are in place for each site, and all manufacturing sites hold ISO9001 standards. Major sites have also been audited against GMP (Good Manufacturing Practice) standards.
Compliance with global chemical regulatory requirements	As a global chemical producer, Croda operates in a highly regulated environment.  Violation or incomplete knowledge of the appropriate regulations could limit the markets into which we can sell, or subject the Group to fines or penalties.	Our Group regulatory team continue with the next phase of REACh product registration which remains the most significant chemical legislation change facing the Group.
People and Process
Major site event involving the loss of a site	Significant operational problems could have an adverse effect on Croda's financial position.  We are reliant on the continued operation of our manufacturing sites.	Strict internal safety and maintenance programmes are operated which are audited by our Group SHE internal audit team.  Business continuity plans are in place.
Major environmental incident	Violations of safety, health and environmental regulations could limit operations and expose the Group to liability, cost and reputational impact.	In addition to maintaining compliance with national and international safety standards, we maintain strictly audited internal safety and health programmes.
Interruption of raw material supply	Interruption in the supply of key raw materials would significantly impact operations and our financial position. Interruption of supply could arise from the implementation of new, more rigorous legislation or from market shortage.	Wherever possible, we try to multi source our key raw materials and/or we purchase them under medium to long term contracts.  We manage our raw material stock levels taking these considerations into account.
Employees and the recruitment and retention of high quality staff	We rely on knowledgeable and specialised employees whose vision and experience is critical to maintaining the Group's success.  The lack of an appropriately skilled workforce could adversely impact the Group's ability to perform in line with expectations.	We have procedures in place to identify and retain key employees and to develop succession plans for key positions, including a Global Talent review process.  People development programmes are in place.  Remuneration policies are in place to reward and motivate staff.
Business Systems
IT systems and security failure	Croda relies heavily on IT systems and infrastructure to operate effectively and efficiently and to facilitate communication globally.  Failure of these systems for a prolonged period of time would have an impact on operations and ultimately our financial position.	We have a global IT group who are very experienced in network and system security management and in project management.  Key systems run on a high availability mirrored hardware and there are documented and tested recovery plans for key locations.
Financial
Management of pension fund assets	Croda has legal commitments relating to the provision of pensions and the operation of our pension schemes.  In volatile market conditions, increased future funding requirements may have an adverse effect on Croda's financial position.	The Group's pension schemes are overseen by the Trustees of the funds who take professional actuarial and investment advice as necessary.  Trustees have the required skills as a result of experience and training, and where appropriate the Group will appoint professional trustees to its schemes.
Currency exchange rate movements	The global nature of the Group's business exposes it to volatility in currency exchange rates which could have an adverse impact on Croda's financial position.	We maintain a strategic spread of manufacturing assets and geographic markets which itself limits currency exposures.  The Group hedges its currency exposure on accounts receivable and payable where appropriate.  Speculative hedging is prohibited.

This year working capital management has been removed from the list of key risks in the light of the lower risk levels.  Risks which have risen up the risk register are a loss of market share to competitors and failure to grow position in emerging markets.

The Group faces other risks which are subject to regular review, but which have been assessed as lower risk and are therefore not included here.  Some risk factors remain beyond the direct control of the Group and the risk management programme can only provide reasonable but not absolute assurance that key risks are managed to an acceptable level.

For further information, please contact:

Tom Brophy

Group General Counsel & Company Secretary

[phone]

22 March 2013

 

END

 

 

ACSNKBDPPBKDNNB