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Croda International (CRDA)

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Wednesday 21 February, 2007

Croda International

Final Results

Croda International PLC
20 February 2007

Wednesday, 21 February 2007

                               Croda International Plc

                         Preliminary Results Announcement
                              Year to 31 December 2006


                     Croda reports record results for 2006

                                                                           2006          2005        % change

Sales - continuing operations                                           £518.9m       £305.6m            69.8

Profit before tax - continuing operations before exceptional items       £54.3m        £50.6m             7.3

Profit before tax                                                        £19.0m        £50.6m           (62.5)

Earnings per share - continuing operations before exceptional items       28.8p         25.8p            11.6

Earnings per share - basic                                                 6.3p         25.6p           (75.4)

Dividend per share                                                       14.30p        13.35p             7.1

•    Successful integration of Uniqema

•    Record number of new product launches

•    Further increase in underlying Croda operating margins to 18.2%

•    New Group structure in place as planned for 1 January 2007

•    Exceptional charge of £35.3m relating to integration of Uniqema

•    Proposed final dividend of 9.65p, making the total for the year 
     14.3p, up 7.1%

Commenting on the results, Chairman, Martin Flower, said:

'The acquisition of Uniqema is a transforming move for Croda.  It gives us a
robust platform for future profitable growth and further enhancement of
shareholder value.  I am pleased to report that Croda's existing business had
another record year of earnings and margin growth despite high levels of cost
inflation and adverse currency movements.  Trading in January has been
encouraging and whilst we have seen only one month's trading so far we are
confident of meeting our targets for the year.'

For further information, please contact:

Mike Humphrey, Group Chief Executive                        Tel:   01405 860551

Sean Christie, Group Finance Director                       Tel:   01405 860551

Charlie Watenphul or Andrew Dowler, Financial Dynamics      Tel:   0207 831 3113

Or visit our web site at: where the presentation to analysts will
be available by midday today.

Chairman's Statement

Whilst the acquisition of Uniqema from ICI has been the major event in 2006, I
am pleased to report that Croda's existing business had another record year of
earnings and margin growth despite high levels of energy and feedstock inflation
and adverse currency movements.

Overall Group continuing pre-tax pre-exceptional profits for 2006 were up 7.3%
at £54.3m (2005 £50.6m) driven by growth in Consumer Care.  Sales for the year
were £518.9m (2005 £305.6m) with a 2.7% uplift in the existing Croda business
augmented by £205.0m from Uniqema in the four months since acquisition. Basic
earnings per share for continuing operations before exceptional items increased
11.6% to 28.8p compared to 25.8p last year.  The Board is recommending a final
dividend of 9.65p making a total of 14.3p, up 7.1% on last year.  The dividend
will be paid on 1 June 2007 to those shareholders on the register on 4 May 2007.
At this level the dividend cover is two times.


The acquisition of Uniqema is a transforming move for Croda.  It provides an
excellent geographic fit, strengthens our global position in Consumer Care and
it gives us a robust platform for future profitable growth and further
enhancement of shareholder value.

Uniqema was purchased from ICI for an initial consideration of £370m on 1
September 2006, funded partly by a £61m share placement.  Good progress has been
made in restructuring the business.  The specialities part of Uniqema has been
integrated with the Croda regional specialities structure; the remaining
acquired business will retain the name Uniqema and will operate as a global
Oleochemical company. We have announced staffing reductions of 290 across the
combined business as a result of these moves.

This has been a period of intense activity for both businesses and I would like
to say thank you on behalf of the Board to all our employees for their efforts
throughout the year.


Trading in January has been encouraging with underlying sales and profits for
the combined group ahead of the corresponding period last year and in line with
our plans.  Whilst we have only seen one month's trading so far, we are
confident of meeting our targets for the year.

Chief Executive's review

In 1999, I wrote a strategy paper for the Board outlining how we should change
Croda by increasing focus on our core oleochemical speciality business.  Once
that was achieved we would then make a transforming transaction by buying one of
a very short list of companies.

The refocusing continues to be an outstanding success, as evidenced by the
excellent Croda results for 2006.  On our short list of targets was Uniqema,
part of ICI.  We finally managed to acquire Uniqema in 2006.  We have bought a
good company that, as part of Croda, will become a great company.  The
transition phase is almost complete and the new organisation was in place on 1
January 2007.  All people who are leaving the new Company have either already
left or know the timing of their departure.  We thank them all for their past

We are now beginning the process of repositioning the acquired business using
the same tools we adopted in 1999.  Croda is a brand new company, combining the
market facing approach of Croda with the site based operational skills of

The new structure is already a reality, with the specialities part of Uniqema
integrated into Croda's existing structure.  The more commodity oleochemicals
business based around fatty acids, glycerine and polymerised fatty acids has
been separated into a new organisation operating globally under the Uniqema
name.  We will improve the quality of both businesses by emphasising innovation,
customer service and rigorous cost control.

The specialities business of Uniqema consists of the seven factories in Wilton -
UK, Mevisa - Spain, Chocques - France, Atlas Point - USA, Thane - India,
Cikarang - Indonesia and Woobang - South Korea, and the sales offices around the
world.  These factories have been integrated into our regional specialities
structure and the offices have been rationalised into the Croda marketing
network, resulting in a number of office closures.  The more commodity
oleochemicals business is now a separate unit encompassing the factories in
Gouda - Holland, Bromborough - UK, Emmerich - Germany, Cremona - Italy, Chicago
- USA and Klang - Malaysia.  This retains the Uniqema name and will operate as a
cohesive global business.  Uniqema's leadership in fatty acid production
technology is complemented by its growing business in derivative polymerised
fatty acids.

Croda now has excellent manufacturing facilities in 14 countries across Europe,
the Americas and Asia compared to six countries prior to the acquisition.  Our
global marketing network has increased from operations in twenty-six countries
to thirty-five.  This is a welcome increase in our powerful global marketing
network, especially in fast growing, developing markets.

So far we are delighted with the acquisition, which gives us some great people
and assets, some very good technologies and a much more balanced geography.  We
are ready and fit for the challenge of delivering a leaner, more profitable
company with solid growth prospects in our chosen business sectors.

The relative performances of Croda and the acquired business in 2006 graphically
emphasise the success of the market facing Croda model, in contrast to the more
internalised, process driven structure of Uniqema in the past.  Old Croda
produced excellent results for the year, in spite of rising raw material costs,
enormous energy price rises and unfavourable currency movements.  Operating
profits rose 9% to another record level of £57.2 million.  Sales were up 2.7% to
£313.9 million (in constant currency they were up 3.8%).  We again reduced our
volumes, especially in the low margin traded oils business. Excluding this,
volumes of our core products rose 3%. The real strength of Croda's product and
technology franchise was demonstrated in the sales increase of nearly 7%
attributable to price and product mix effects.  We continued to launch new
products and increased sales in Consumer Care by almost 4%, whilst increasing
operating profits by over 9%.  Personal Care was again the driving force behind
this excellent performance.  Enterprise Technologies successfully launched two
new product ranges - inorganic sunscreens and the nascent range of polymers,
both for the growing global market in Personal Care.

Strong cash generation underpinned the strong trading, helped by a well directed
level of capital expenditure, which has again improved the quality of our global

UK sales were flat, as our customer base continues to shrink, but sales in
mainland Europe were well ahead of 2005, with good growth in France, Germany and
Holland.  In North America, sales were generally flat, mainly due to customer
destocking in the second half, which now seems to have run its course.  In Latin
America, sales growth was again excellent, with particularly good performances
in Brazil, Argentina and Mexico.  Asian sales were ahead, with further strong
growth in China.

We had mixed success with our ongoing disposals programme for non core
businesses.  We sold the Application Chemicals business in mid year and will
dispose of the site in Doncaster separately in early 2007.  In the year,
Chemtura, the majority shareholder of Baxenden Chemicals, attempted to sell the
company. As such we reported Baxenden last year as discontinued. However, this
business has now been withdrawn from sale and together we are reviewing our

The full roll out of SAP to our major units is now complete, with the USA fully
on-stream and Japan implemented in January 2007.  We have expanded capacity at a
number of sites, most notably with a new ester plant in Brazil and new
facilities at Sederma in France, to satisfy demand for our speciality products.

In spite of the continuing consolidation of our customer base, I am pleased to
report that no one customer represents more than 3.4% of our global turnover.
The top ten customers still represent only 19% of our global business.  The
acquisition of Uniqema will not change these ratios to any significant degree.

Consumer Care

This sector again performed strongly in 2006, with sales growth of 4% and an
increase in operating profit of over 9% with a pleasing increase in margins.  In
2006, this sector represented 69% of Group turnover pre Uniqema and 84% of
operating profit.  This is a true speciality business with excellent margins
driven by innovation and growing markets.  These gains were achieved in spite of
a very unfavourable raw material cost environment and unwelcome currency shifts.

There were a record number of new product launches in all units in this sector.
All units look well set to continue to progress in the future, with particularly
good prospects for the Sederma actives business and the Crodarom range of plant

Good progress was made in most regions, with the exception of the USA where flat
sales, but increased profits, reflected the difficulties of the overall market
in the second half of 2006.  There are strong signs that this period of
destocking is coming to an end.

Industrial Specialities

Sales in this sector were flat, with all units performing as well as could be
expected in tough market conditions.  Profits were up 7% as we improved the
quality of the business by exiting lower margin products.

Application Chemicals has been sold from this sector, whereas Baxenden Chemicals
profits reappear, as it has ceased to be classified as discontinued.


As anticipated, the performance of the Uniqema businesses in the last quarter of
2006 was lower than the previous year.  In stark contrast to Croda's existing
business, there were almost no real price increases in 2006.  With strong cost
pressures from energy and raw materials and unhelpful currency shifts, it is not
surprising profits were falling.  Sales were robust in quarter four, but profits
fell.  We have a strong belief that Uniqema's high quality products have been
underpriced and steps have already been taken to increase selling prices to more
fully reflect the cost increases suffered.

We start 2007 with a clear picture of the business and a very committed team.
The disruptions of restructuring are effectively behind us and the increased
focus on direct customer contact should yield the expected results.  The
reorganisation has resulted in a large number of people leaving the company and
by 2008 we expect a reduction of approximately 7% in the original combined
headcount.  We are well on the way to finalising all the other major synergy
projects as part of our objective to achieve £20m of annualised synergy benefit
by the end of 2008.


2006 was a year of terrific progress in the core business in spite of the
potential distractions of the largest transaction in the history of Croda.
Forty years ago, Croda bought two companies that were bigger than itself and
created the platform for what Croda is today.  I am proud of the teams from both
Croda and Uniqema who have worked amazingly hard to implement the transition and
integration phases with speed and efficiency.  We are confident we can achieve
the business and profit improvement we outlined at the time of the transaction.
I have visited all of the major sites we acquired and am encouraged by the
quality and enthusiasm of the people and the strength of the asset and
technology base.

2007 will be an even more exciting year.

Financial review

In a year dominated by the acquisition of Uniqema it is pleasing to report such
strong progress in the existing business.  Operating profits were up 9.0% with
improved margins, despite start up costs of Enterprise Technologies and our new
office in Shenzhen, adverse currency translation and higher raw material prices.

Operating profit growth was driven by Consumer Care up 9.3% to £48.0m.
Industrial Specialities saw 7.0% growth despite the modest decline in the
reclassified Baxenden business.

Uniqema contributed £4.3m operating profit in the four months since acquisition
with sales growth ahead of our expectations but lower margins, due in the main
to un-recovered input cost rises.

The £33.0m operating exceptional item, of which the cash cost is £28.8m, arises
as a result of the post acquisition restructuring we have already announced and
begun to implement in Uniqema.  The main elements are redundancy, charges for
onerous lease and supply agreements and costs in relation to the termination of
distribution arrangements.  The bulk of the cash cost of the restructuring will
occur in 2007.


All commercial, customer facing, restructuring of Uniqema was completed for 1
January 2007 in line with our pre acquisition timetable.  Distribution, back
office and system changes will take place throughout 2007.  290 redundancies
have been announced across the Group as part of this programme.


Interest costs rose significantly as a result of the acquisition of Uniqema
which masked the benefit of the strong underlying cash generation in the year,
though IAS19 pension financing income partially reduced the charge.


In 2006 the effective tax rate before exceptional items has fallen to 33% from
34.8%. The mix of overseas earnings in countries with higher tax rates than the
UK has not changed materially as a result of the Uniqema acquisition.


Croda acquired Uniqema from ICI on 1 September 2006 for an initial consideration
of £370m. We raised £61m through a share placement on 5 September 2006, the
balance financed by debt. The provisional total consideration of £381.8m
referred to in note 12 includes fees and payments for inherited cash and higher
working capital less a deduction for pensions based on the September 2006

Discontinued operations

We sold our metal treatments business, Croda Application Chemicals, to Shell in
March 2006 for an initial consideration of £3.9m.  The sale of our associate,
Baxenden Chemicals Limited, did not complete and Baxenden has therefore been
re-classified as a continuing business within Industrial Specialities.  The
prior year comparatives have been adjusted accordingly.


We are again able to increase the dividend ahead of the rate of inflation and
improve our dividend cover.  We propose to raise the final dividend 7.2% to
9.65p making a total of 14.30p (2005: 13.35p).  Pre exceptional continuing
dividend cover increases to 2 times compared to 1.9 times in 2005.


We generated over £70m of cash from our operations in 2006.  This was after
making a £6m additional payment into the Croda pension fund in December.  The
strong EBITDA was boosted by a small working capital inflow.  Capital
expenditure across the enlarged group was £22.6m, close to the level of
depreciation.  Overall there was an increase in net debt of £305.7m due largely
to the acquisition of Uniqema.


The Group's treasury policies are approved by the Board and subject to regular
reporting and review. The main financial risks faced by the Group relate to
currency, interest rates and availability of capital.

Major changes in our funding structures have taken place as a result of the
Uniqema acquisition. We arranged a £450m syndicated term loan and revolving
credit line and this together with our US$55m fixed loan note forms the core of
our borrowing facilities.

We hedge up to three months on known currency transaction exposure using forward
contracts and foreign currency bank accounts.  We do not hedge translation
exposure but reduce the risk by matching currency assets with borrowings where
it is possible and tax efficient to do so.  To this end we borrowed US$130m and
€145m within the new facility.

We also fixed interest rates on £100m of our debt in line with our policy to fix
interest rates on up to half our borrowings.

Following our £61m share placement in September 2006, we cancelled 8.7m treasury
shares, leaving a balance of 3.8m.


Croda has a number of pension funds across its global operations as does
Uniqema. During 2007 all Uniqema's ongoing pension arrangements will transfer to
Croda. We made a one off payment to the Croda UK pension fund of £6m in December
2006 and a further £14m was paid into the fund in January 2007.

The pension deficit under IAS19 increased to £140.5m at 31 December 2006 (2005:
£107.1m).  The £40m unfunded Uniqema liabilities taken on as part of the
acquisition less the £6m additional contribution from Croda were the main
factors behind this movement.

Information Technology

Croda and Uniqema both use SAP as their core software application. We have
separated all Uniqema systems from ICI and will make the necessary changes to
combine systems across the enlarged group during 2007.

Croda International Plc

Preliminary announcement of trading results for the year ended 31 December 2006

Condensed Group income statement

                                                                2006            2006          2006          2005
                                                                  £m              £m            £m            £m
                                               Note           Before
                                                         exceptional     Exceptional
                                                               items           items         Total         Total

Continuing operations
Revenue                                           2            518.9               -         518.9         305.6

Cost of sales                                                 (386.5)           (7.3)       (393.8)       (214.5)
                                                              ______          ______        ______        ______

Gross profit                                                   132.4            (7.3)        125.1          91.1

Operating expenses                                             (72.2)          (25.7)        (97.9)        (40.0)

Share of associate's post-tax profits                            1.3               -           1.3           1.4
                                                              ______          ______        ______        ______

Operating profit                                  2             61.5           (33.0)         28.5          52.5

Net financial expenses                            3             (7.2)           (2.3)         (9.5)         (1.9)
                                                              ______          ______        ______        ______

Profit before tax                                               54.3           (35.3)         19.0          50.6

Tax                                               4            (17.9)            6.8         (11.1)        (17.6)
                                                              ______          ______        ______        ______

Profit after tax from continuing operations                     36.4          (28.5)           7.9          33.0

Profit after tax from discontinued operations     7              0.1               -           0.1         (0.2)
                                                              ______          ______        ______        ______

Profit for the year                                             36.5          (28.5)           8.0          32.8
                                                              ______          ______        ______        ______

Attributable to:

Minority interest                                                                                -           0.1

Equity shareholders                                                                            8.0          32.7

                                                                                            ______        ______

                                                                                               8.0          32.8
                                                                                            ______        ______

                                                                                           pence per    pence per
                                                                                               share        share
Earnings per share of 10p (note 5)
Total                                                                                            6.3         25.6
Continuing operations                                                                            6.2         25.8
Continuing operations before exceptional items                                                  28.8         25.8

Total                                                                                            6.2         25.2
Continuing operations                                                                            6.1         25.4

Ordinary dividends (note 6)
Interim                                                                                         4.65         4.35
Final                                                                                           9.65         9.00

Condensed Group statement of recognised income and expense
                                                                                               2006         2005
                                                                                                 £m           £m

Profit attributable to equity shareholders                                                      8.0         32.7

Exchange differences                                                                           (3.6)         4.7

Actuarial movement on retirement benefit obligations (net of deferred tax)                     13.5         (3.8)
                                                                                             ______       ______

Total recognised income and expense                                                            17.9         33.6
                                                                                             ______       ______

Condensed Group balance sheet at 31 December

                                                                                               2006         2005
                                                                                   Note          £m           £m

Non-current assets
Intangible assets                                                                             190.4          6.5
Property, plant and equipment                                                                 333.5        122.4
   Associated undertaking                                                                      11.0            -
   Other                                                                                        0.9          1.4

Deferred tax assets                                                                            46.8         36.0
                                                                                             ______       ______

                                                                                              582.6        166.3
                                                                                             ______       ______
Current assets
Inventories                                                                                   133.5         53.4
Trade and other receivables                                                                   180.8         55.7
Cash and cash equivalents                                                                      48.6         39.3

Other financial assets                                                              8           0.8          0.1
Current tax assets                                                                              2.6            -
Assets classified as held for sale                                                  7           1.2         15.4
                                                                                             ______       ______

                                                                                              367.5        163.9
                                                                                             ______       ______
Current liabilities
Trade and other payables                                                                     (200.1)       (43.6)
Borrowings and other financial
   liabilities                                                                      8         (55.0)       (24.2)

Provisions                                                                         10         (17.4)           -
Current tax liabilities                                                                           -         (5.5)
                                                                                             ______       ______

                                                                                             (272.5)       (73.3)
                                                                                             ______       ______        
Net current assets                                                                             95.0         90.6
                                                                                             ______       ______        
Non-current liabilities
Borrowings and other financial liabilities                                           8       (324.3)       (39.4)

Other payables                                                                                 (1.1)        (1.0)
Retirement benefit liabilities                                                               (140.5)      (107.1)
Provisions                                                                          10        (33.0)       (12.6)
Deferred tax liabilities                                                                      (53.1)       (16.2)
                                                                                             ______       ______        
                                                                                             (552.0)      (176.3)
                                                                                             ______       ______        
Net assets                                                                                    125.6         80.6
                                                                                             ______       ______        

Equity shareholders' funds                                                           11       123.7         79.7
Minority interests                                                                              1.9          0.9
                                                                                             ______       ______        
Total equity                                                                                  125.6         80.6
                                                                                             ______       ______        

Condensed Group cash flow statement
                                                                                   Note        2006         2005
                                                                                                 £m           £m
Cash flows from operating activities
Continuing operations
Operating profit                                                                               28.5         52.5
Adjustments for:
  Depreciation and loss on disposal of fixed assets                                            20.3         14.0
  Share of associate's post-tax profits                                                        (1.3)        (1.4)
  Exceptional provision                                                                        33.0            -
  Other provisions                                                                              0.2            -
  Cash paid against operating provisions                                                       (3.5)           -
  Changes in working capital                                                                    4.4          3.4
  Pension fund contributions in excess of service costs                                       (11.3)        (2.8)
  Share based payments                                                                          1.0          0.7
  Dividend from associate                                                                         -          1.4
                                                                                             ______       ______        
Cash generated from continuing operations                                                      71.3         67.8
Discontinued operations                                                                        (1.0)        (0.2)
Exceptional financial expenses                                                                 (2.3)           -
Interest paid                                                                                 (11.6)        (3.7)
Tax paid                                                                                      (19.1)       (15.9)
                                                                                             ______       ______

Net cash generated from operating activities                                                   37.3         48.0
                                                                                             ______       ______
Cash flows from investing activities
Acquisition of subsidiaries (net of cash acquired)                                  12       (356.2)           -
Purchases of property, plant and equipment                                                    (22.6)        (9.1)
Proceeds from sale of property, plant, equipment and other investments                          2.0          1.4
Proceeds from sale of businesses (net of costs)                                                 3.2            -
Cash paid against non-operating provisions                                                     (0.2)        (5.2)
Interest received                                                                               1.5          1.3
                                                                                             ______       ______

Net cash used in investing activities                                                        (372.3)       (11.6)
                                                                                             ______       ______

Cash flows from financing activities
Additional borrowings                                                                         341.9         15.0
Repayment of borrowings                                                                       (27.9)        (0.6)
Capital element of finance lease repayments                                                    (0.2)        (0.1)
Net purchases of own shares                                                                   (18.2)       (21.8)
Proceeds from share placement                                                                  60.6            -
Dividends paid                                                                       6        (17.9)       (21.7)

Net cash used in financing activities                                                         338.3        (29.2)
                                                                                             ______       ______

Net increase in cash and cash equivalents                                                       3.3          7.2
Cash and cash equivalents brought forward                                                      26.4         17.5
Exchange differences                                                                           (1.7)         1.7
                                                                                             ______       ______

Cash and cash equivalents carried forward                                                      28.0         26.4
                                                                                             ______       ______

Cash and cash equivalents carried forward comprise
Cash at bank and in hand                                                                       48.6         39.3
Bank overdrafts                                                                               (20.6)       (12.9)
                                                                                             ______       ______        
                                                                                               28.0         26.4
                                                                                             ______       ______

Reconciliation to net debt
Net increase in cash and cash equivalents                                                       3.3          7.2
Increase in debt and lease financing                                                         (313.8)       (14.3)
                                                                                             ______       ______

Change in net debt from cash flows                                                           (310.5)        (7.1)
Loans in acquired businesses                                                                   (0.8)           -
New finance lease contracts                                                                    (0.1)        (0.2)
Exchange differences                                                                            5.7         (1.7)
                                                                                             ______       ______

                                                                                             (305.7)        (9.0)
Net debt brought forward                                                                      (24.2)       (15.2)
                                                                                             ______       ______

Net debt carried forward                                                                     (329.9)       (24.2)
                                                                                             ______       ______

Notes to the preliminary announcement

1.     Basis of preparation

The financial information above is derived from the Group's full statutory 
accounts on which the auditors have reported; their report was unqualified 
and did not contain a statement under section 237(2) or (3) of the Companies 
Act 1985.  Statutory accounts for 2005 have been filed with the Registrar of 
Companies and those for 2006 will be delivered following the Annual General 
Meeting. As explained in the Financial Review, Baxenden has been reclassified 
as a continuing operation as the business is no longer for sale.

2.     Segmental information

Primary reporting format - business segments

At 31 December 2006 the Group is organised on a worldwide basis into two main 
business segments, relating to the manufacture and sale of the Group's
products which are destined for either the Consumer Care market or the market
for Industrial Specialities.  There is no material trade between segments.
Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.  The
results of Uniqema post-acquisition have been kept separate from the two main
segments as the acquired business was managed and reported as a stand alone
entity.  With effect from 1 January 2007 the results of the acquired business
will be analysed across the Consumer Care and Industrial Specialities segments
as its operations become aligned with the pre-acquisition structure of the

                                                                                               2006         2005
                                                                                                 £m           £m
Revenue - continuing operations
Consumer Care                                                                                 215.9        207.8
Industrial Specialities                                                                        98.0         97.8
Uniqema                                                                                       205.0            -
                                                                                             ______       ______

                                                                                              518.9        305.6
                                                                                             ______       ______
Operating profit - continuing operations before exceptional items
Consumer Care                                                                                  48.0         43.9
Industrial Specialities                                                                         9.2          8.6
Uniqema                                                                                         4.3            -
                                                                                             ______       ______

                                                                                               61.5         52.5
                                                                                             ______       ______

Secondary reporting format - geographical segments

The sales analysis in the table below is based on the location of the

                                                                                               2006         2005
                                                                                                 £m           £m
Revenue by destination - continuing operations
Europe                                                                                        241.7        131.7
Americas                                                                                      175.4        111.5
Asia                                                                                           73.1         42.3
Rest of World                                                                                  28.7         20.1
                                                                                             ______       ______
                                                                                              518.9        305.6
                                                                                             ______       ______

3.     Net financial expenses

                                                                                               2006         2005
                                                                                                 £m           £m

Bank interest payable                                                                          13.3          3.8
Bank interest receivable                                                                       (3.1)        (1.5)
Expected return on pension scheme assets
  less interest on scheme liabilities                                                          (3.0)        (0.4)
                                                                                             ______       ______

                                                                                                7.2          1.9
                                                                                             ______       ______

4.     Tax

                                                                                               2006         2005
                                                                                                 £m           £m
Analysis of tax charge for the year
United Kingdom current tax                                                                     (0.9)         1.4
Overseas current tax                                                                           12.6         15.4
Deferred tax                                                                                   (0.6)         0.8
                                                                                             ______       ______        
                                                                                               11.1         17.6
                                                                                             ______       ______        

5.     Earnings per share

                                                                                               2006         2005

                                                                                                  p            p

Earnings per share - continuing operations before                                              28.8         25.8
exceptional items
Impact of exceptional items and     discontinued                                              (22.5)        (0.2)
                                                                                             ______       ______        
Earnings per share - basic                                                                      6.3         25.6
                                                                                             ______       ______        

6.     Dividends paid

                                                                                    Pence       2006        2005
                                                                                      per         £m          £m
2004 Interim - paid January 2005                                                     4.10          -         5.4
2004 Final - paid July 2005                                                          8.40          -        10.7
2005 Interim - paid October 2005                                                     4.35          -         5.5
2005 Final - paid June 2006                                                          9.00       10.9           -
2006 Interim - paid October 2006                                                     4.65        6.2           -
                                                                                              ______      ______        

                                                                                                17.1        21.6

Preference (paid June and December)                                                              0.1         0.1
Dividends paid to minority shareholders                                                          0.7           -
                                                                                              ______      ______       

                                                                                                17.9        21.7
                                                                                              ______      ______        

The directors are proposing a final dividend of 9.65p per share (£13.5m) in 
respect of the financial year ending 31 December 2006.  It will be paid on 
1 June 2007 to shareholders registered on 4 May 2007.  The total dividend for 
the year ending 31 December 2006 is 14.3p per share (£19.7m).

7.     Discontinued operations

On 24 March 2006, in continuance of the Group's stated objective to dispose 
of non-core activities, the Group's metal treatments division was sold to 
Shell UK Limited.  The sale did not include the non-current assets of the
business, primarily land and buildings. These have been valued significantly in
excess of their carrying value and, accordingly, there has been no
re-measurement to fair value less costs to sell.

During 2005, the Group, in conjunction with the company's majority
shareholder, commenced the process of selling its holding in the Group's sole
associate, Baxenden Chemicals Limited.  The sale process did not result in any
prospective purchaser being able to match the shareholders' valuation of the
company and accordingly the process was discontinued.  Baxenden has thus been
reclassified back into continuing operations.

The impact of the operations discontinued in 2006, which resided within
the Industrial Specialities segment, is as follows:

                                                                                               2006         2005
                                                                                                 £m           £m

Pre tax operating results from discontinued operations                                          0.2         (0.2)
Tax                                                                                            (0.1)           -
                                                                                             ______       ______

Post tax operating results from discontinued operations                                         0.1         (0.2)
                                                                                             ______       ______

8.     Financial assets and liabilities

The Group manages its interest rate profile using a combination of interest 
rate swaps.  Since 2002 an interest rate swap has been used to convert a 
proportion of the Group's fixed rate debt to a floating rate.  During the year
the Group took out additional interest rate swaps to fix a proportion of the
floating rate acquisition funding.

Under IFRS, the fair value of such derivative instruments must be
recognised in the financial statements with a corresponding fair value
adjustment to the underlying loan instrument.  Accordingly, a financial asset of
£0.8m has been recognised within current assets, being the fair value of the
interest rate swaps, and current financial liabilities include £0.8m in
recognition of the corresponding adjustment to the fair value of the Group's
fixed rate debt at 31 December 2006.

9.     Treasury shares

During the year the Company purchased a further 4,335,000 shares on the open 
market with a nominal value of £0.4m to be held as treasury shares, taking
the Company's total holding to 12,457,589 shares.  At its meeting on 29 June
2006, the Board took the decision to cancel 8,700,000 of the shares held by the
Company as treasury shares, leaving a balance of 3,757,589 shares so held.

The total consideration paid for treasury shares has been deducted from
shareholders' funds and as a consequence of the subsequent cancellation of the
shares, an amount equal to the nominal value of the cancelled shares has been
transferred to the newly created capital redemption reserve.

10.   Accounting estimates and judgements

The Group's critical accounting policies under IFRS have been
established by management with the approval of the Audit Committee.  The
application of these policies requires estimates and assumptions to be made
concerning the future and judgements to be made on the applicability of policies
to particular situations.  Estimates and judgements are continually evaluated
and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.

Under IFRS an estimate or judgement may be considered critical if it
involves matters that are highly uncertain, or where different estimation
methods could reasonably have been 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.  Critical judgement has been required when preparing the
Group's accounts as follows:


At 31 December 2006, the Group has an environmental provision of £10.7m
in respect of soil and potential ground water contamination on a number of
sites.  Restructuring provisions, totalling £34.7m as at 31 December 2006,
largely relate to the ongoing plans to integrate the acquired Uniqema business
with the existing Croda business.

The environmental provision was established in line with UK GAAP and has
been reviewed to ensure compliance with IFRS.  The restructuring provisions have
been established in line with IFRS. Based on environmental information currently
available and the detailed plans established for the restructuring of the Group,
this level of provision is considered appropriate by the directors.

Goodwill and fair value of assets acquired

The Group's goodwill carrying value has increased significantly in the year 
following the acquisition of Uniqema. The Group tests annually whether
goodwill has suffered any impairment and the Group's goodwill value has been
supported by detailed value-in-use calculations relating to the recoverable
amounts of the underlying cash generating units. These calculations require the
use of estimates, however as recoverable amounts far exceed carrying values,
including goodwill, there is no sensitivity with regard to impairment.

11.   Condensed statement of changes in equity
                                                                                               2006         2005
                                                                                                 £m           £m

Opening shareholders' equity                                                                   79.7         88.8
Shares issued                                                                                  60.6            -
Total recognised income                                                                        17.8         33.5
Ordinary dividends on equity shares (note 4)                                                  (17.1)       (21.6)
Transactions in own shares                                                                    (18.2)       (21.8)
Share based payments                                                                            0.9          0.8
                                                                                             ______       ______

Closing shareholders' equity                                                                  123.7         79.7
                                                                                             ______       ______

12.   Acquisition of Uniqema

On 1 September 2006, the Group completed the purchase of the Uniqema
business from ICI plc for a total consideration of £381.8m.  The purchase
included a number of wholly-owned statutory entities, where 100% of voting
shares were acquired, two majority-owned companies, where ICI's stake was
purchased in full, and assets and liabilities in territories where Uniqema
previously had no separate statutory presence.

The purchase has been accounted for as an acquisition.  Due to the
nature of the acquired business, and after a rigorous review, there were found
to be no separately identifiable and quantifiable intangible assets, other than
computer software, due in the main to the lack of any valuable trademarks,
licences or other product related intangibles. Consequently, the whole excess of
consideration over net assets acquired is recognised as goodwill in the
financial statements.

The goodwill is justified by (i) the acquisition of a skilled workforce;  (ii)
the fact that Uniqema's product portfolio complements and enhances Croda's
existing product offering;  (iii) further expected growth as a result of
rationalising and improving Uniqema's existing distribution network; and (iv)
cost saving synergies as a result of bringing the business within Croda's
existing structure.

The assets and liabilities acquired, along with the cost of the acquisition are
summarised below:
                                                                                                     fair values

Intangible assets                                                                                            6.9
Property, plant and equipment                                                                              217.1
Inventories                                                                                                 82.9
Receivables                                                                                                111.6
Cash and cash equivalents                                                                                   18.1
Loans acquired                                                                                              (0.8)
Payables                                                                                                  (131.3)
Deferred taxation                                                                                          (22.2)
Provisions                                                                                                  (8.5)
Retirement benefit liabilities                                                                             (68.1)
Minority interest                                                                                           (1.6)

Net assets acquired                                                                                        204.1
Goodwill                                                                                                   177.7

Provisional total consideration                                                                            381.8

The consideration was satisfied wholly in cash.  The fair values are provisional
at this stage and will be finalised in the 2007 financial statements.

The net outflow of cash and cash equivalents on the acquisition of
Uniqema was as follows:


Provisional total consideration                                                                            381.8
Consideration adjustments re working capital, net debt and pensions unpaid at year end                      (6.0)
Accrued acquisition costs                                                                                   (1.5)
Cash and cash equivalents acquired                                                                         (18.1)


From the date of acquisition to 31 December 2006, Uniqema's contribution to
Group results was as follows:

Income statement
Revenue                                                                                                    205.0
Profit before tax                                                                                            4.2

Proforma results for the Group for 2006, on the basis that Uniqema had
been acquired at the beginning of the year, are as follows:


Revenue                                                                                                    958.6
Profit for the year before exceptional items                                                                36.0

The proforma results include the following adjustments:

(a)  Fair value adjustments - proforma depreciation charges are based on the
     provisional fair values as outlined above.

(b)  Borrowings incurred to finance the acquisition - the proforma results
     include the estimated full year borrowing cost had the acquisition funding 
     been in place at the start of the year.

(c)  Alignment of accounting policies - the proforma results assume Croda's
     accounting policies applied from the start of the year.  Adjustments to
     Uniqema's results for the year are thus required where policies differ.

                      This information is provided by RNS
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