I'll now hand over to your host, Steve Foots, the CEO, to begin. Steve, please go ahead.
Good morning. Many thanks for joining the call today, and hope you're all safe and well. We're sorry not to be with you in person, but the presentation as usual will follow the normal format for Croda. Some comments, then to Jez for the financials, and then I'll come back to talk about some key aspects of our strategy. We'll take questions over the telephone and via the webcast at the end of the presentation too. Overall, our strong business model has delivered a resilient performance, and we've managed through a very challenging period, it goes without saying. I use the word resilient for a number of reasons. On the supply side, all of our 19 principal manufacturing sites have remained in operation and nearly all of our workforce has continued to function as normal.
Limited impact operationally around the world. That's great credit to our teams and great credit to the local government support that we're getting as well. On the demand side, we've seen a modest reduction in sales. The group margin has also held up well. As a capital-light business, we've continued to generate strong cash. This has allowed us to continue investment in future growth, agree on exciting technology-rich healthcare acquisition, and pay a dividend to shareholders demonstrating our confidence in the future. The 28th successive year of increased dividend payments. In response to COVID, we had three priorities from the outset. As you'd expect, our major priority has been the health and safety of all of our people. We needed to look them in the eye at the end of the crisis. We're not there yet, knowing we've done everything possible to safeguard their well-being.
We have a more engaged workforce as a consequence of that, more loyal, and it generates a lot more goodwill. We're looking after our people, which is absolutely right. Next, we focused on keeping the show on the road, maintaining the performance of the business by closely controlling costs and working capital as you'd expect us to. We've been talking to customers in a lot more frequent basis along the way. Finally, but just as important, we have continued to plan for the future to ensure that Croda is taking full advantage of the emerging opportunities from the pandemic, which I will come on to later. The key principle has been treating all our stakeholders fairly. We didn't follow anybody. We protected employee salaries. We helped a number of our smaller customers and suppliers with flexible payment terms.
We helped communities around the Croda world with our Act of Kindness initiative, and we paid a final dividend to our shareholders. We've treated everybody fairly, and we're doing the right things. All of this plays well to our purpose. Turning to the numbers, they are what they are, but you can see the resilience borne out in them. Innovation and commercializing clever people's knowledge is what our business model is all about. Had a modest reduction in sales, a resilient performance in margin, and the output of which is strong profit and cash generation. This is allowing us to further invest in the business. Turning to the sector performance, in personal care, we continue to see positive trends from quarter four into quarter one. Quarter two was significantly impacted by a downturn in consumer demand, luxury travel, department stores.
This was particularly evident in Europe, where a lot of our customers either closed or repurposed their facilities into making hand sanitizer gels. In Latin America, where there is a greater reliance on door-to-door selling. During the quarter, we've accelerated our customer interactions massively, much more engagement than we normally would see, and we're excited about what our customers are telling us. There's lots of innovation in the pipeline. We've also seen a very good recovery in China with personal care sales in China up 9% in quarter two, and we remain confident of a good recovery once lockdown measures have eased further. Turning to Life Sciences, that's less impacted by COVID-19. Strong underlying healthcare business. Crop will be more second half weighted due to phasing issues and margin progress is in line with our expectations. The Avanti acquisition I'll come back to later in the pack.
In Performance Technologies, industrial end markets are clearly challenging, but this was partly offset by strong food packaging and home care sales for the group. Let me stop there and I’ll hand over to Jez for the financials.
Thanks, Steve, good morning, everybody. As Steve has said, the first half year saw a resilient performance. Sales were 5.8% down in reported currency at GBP 673 million. This reduction of 7% in constant currency sales terms translated to a 9% reduction in adjusted operating profit in constant currency to GBP 161.6 million. Operating costs reduced with the benefit of cost savings delivered at the end of 2019 and lower discretionary spend during the first half of 2020. These cost savings were partly offset by the start-up of the North America biosurfactants plant in the early part of 2020. Net interest was broadly unchanged at GBP 9.1 million, with higher net debt from the 2019 special dividend payment, mostly offset by lower interest rates following our refinancing. Adjusted profit before tax came in at GBP 152.5 million, 10% behind the prior year period.
With lower volume and a weaker product mix, return on sales declined by 1.1 percentage points to 24%, a resilient performance reflecting the strength of Croda's operating model. With the tax rate broadly flat at 25%, adjusted earnings per share were GBP 0.888, just under 10% lower than 2019. Having paid the increased 2019 final dividend in May, the interim dividend has been held at GBP 0.395 per share. Finally, the free cash flow remained healthy at over GBP 80 million in the half. Adjusting profit items charged in the first half totaled GBP 7.6 million.
This covered a further GBP 1.7 million exceptional charge for delivering the cost savings announced at the end of 2019, which are delivering up to GBP 20 million of annual benefits to reinvest in the business. Acquisition costs relating to Avanti totaled GBP 1 million, and amortization of intangible assets relating to previous acquisitions was GBP 4.9 million.
Profit before tax on an IFRS basis was GBP 144.9 million. Now let's look at the key bridging items for the change in sales. Core business sales declined by 6%. This comprised a 2% reduction in volume due to the impact of COVID-19, and a 4% reduction in price mix. Whilst raw material prices were generally stable, this price mix primarily reflected a weaker product mix due to lower sales of higher value-add products in personal care and performance technologies, and relatively better sales of lower value-add products used by consumers during the crisis. There was no impact from acquisitions during the period. Industrial chemicals contributed to a 1% reduction in group sales, and currency translation was favorable by 1%. Now looking at the key movements by core sector. Consumer product markets responded more rapidly to lockdown than industrial end markets, as Steve has described.
As a result, Personal Care sales were hardest hit, 9% lower. This, together with a weaker product mix, saw operating profit 17% lower. Margin was resilient, though, staying above 30%. We expect this to recover back to the low 30s once volumes return. Life Sciences sales were 2% lower. As we highlighted at the full year results in February, this reflected a strong comparison period from 2019, particularly in Croda. Continued growth in target markets in Healthcare saw operating profit rise by 7% and return on sales increased to 32.5%. Although sales in Performance Technologies were 6% lower due to slower industrial demand, the impact of COVID-19 was seen later here than in Personal Care, with customers initially moving to protect their supply chains. However, profit was harder hit, down nearly 20%, and return on sales is just above 15%, still a strong performance compared with its peer group.
Let's look at each of the core sectors in more detail. Following a solid first quarter, which saw continued recovery in the North America market, the personal care and beauty industry was significantly affected by the COVID-19 lockdowns. China was impacted in the early part of the year, but rebounded quickly. As the bottom chart shows, Croda sales were down 4% in the first quarter before recovering to be up 9% in the second. The second quarter has seen European consumer demand heavily affected. As Steve said, most of the French cosmetics industry has shut down for several weeks, and consumer retail data showed a 14% reduction in sales in the quarter. By contrast, North America consumer demand has been less impacted, with lockdown intensity varying state by state. Latin America has been hardest hit, particularly in Brazil, where 50% of consumer sales are typically made on the doorstep.
Whilst there are signs of lockdown conditions easing in Europe, Latin America is likely to remain difficult. Overall, this resulted in a 6% reduction in personal care volume and a 3% weaker price mix as the more at-home use staple products of the beauty formulation business proved more resilient than the higher value going out products. Also, beauty actives demand is typically resilient in these circumstances, but disruption to the prestige distribution channels of duty free, department and luxury stores had an impact on consumer buying patterns. We've not seen any signs that the long-term drivers to growth in personal care have changed. Our strategy to strengthen the growing personal care through organic and inorganic investment remains unchanged. Pleasingly, our digital investment has begun to pay off, allowing us to maintain our customer intimacy through virtual contact and support. Life Sciences has seen limited adverse impact from COVID-19.
Healthcare demand has been modestly affected, with fewer prescriptions issued and delays to some elective surgery. There has been no discernible impact on Crop. Volumes grew by 2% overall in the half, while price mix declined due to Crop sales moving from the first half to the second half year. Growth continued in the key high value niches of healthcare. Our excipient delivery systems business grew by 11% as pharma customers looked to high quality solutions from well-invested, stable, and innovative partners like Croda. The Biosector vaccine adjuvant business had a much stronger period, growing sales by 25%. Consumer health product sales were broadly flat year-over-year. Crop protection sales were lower against a strong comparison period, coupled with delayed plantings in Latin America due to adverse weather. We also withdrew voluntarily from products with a negative environmental footprint as announced at the last year-end.
The output for crop looks strong, with North America recovering from last year's US-China trade dispute and a strong innovation pipeline with our global customers. Seed enhancement also recovered some lost sales from 2019 during this seasonally quieter first half period. Our Expand to Grow strategy for Life Sciences is working well. Return on sales for the overall sector has reached 32.5%, an increase of over four percentage points since the acquisition of Incotec at the end of 2015. Our specialty excipients and vaccine adjuvants are being trialed in a number of COVID-19 related projects, and we're investing for the future, both organically in plant expansion and inorganically through M&A. After a weak 2019, Performance Technologies experienced a steady recovery in demand during the first quarter. However, with significant closures of automotive and industrial plants, sales weakened progressively through the second quarter.
Partially offsetting this, sales have been strong in both the home care and packaging markets due to COVID-related demand and new innovation. This is shown in the top graph. Home and fabric sales grew by 11% in the first half, while Energy Technologies saw sales decline by 18%, reflecting its focus on automotive and industrial lubricants and on flow control in oil production. Smart Materials was more resilient, down just 2%, with polymer additives being used in many COVID-related applications, including PPE, medical devices, and packaging. Overall volume was down 2% in Performance Technologies. Profitability was impacted by a combination of operating leverage and production constraints in our European and Indian plants. The Refine to Grow strategy will reduce the sector's exposure to more cyclical markets with growth in high-tech, higher growth markets.
Innovation will be important, and we are seeing strong interest and growing sales for Coltide Radiance, which we presented to you at the full year results, which doubles the life of fabrics. We are building towards an expected GBP 20 million annual sales pipeline for this product by 2023. We are also investing in Asia with our new Shanghai R&D facility opening in the second half of this year, which will give greater access to many new Chinese customers. With the successful commissioning of our North American biosurfactants plant earlier in the year, we have secured our first two contracts for eco products in Performance Technologies, together with a first contract in Personal Care. The eco pipeline is now worth almost $20 million in annual sales, with sustainably positioned customer products launching from the end of 2020.
While we are excited by the development of new sales opportunities, COVID has provided something of a perfect storm for the plant with food-grade bioethanol, which we use as a feedstock, in short supply due to hand sanitizer demand, resulting in a high raw material cost at a time when petro-derived ethylene is at record lows. In the meantime, anticipate that this will cost us about $10 million in added costs in 2020. Croda continues to generate a healthy cash flow despite lower demand. Free cash flow in the first half year was GBP 80 million, a reduction of GBP 15 million on 2019, driven entirely by the reduced EBITDA.
The change in working capital was GBP 14 million better than 2019, and it's pleasing to note that we have seen no material deterioration in the timeliness of customers' receivables during the COVID-19 crisis. Capital investment increased by GBP 9 million to GBP 50 million in the first half year, despite some delays to projects during lockdown. I would expect investment in the full year to be just over GBP 100 million, allowing us to complete key investments, including the doubling of specialty excipient capacity in the U.S., creation of a new customer and R&D facility in Princeton in the U.S.A., and consolidation of our U.K. distribution facility. We're also expanding in healthcare in Japan and Denmark, investing in greater digital and innovation capability in China, and expanding some of our European plants.
At a time when many companies are slashing investment, we believe that maintaining investment at this time will enable us to grow more rapidly in the coming years. Finally, Croda has a strong balance sheet, having completed its debt refinancing in 2019. As the top graph shows, we have excellent liquidity with almost GBP 450 million in undrawn committed facilities as of 30th of June. Furthermore, there are no material maturities before 2023, as the bottom graph shows, with funding out to 2030.
On top of this, we have in July added a $200 million acquisition funding facility to allow us to complete on Avanti, therefore preserving our ample liquidity. Net debt at the half year, which is pre-acquisition, was GBP 577 million. This is a leverage ratio of one and a half times EBITDA. Our downside modeling shows significant leverage and liquidity headroom even in more extreme crisis scenarios.
I'll now hand you back to Steve, who will update you on our strategic priorities.
Thanks, Jez. Okay, let me take you through our strategy update. As an executive team, we've prioritized time to think through the impact of a post-COVID world for the group. If you just look at the slide on strategic priorities, whilst our mega trends and sector strategies remain unchanged, which is very reassuring by the way, we've refreshed our near-term strategic priorities. We have five key priorities. Scaling drug delivery, which I'll come onto shortly. More proactive M&A. The pandemic could open up more opportunities. We want to be more focused with more bolt-on. As a reminder to you all, we're interested in more Avanti type acquisitions, lots of IP, new technologies, and clever people. Asia as a region is the most significant growth opportunity for us and ambition too. It's there to build.
Our aim is to build the Croda brain there, especially in China. We want to scale biotechnology as well. We have a lot of talented innovators, nature does it better. Here we want to scale up a lot of our technologies, both operationally and from R&D. This will involve a number of smart partnership arrangements going forward there. In digital, a real area of progress, which is creating new opportunities to engage with customers in many different ways. For the purpose of today, I wanted to provide more color on scaling drug delivery, including how Avanti fits into our strategy, but first, digital. During COVID-19, quite surprisingly, really, when you think about it, we've become more intimate with our customers. One of the big benefits has been even closer interaction with customers and potential customers. Digital has driven that.
If you look at the table on the left-hand side, we've seen a 200% increase in webinars, a 400% increase in customer attendees. These webinars often involve our marketing and R&D teams, a powerful way of explaining our latest innovations and trends to our customers, and again, to our potential customers. It's all about creating business opportunities, and the stats are a great leading indicator for future business. We're also putting firmer foundations in place, building our digital marketing brain. We've got over 12 people around the world now in places like China, America, Europe, et cetera. We're building a new personal care website for indie customers and focus websites in China because of the rapidly developing growth potential there, too.
If you look at the case study on the right, you can see that we found new ways of bringing our innovation to life in China. Digital users in China spend an average of six hours online per day, they're used to seeing technologies coming through, the response has been amazing. 65,000 participants in one of the live streamed trade events we participated in there. We're accelerating our conversations with customers, in the old days, a good salesman would visit 12- 14 customers per week. Through digital channels, our customer audience is an order of magnitude bigger. We're seeing a surge in customer interactions, particularly in Personal Care, that bodes well for the future. Turning to drug delivery, as you know, I want Life Sciences to be as profitable as Personal Care as quickly as we can. That's the mandate for the group.
Fast-growing drug delivery platforms are an essential part of that, and we want to build drug delivery into a truly global business for Croda. If you look at the trends on the left, some of these we've spoken about for some time, but some of them have emerged more recently. There's a shift from more traditional drugs to biological actives. This is already happening. As you know, nine out of the top 10 selling drugs around the world use these biological actives now. Biological drugs are challenging to deliver, with the majority delivered by injection. Specialty excipients are chosen for their superior performance, enhancing the API's performance in sensitive, challenging applications.
Developing of next generation therapeutics is probably a new area to you and to us, and that's things like small molecule and large molecule development of actives driven by immunology and wider gene therapy in areas like vaccines and cancer drugs. Really good technology for the future for the group. Of course, COVID vaccines are heavily profiled at the moment in gene therapy, but equally, there's new solutions to address diseases outlined in SDG 3, which are things like malaria, TB, and HIV, and all of those we're investing in R&D. From a regulatory point of view, things like safety, transparency, and traceability remain the buzzwords of the industry. They have been there for quite some time. Customers are selecting our products increasingly because of the high performance, purity, and potency of our products. All of that is to de-risk the supply chains.
A competitive advantage for us and for them as well. In terms of direction, on the right, essentially we're moving from consumer health, you can see that as non-prescription drugs, to patient health, more prescription drugs, to capture increased value. With the price opportunity increasing from a few Pounds per kilogram to hundreds of thousands of Pounds per kilogram, you can see why we're interested in that. Our job is not to make the active ingredient, though. It's to enhance the performance of the active. We have a broadening set of platforms for drug delivery, and lipid nanoparticles is the exciting emerging technology from Avanti. It goes without saying, revenue and margin opportunities are increasing as we move from left to right. As we move to drug delivery, we have an increasing breadth of technology in our portfolio, which is creating lots more opportunities for us.
You all know about specialty excipients. We've been banging on about that for quite some time, but many others you don't know. They're new opportunities for the group. One of the big ones, gene therapy for vaccine and cancer applications. A good example is Avanti's messenger RNA technology for vaccines. Effectively, it's an encapsulation technology that delivers the active into the cell. We've also got processing ingredients to fast track the manufacture of biological actives. Again, we're not making the active, but we've got ingredients that can facilitate the manufacture of these actives. Also, a number of nascent technologies coming through for respiratory diseases as well. The photo on the right at the bottom is of Croda Denmark, our Biosector acquisition. As Jez talked to you about, really good growth this year already, and we're expecting good things with that going forward.
They have the only aseptic adjuvant manufacturing facility in the world for vaccines. Turning to Avanti. We bought Avanti because of their deep knowledge in drug delivery, exciting new technologies, rich IP, but above all, clever people. If you look at the picture at the right, there's lots of R&D people there and a great age distribution, which you probably can't see. That was one of the central reasons for buying Avanti. They will become our central R&D brain in drug delivery as we globalize the drug delivery platforms. Most of the employees are scientists serving around 3,000 customers. They launch over 100 products per year, so a very impressive innovation culture, great track record. The strategic rationale, it's all about buying knowledge and clever people. I think you've heard that a few times from me now. It doubles our R&D capability in healthcare.
We'll learn from them, and they will learn from us, no doubt about that. This isn't a technology startup. It's a great business in its own right, growing double-digit and generating strong profit and cash. In summary, we've delivered a resilient performance, which reflects the strength of our business model, and we will continue to take advantage of our healthy cash flow and strong financial platform to invest further in the business. In outlook, it's very difficult to anticipate the future with the timing of recovery unclear. The working assumptions are Life Sciences will benefit from the phasing of Crop Care sales and opportunities in healthcare. Consumer markets were rapidly impacted by lockdown, but are expected to recover more quickly than our industrial markets. The group margin and cash generation expected to remain robust.
The strategy unchanged but refreshed, and that will underpin and even accelerate our future growth. Let me stop there and hand back to the operator to take your questions.
Ladies and gentlemen, if you'd like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. If you're joining online, please select the flag icon to ask a question and reselect the flag icon if you change your mind. When preparing to ask your question, please ensure your phone is unmuted locally. We have a question from Charlie Webb from Morgan Stanley. Charlie, your line's open. Please go ahead.
Brilliant. Thank you very much. Morning, Steve. Morning, Jez. Just a couple from me.
Morning.
Morning. Just first off around personal care. Thank you for kind of breaking out price mix and volumes. That's helpful. Just on that volume, the - 6% you saw in the first half, when you look at the industry, you look at your customers, would you say that is reflective of that environment that you see with them? Would you say that given the tough environment, perhaps, typically your products are more geared to some of the higher-end customers, there's been a bigger shift there and therefore perhaps you have lost some share in this more volatile market. Just trying to understand if it's in line with the market or if there's some kind of share moving around given perhaps the overall product mix. That's the first question. There's a second question on life sciences. Obviously, a resilient first half.
Just trying to get a better sense on what gives you that confidence. I mean, it sounds like you're confident on the second half with phasing in Crop and obviously the Healthcare and scale-up of your additional capacity. Just perhaps if you can give us some more context around what you're kind of expecting for Healthcare and Crop in the second half, what you're seeing in July, just so we can understand how that's going to play out for the rest of the year would be helpful.
Okay. Thanks, Charlie. Well, let's do personal care first, I'll bring Jez in on the volume side, I'll come back on Life Sciences. Personal care, the trading is modeled or correlated very well with the government lockdowns everywhere around the world, we would say. We monitor that. You can see that through the Nielsen data and the IRI data, which we look at. We're probably a two months lag behind that, two and a half months lag. What you see there is very directional to where we're going, probably. I think what you've got in there is the out-of-home and the in-home differences. The out-of-home has been more affected, that's obviously things like high-end skincare, duty-free hair salons and the like.
People clearly haven't been going out, so that's been hit harder than the in-home, which is more the shampoos, conditioners, and things like shower gel. Volumes are broadly where I would expect them to be. You can look at individual customers out there and see differences. Some have got bigger volume negatives, some have got smaller volume negatives. Very difficult to correlate on that. I tend to look at Croda by geography because of the national lockdowns in personal care. You look at personal care in Europe, for example. The quarter two effect has been more significant in Europe and Latin America for different reasons. Europe primarily is, well, we're all in lockdown, so that's obvious. The French beauty industry virtually closed for about six weeks because they were repurposing their plants on hand sanitizer gel.
That has an effect, particularly on our skin actives business and our effects businesses more than it does on the formulation business, for example. Also in Latin America, as you all know, it's direct selling there, so nobody's knocking on the door, or very few people are knocking on the door. That's been more impacted. You look beyond that and you start to see really encouraging signs. China is the barometer that we use. I think I've mentioned that before. We're up 9% in sales in quarter two in personal care, which is a good sign. That's encouraging us to think that once these national lockdowns moderate further, and your guess is as good as mine as to how quickly they are moderated, then the personal care business will start to come back strongly. There's no market share loss for sure.
If anything, we're gaining in some areas, and we've got some good evidence that we're gaining in some areas, particularly right across the board in there because we're in a good position. We're looking out. We're not cost-cutting, and we're not looking internally. We're actually looking a lot more with our customers, and you can see that with the digital stuff. I don't know if there's anything else on volume, Jez, you want to say comparable with that?
No, I don't think so. Charlie, yeah, the volume is down more in the cosmetics area, and that's consistent. If we break into that consumer data. That overall 14% drop in Europe, within that, you see cosmetics down 41%. In the U.S., although overall the market's pretty flat, you see cosmetics down by 26%. It's that going outside of things which tends to be the higher end, the higher value part of the portfolio that has clearly been more affected on volume with the simpler products and the everyday products used at home, as Steve says, being less affected.
Charlie, on life sciences, we're very confident on life sciences. Life sciences is effectively immune from the pandemic. First half, read into the first half, a very good underlying healthcare pharmaceutical performance, which is great. Very good seed enhancement performance, one of the best performing first halves in the mix of markets that we operate in. It was crop that was behind. Crop was the one that was behind for no particular reason. It was more a phasing issue, and we sort of knew that. There was tough comparators, but a lot of that is certainly in the second half. We can see that already. Only the three things for the second half that are likely to go in the favor of life sciences are a rebound in crop due to phasing, and as I said, we can see that.
We have got some new committed healthcare orders for the second half of the year as well, which is in train now and obviously supporting that is the new capacity coming on stream. We've also got Avanti as well. We should close Avanti shortly. We'll have Avanti for a good part of the second half as well, and that's growing very well. It's got double-digit growth in there. We're really pleased with that too. Life Sciences is good. You can see the margin projections are good. They're going towards what you would expect Personal Care margins to be in a normal environment. They can easily get there soon. We would expect that. Yeah, very confident on Life Sciences, very difficult to predict on Personal Care and Performance Technologies in the second half.
Consumer markets will probably rebound quicker than the industrial ones.
No, that's very helpful, guys. Thank you very much.
Our next question comes from Matthew Yates from Bank of America. Matthew, your line's open. Please go ahead.
Hey, good morning, gents. Just a couple of questions, please. The first one on the biosurfactant plant, which I guess continues to disappoint, and I appreciate I don't think any of us could have seen a collapse in ethanol availability o f the $ 10 million additional feedstock cost you're highlighting, do you think you can recover any of that through passing through price increases to customers? That's the first question. The second question is around what you talked about in the presentation and using these digital tools to interact with customers. Just how good a substitute are you finding that virtual offering to the physical working with customers on new product development? Do you think that's going to have any impact on your NPP product development over the coming quarters? Thanks.
Yeah. Okay. Well, bioethanol. You look at bioethanol, the plant itself, it's not disappointing. It's disappointing to get on track. It's taken longer than we'd like. Actually, over the last six months, it's had a really clear run and operationally, it's in really a good position. Once you get these sites up and running, they're a bit like an airline. Once you get in the sky, they stay in the sky for several years before you bring them offline. This one is no different to that. That's working well. The customer engagement is brilliant. We've got now, I think you can see in the pack $20 million of pipeline there already, and lots more engagement.
I think what you're going to see post this pandemic is the pandemic is the big challenge of today, but the bigger challenge for the next 10 years is sustainability, I call it, and we're already seeing a much heightened interest from our customers on our specific composition of products, safety of our product ingredients, renewability. We think that's going to drive an increasing interest and future sales for that plant because that's based on renewable ingredients. All of that looks really good. The disappointment, and we couldn't plan for that, has been this bioethanol issue. We didn't model that, and it's the perfect storm in terms of raw material positioning.
The $ 10 million is sort of, Jez will help me, but it's probably $4 million hit already in the numbers in the first half, so we've taken that hit, and potentially up to $6 million in the second half of the year. It's a sort of 2020 issue rather than anything else. What we can do to mitigate that is using non-food grade bioethanol, which we are trialing, and we expect to consume through the second half of the year. That will help, but also the demand will probably moderate as we get towards the end of the year for hand sanitizer gels as well. In the round, actually, it's disappointing. It's largely out of our control, but the things that are in our control about customer interaction, pipelines, getting the plant reliable, they're all in great shape.
We see a really good opportunity for 2021 and 2022 of a really good growth being captured there. That's the point on that. On digital, yeah, it's amazing. I was a sales guy growing up, and trying to do 14 customer visits a week was a challenge, and that wasn't just for me, by the way. That was for everybody. Some might say it wasn't. What you're seeing now is just amazing. The interaction is a magnitude different. The customer audience is just a different audience. Now, over the last three months, we've obviously been tuned into that with our marketing teams and R&D teams. It's definitely the future, but it won't replace direct face-to-face selling. For me, it will never do that, but it will be a very important part of our selling programs and marketing programs going forward. You need them both.
It can, it will accelerate NPP. It just feels like it will. We've been working hard. Whilst we haven't been able to spend time at the bench with our R&D facilities, because a lot of them have been offline for quarter two, we've been spending a lot of time promoting our products in front of customers. You can see from those stats, some of these numbers are very significant. It's a great opportunity to engage with your customers. As I said, we've become more intimate with them as a consequence of this. We'll certainly be continuing that in different forms, too. Okay.
Thanks, guys. Take care.
Our next question comes from Andrew Stott from UBS. Andrew, your line's open. Please go ahead.
Good morning, everybody.
Hi, Andrew, morning to you.
Morning.
Thanks for taking the questions. I had a couple, mainly on Avanti. I wonder if you could explain to a layman, especially around what seems to be more complex chemistries than I can manage, what's particularly exciting about that acquisition for you? If you can try and tell us, what does it really bring to Croda that you just didn't have? On the technicals of that acquisition, how does the earn-out work? Is it a three-year target? How is that full payout potential reached? For this year, how many months do you expect to have it in? Sorry, a few questions there on Avanti.
[Crosstalk] a layman, I think we're both the same, but I'll try and answer that.
Yeah,
the last question first. We expect to close in quarter three. Let's assume if we own it for four months, there should be 3%-4% growth to Life Sciences this year. We start with that. I think secondly, your point, what we're excited about is, I'm excited about drug delivery, and you know that. I'm more excited about the depth of knowledge that we can create in drug delivery. Personal care is brilliant for Croda because it has great knowledge, and we're developing that in Performance Technologies, too. Here, we're buying great knowledge. You've got 150 people, 100+ scientists. A lot of them PhDs as well. The previous chief exec would have a field day talking about propeller heads.
Brilliant R&D, they have a deep pharmaceutical expertise, particularly in drug delivery. They've got 3,000 customers, but they've got a lot of academic partnerships which we can leverage that. Their competence is R&D, not operations. What they do is they're good at first-phase scale of pharma projects, but then what tends to happen is that that's farmed out, pardon the pun, farmed out to bigger contract manufacturers, and then they lose quite a lot of value with that. Well, Croda can do quite a lot of those, a lot of scale-up in our sites. We've got multiple sites that could scale this up, their projects. The technology, lipid nanoparticle technology is what it is. It's liposomes. More and more of the next-generation drugs, whether it's cancer drugs, oncology drugs, or vaccines, are using this type of technology.
What it does is its primary use is encapsulation. It encapsulates the active and it delivers it into a cell. It opens the door of a cell, effectively. That's what it does. It does it very differently to specialty excipients. The example I used in the presentation was messenger RNA. That's a good example where it delivers, it encapsulates around the RNA. The RNA can't go into a cell directly, but what it can do through an encapsulation route, through lipid nanoparticles, it can deliver that into the cell. It opens the door of the cell. That's really important, we would say there. That's the type of technology. The next-generation cancer drugs and oncology drugs are moving that way. It's all about boosting the immune system as well.
The immunology it's called, and a lot of new development in pharmaceuticals is about boosting immune systems. They have very sophisticated technologies to do that. That's that. On the earn-out, the way we looked at an earn-out is we appreciate that's unusual. You certainly don't see that in the chemical industry, and it's a significant earn-out. How we looked at it is we paid $185 million for the business, the base business. We wanted to detach the opportunities from the base business. The base business was effectively, it's growing at double digits. We didn't want to pay for potential future projects that didn't pay out just in the base value. We did that. What we've looked at with them is, like in any pharmaceutical company, they have bigger projects that they're working on.
We always have them as well, but a lot of them never get commercialized. Some of them potentially do. What you're trying to do then is agree a sort of an earn-out that effectively captures the benefit for both parties if it's material, if things take off. We wanted to detach that away from the base business. We're not paying for, I don't think any of our shareholders want us to pay for potential business rather than the real business and the base business. Jez, anything else on earn-out?
Clearly on the earn-out, if the earn-out pays in full or in part, and it could do either of those, then clearly the value of that earn-out to Croda is much more than the amount we are paying away. I think it's a win-win from that point of view. As Steve said, the $185 million is based on the existing performance-
Can I just check, is it a revenue earn-out or an EBITDA earn-out?
Yeah, it's revenue. It's a revenue earn-out. We don't need to take you through the detail, and you don't really need to know the proportions, but it's revenue-based. These are very high margins, so the revenue base is significant.
A large part of the revenue is likely to be the profit. Technically, it's a revenue-based. The key being, obviously, from completion of the acquisition, we control the projects that are going on, the projects that are being delivered. You're not going to end up in a position where you're paying a revenue earn-out on something which is unprofitable because we're responsible for the company.
Let's put it this way, we would be delighted to pay the full earn-out on behalf of the company, because the company would generate a lot more profit generation than that earn-out. Obviously, it goes without saying that.
Yeah, it's great. Some of the projects that we're sitting on are potentially very significant. We know a lot of them never get to market. That's the issue with these things. They're quite binary, I call them. The earn-out is there just to cover that. They've worked hard with these projects for quite a few years, and there's a contribution of the profit that effectively goes to them if they do come good.
Thank you. Sorry, just to follow up. The group CapEx for 2020, do we just take 50 and double it? Also any thoughts on 2021?
We've got quite a lot of growth projects going on at the moment. We'll be completing this year the doubling of capacity on the specialty excipient plant in the U.S., and we've started work on the U.K. and the Japan plant. We've got new customer centers for the U.S. and for R&D in China. There's quite a lot going on at the moment. I think the GBP 50 million in the first half year was slightly constrained by COVID-19. Clearly on some sites, we took off people who didn't have to be there, which would include construction workers, so we could just focus on the operations side of the business. I suspect the second half will be a little bit higher than GBP 50 million, just because of the number of opportunities we have. Something just over GBP 100 million for the full year should be a good guide.
We still think going forward that the overall level of spend should be around about GBP 80 million, GBP 90 million. It's just the way in which the projects are falling this year. As Steve said, the opportunity to invest at a time when a lot of people are slashing their investments. We think that there's a lot of opportunities there, particularly around the life science business. We'll continue to do the appropriate investment. We'll remain relatively capital light. There's no major projects in there. The biggest one would be about GBP 20 million. This isn't big projects on the ECO Plant scale, but there's a number that are going to add meaningful capacity and capability over the next 6- 12 months.
Okay, thanks, Jez, and thanks, Steve.
Yeah, thanks.
Thanks, Andrew.
Our next question comes from Chetan Udeshi from JP Morgan. Chetan, your line's open. Please go ahead.
Yeah, hi. Thanks. A couple of questions, maybe one for Jez. Just looking at the depreciation in first half, there wasn't a major or material swing. I think at the full year results, you were talking about maybe including biosurfactant plant, an increase of maybe GBP 12 million, GBP 13 million. Can you help us understand if that is going to come primarily in second half or has something changed in terms of numbers for full year? Maybe one for Steve. I appreciate the lack of visibility on what is the pace of recovery in personal care, but are you seeing any of that yet in the numbers, or is it still pretty patchy to call out in terms of any noticeable signs of recovery?
Okay.
Hi, Chetan. On depreciation, as you say, the key driver to depreciation was commissioning of the biosurfactant ECO Plant in North America. Because that came on during the first quarter, we only have one quarter of depreciation in the second quarter. The overall impact of that is around about GBP 8 million in a full year. There's a couple of million in the first half, and there'll be a couple of million more in the second half because of having two quarters of depreciation. Okay.
Yeah, the personal care recovery, it's hard to say. It's very difficult for us to forecast. If you wanted us to put a forecast together, you wouldn't believe it, and we wouldn't believe you with your forecast as well. It's just very difficult out there. It's got to be evidence-based. We look at China. We're very pleased with China, how that's recovered. We're looking closely at the Nielsen data and the IRI data from the U.S. They're good indicators for us that people are starting to purchase personal care products again, and that's probably the best. We're starting to see that the Nielsen data is improving. It's less negative, as is the IRI data as well. That bodes well for a recovery. We relate it to SARS. When SARS was upon us, we recovered pretty strongly.
I think before we get there, we just have to see how these national lockdowns moderate further because personal care is exposed to people getting out. The more people that are out
Obviously the more people that will use cosmetics, there's no doubt about it. Getting back an improvement, I think that will gradually improve, but certainly over the next few weeks and months. It's a great business. It's very solid business for Croda. There are lots of technologies in there. We're in lots of countries around the world, so we would expect that to come back. We'd like Europe. I think the big thing for us is Asia, certainly China doing well, but the rest of Asia coming back and North America too, which is encouraging signs in North America, and we want to see Europe starting to come back. We would expect that over the next few months as well. Latin America will take a bit longer because of where they are in the pandemic at the moment.
That's sort of where we are with it.
Thank you.
Our next question comes from Kevin Fogarty from Numis. Kevin, your line's open. Please go ahead.
Great. Thanks very much. Just a couple from me. I guess if we look at sort of the Performance Technologies, the drop-through there in terms of the operating leverage was much more significant than we've seen in previous periods. I just wonder, is that sort of purely driven by the sort of mix change or is there anything else sort of going on there? Just secondly, in terms of working capital, I get the sort of year-on-year improvement on lower volumes. We still saw sort of increased investment in inventories, and I just wondered sort of what businesses is kind of requiring that sort of increased investment on the inventory side. Just finally, if I could wrap up with a sort of general question on benefits from COVID-19, perhaps in terms of market share gains, where do you see the greatest potential for that coming through?
Yeah. Okay. Well, let Jez do Performance Technologies. I'd just like to comment on working capital and the benefits.
Okay. Hi, Kevin. Yeah, I think first of all, probably about half of the plants that we have are shared across the sectors. Clearly, one of the issues you have when volumes are dropping in two of the three sectors is it's a better operating leverage position when you've got some sectors rising, as we normally do, while other sectors are falling. Clearly, you have a bigger impact on operating leverage when several businesses are going down at the same time, as we've seen during the COVID-19 situation. Overall, in terms of operating leverage, yes, it is a more operating levered business. The other thing we saw was we did see significant impact just on production from a couple of the European plants where we had shutdowns going on and also from the Indian plant, which is quite a main performance technology producer.
India is the one place, the one site where we've had significant restrictions on our ability to produce volume to ship it in India and outside of India. The only products we've really been allowed to produce in India for at least a couple of months now has been the Life Sciences products because they are sort of on a list that you're allowed to make. You had a sort of double, well, triple whammy, probably. You've had the operating gearing effect. You've had the fact that other businesses are not picking up the slack in volume and therefore carrying more of the cost. You've got the specifics around the European and India sites. I think it's an extreme position on that, but not generally a sign of how much gearing effect we would expect to see in that business.
Yeah. On working capital, I mean, the working capital increases are 100% deliberate. There's been actually quite a bit of intervention from the CEO in stocks. I've been here before four or five times in a recession, and I've made sure that we've got stock in the right place around the world for a recovery. We haven't had that in some cases in the past. What I mean by that is we would expect Asia and North America to come out of it pretty quickly, and then Europe shortly, soon after the U.S. is sort of our working assumption. There's one thing about getting the right stock in place, and the other thing is making sure it's in the right location.
We've been making sure in Asia and North America that we've got stock from all assets globally, in the right place rather than in the wrong place, if you know what I mean. We feel comfortable with the stock holdings we've got around the world. We'll monitor that closely in the second half. We're there ready to respond when demand starts to come back, which of course it will. The $64 million question is how quickly it responds. We're in a comfortable position, so don't worry about working capital. Just see that as a great opportunity to capture fresh growth for later in the year and probably next year. That's the point on working capital. The benefits of COVID-19, I mean, we'll come through this. We're weathering the storm very well, as one or two of you have mentioned.
What that means for Croda, we always invest. I mean, Jez talked about maintaining investment. We're actually increasing investment. We're increasing investment in R&D and digital, in acquisitions by buying Avanti. We're doing the right thing, we're investing in our people as well. The best time to invest, I've always said, it's a Croda mantra that goes through decades, is you invest in the downturn as well as the upturn. That's what we're doing. I think in a year or two time, when we reflect on it, we'll be in a much better place because of that. We are capturing business. We're pSarticularly capturing business in personal care, we feel.
Life Sciences is just great growth from the technology platforms, and we're also capturing new business in some parts of Performance Technologies like the Coltide Radiance and things like that, which is just great technology. I think we're in a very good position. We're doing all the right things. We're planning ahead. We've got time to do that, and we're putting our programs in place to accelerate those strategic priorities I talked about earlier. In good shape certainly for a rebound whenever that comes.
Great. That's really helpful. Thank you very much. Thank you.
Our next question comes from Esha Sharma from Manvest Bank. Esha, your line's open. Please go ahead.
Good morning, gentlemen. Thank you for taking my questions. Could you help us with the monthly progression? How did you see the personal care business developing? Especially how do you see July in the first few weeks, if that is possible, please? Is it incrementally a bit better than June or flatish? That would be really helpful. My second question is on life sciences. Now that you've already achieved a margin of 32.5%, is it fair to assume that the expansion might even be beyond the 33% level in the midterm and more accelerated? The last one is on raw materials. What is a reasonable assumption for the full year-over-year, given the decline in oil derived raw materials please?
Okay. I'll take them each in turn. Personal care, best to look at a trend of, we would say May, June, July, that's pretty stable. It's weak but broadly flat, we would say. It is patchy everywhere, and it's all correlated with the lockdown. We'll be watching that closely as things develop. In terms of life sciences, the margin improvement is great and that will continue, I have no doubt. The Avanti acquisition is very high margins as well. The growth that we've got in the core platforms, which are things like lipid nanoparticles, the vaccine adjuvants from Biosector, and specialty excipients, they are the major drivers, and they're at the higher margin. We would expect continued margin progression there, let's call it that.
We've always said we want to get to 33%, 35% margins like personal care, and there's no reason why they can't. Who knows, getting beyond that is something that's certainly achievable, too. I would say that on those two. Raw materials, Jez?
Yeah. We saw the picture as broadly flat. Obviously, we're buying primarily naturals, commodity grown raw materials. Overall, the basket has been pretty flat. It's subject to a lot less volatility overall than you would see in a more petrochemical-centered basket. Yeah, overall, with the increase around bioethanol and some decreases in other areas, I would say pretty benign from raw materials as we've seen for a number of years now. I think on the life science margin, we might get a small bit of initial dilution on Avanti just because it's at a very good margin, but probably 25%-30% EBITDA type level, so it'll be quite small dilution, but again, opportunity-wise, we certainly see it as a life science plus margin opportunity.
That's very helpful. Thank you so much.
Thanks, Esha.
We have a question from Adam Collins from Liberum. Adam, your line's open. Please go ahead.
Good morning. I think I've got three loose ends, please. First of all, on Life Sciences. I think at the beginning of the year, you were talking about a 2% growth impact as you deliberately exited some crop products with poor enviro footprint. Just wanted to understand, is that happening? Then on the sort of broader growth story, understood it's a very defensive area. Was there not some negative impact from the fact there's been lower GP visits and elective surgeries during the period? I'm thinking now of this consumer health business, the smaller part of your operations, but nevertheless affected by the frequency of prescription activity. Maybe I'll do it in turn. That's the first question.
Yeah, fine. I'll do the first bit, and Jez can do the GP visits. He goes to GP more than I do, so he knows these things. He's a bit older than me. The 2% thing, yeah, that's happened. We took the decision, very much part of our sustainability agenda is we don't want these alkylphenol systems in our plants or any other hazardous material of that nature, or toxic ingredients. They're out. They've gone out, so they're impacting, and they have impacted. That's fine. It's one of those things. The underlying strength in the Life Sciences result in the first half has been driven by the healthcare platforms generally. Jez talked about those in his pack. Also seed enhancement, which has been great. It's only been Croda that's been down just on phasing issues. Jez, you want to talk about GP stuff?
Yeah. We saw a modest impact, Adam, in the sense of, look, we're a bit removed from it and the inventory pipeline in pharma can be anything up to 12 months. We could see that there was clearly some impact from the reduced number of prescriptions being written and the reduction in elective surgery going on. We could definitely see some impact of that when we look at the customer product mix. The general feel was in the excipient side, we still saw very good 11% growth, and that's across both the standard excipients and the specialty excipients. The specialty excipients continuing to grow 10%-30% year-on-year. We didn't really see a change in that. Consumer health, yeah, we were flat to sort of + 1% on there.
That for us picks up more sort of topical treatments, oral care, that sort of side of the business, and it's been relatively steady. I don't think anything that we would be concerned about there. As we've said, the second half outlook and beyond looks very positive on both health and crop. Did you have a second question, yeah?
Well, I had a couple, yeah. Within six months, we could be heading for a hard Brexit in the U.K. You mentioned that you are comfortable with the inventory position and sort of touched on being right-sized for Asia and North America in particular as it recovers. What would you anticipate to be the impacts of the business in the event that we do see a hard U.K. exit from the E.U.? That's the first one. The second one was just on the OpEx issues. Givaudan yesterday was talking about puts and takes, lower travel costs, no product testing in its personal care areas, but more freight costs. Have there been any significant movements there, either positive or negative?
Well, let me start with Brexit. Jez leads the Brexit team internally, I'll get him to comment on the detail. We've got a chemical industry group that works with government on a sort of two-weekly basis to talk about Brexit. I'm involved in that, other chief execs are as well, for the industry. We're encouraged with where they are behind the scenes with the development of their discussions, let's call it that. The impact for Croda is modest. We have 95%, a bit more than that now, of our sales outside of the U.K. The impact is always likely to be small.
I think the area that we're focused on at the moment is making sure we keep the regulatory playing field the same as Europe and the U.K., which is called REACH, and making sure that our European partners in Cefic want the same thing. We're still hoping that will be the case, although who knows where that goes, but we're lobbying government very hard on that at the moment. That's the only one that's an industry point. Jez, do you want to go on the detail anymore? Detail on Croda?
Yeah. I guess a couple of areas that we've looked at. I think now actually we're at the point where, from the trading point of view, it's sort of almost, to some extent, from the point of view of the changes we need to make, it doesn't really matter now whether we're in a hard Brexit or whether we get a basic free trade agreement at the end of the transition agreement. In the sense that under both systems, we're going to have to account for sort of VAT duties, et cetera in Europe, where in the past we've just shipped from the U.K. and not have to worry about that. Obviously, what we prefer in that is a free trade agreement where the duties are set at zero, rather than having to have duties.
We did evaluate the tariff impact of moving completely to WTO for the U.K., and the European manufacturer a couple of years ago. We were looking at mid to high single-digit million Pounds annual impact from WTO tariffs. That's our sort of backstop, I guess that one could end up with GBP 5 million, GBP 7 million of duties and so forth, which clearly one wouldn't want. I think mechanistically now, you're going to have a VAT and a duty system, it's just whether or not those duties are set at zero. I think we can manage those impacts on the trading model. As Steve said, more of a focus on trying to avoid duplicating an entire regulatory system.
We can clearly do it would just incur additional cost to implement and then to maintain, clearly, we already run multiple regulatory systems around the world. We can do another one, it's just that it's a bit pointless from that point of view. We don't really get any value from it. I think, the general view would be that hopefully one would see less immediate issues come January in terms of goods getting blocked at borders and so forth, particularly given the U.K.'s announcement that goods would be able to flow into the U.K., which affects us more on the raw material side. I think, we're in a good place on the Brexit planning. We'd rather not have tariffs. We'd rather not have a separate regulatory system, but they are manageable, with a bit of cost if those come along.
In terms of the OpEx side of things, overall, we were down about GBP 1 million in OpEx. You'll see that I have made an adjustment to the way we report the OpEx in the income statement, just to make it a bit more consistent with the way peers report and so forth. That's just a flip between the cost of sales and the OpEx lines that you'll see in the income statement, for those of you who are looking. The OpEx overall was down about GBP 1 million year-over-year. That's a function of the let say GBP 20 million of savings that we implemented last year, less the additional resource that we've reinvested in areas like China. It's a function of definitely reduced discretionary spend around travel and exhibitions, because clearly, that's not happening at the moment.
Then it's offset partly by the ECO Plant startup, because obviously that creates a bunch of OpEx costs that we didn't have previously and the depreciation that we touched on earlier. Overall, we've kept a tight rein on operating costs, but in the same way on the investment side that we're not slashing investment, that this is the time to invest. We're also doing the same on the resourcing side, that where we can see opportunities such as China and Digital China, we're investing behind that because it's the right thing to do now. Given our model, we're a pretty lean operating model anyway.
Still from the OpEx-
That's great.
Thanks, Adam.
Thanks a lot.
Our next question comes from Martin Evans from HSBC. Martin, your line's open. Please go ahead.
Yes. Thanks very much. Just getting back to the potential for Avanti looking forward. Do you think in terms of its significance, that it's the equivalent to your Sederma deal years ago in personal care, in terms of giving you the critical mass you need and the potential? Do you still feel on drug delivery there's the need for another add-on? Secondly, just in terms of the customer offering going forward, that you can offer the 3,000+ customers of Avanti, given your, as you say, your ability to scale up and their ability on R&D. Is that important if you can almost offer a sort of one-stop shop offering to customers or doesn't it really matter in the world of pharmaceuticals? Thanks.
Yeah. Great. Thanks, Martin. Good questions. Yeah, Sederma, just to remind people, what Sederma brought to personal care was we learned from them, and we were a very good personal care business before Sederma. And we learned a lot from them. They created pentapeptides, and they had a brilliant R&D and marketing function, and we learned a lot from that. We're still learning from them now. In many ways, there's lots of parallels with Avanti. It's still early days. We haven't got them on board yet, just about to. They have the potential to do very much the same, in so much that we'll learn from their drug delivery experience. They've got deep knowledge there. Their R&D and track record in R&D over the last several years has been outstanding. It's excellent. It's great.
They'll take us into areas that we either we're not aware of at the moment or certainly can leverage going forward. It has the potential, I think, in six months, 12 months when we come back, who knows where it'll be. It won't stop us doing more, though, as well, is the point there is. We think there's other opportunities there as well that we want to look at, too. I think in terms of the customer base, the way to look at it, Martin, is we're trying to move to more pharmaceutical services. What you need there is you need a very good R&D base to that. You need to then have scale-up potential, preferably in your organization, which is manufacturing-led. You need to have a great selling function to take them to market. We've got great selling function.
We have the great ability our operational capability is strong in this area. We didn't really have the deep expertise in R&D. We see this as a sort of, you triangulate around those three functions, and this will bring a lot to the other two as well. They're a very North American business. They don't have huge sales outside of North America and parts of Europe. We think from a selling point of view, we can get a global reach that they couldn't get before, which is what we did with Sederma, if you remember. I think just generally, we will have more appeal to our customers and our new customers because of that R&D manufacturing and selling strength now. We become a real operator in this space. Of course, that's important.
Our job now is to create really terrific value from it, when we think we can. It'll be an exciting journey, but it is definitely the most exciting acquisition under my leadership as CEO, certainly at the moment, from what we can see. That will be proved out and borne out by results, and you'll hold us to that. That's absolutely right.
Great. Thanks.
Next question comes from Tom Wigglesworth from Citi. Tom, your line's open. Please go ahead.
Hi, gents. Thanks very much for the presentation. Just a quick one now, just on that transfer from the R&D side of Avanti to the manufacturing. Are the margins similar on the manufacturing side? You've said that you can use your existing sites to manufacture some of their products, but is there a point at which you would then have to consider expanding that manufacturing capacity? Is that something that's one to two years away or something that's more five years down the road?
Yeah. Good question. It's still to be proven because we're learning as we go along. There looks like they're similar margins. I think the issue is not so much the margin, it's the capability to make it. At the moment, Avanti, it's a great business model, but it's not the perfect business model because they can have a lot of these small scale, 1 kg , maybe 0.5 kg of q uantities, up to 5 kg quantities. Something in that area they can satisfy from their own plant. Anything beyond that, when you scale up, they have to outsource to another partner. They lose, I think they lose a significant contribution when they do that. Clearly, we want to pick that contribution up. I think it's not so much margin. The margin is still very high.
I'm not sure if there's much change between that, it's the losing out of the opportunity to scale up which is very rewarding. That's the lucrative part, is the manufacturing of it. Just to give you some feel for these things, we've moved along that continuum from consumer health is GBP 3, GBP 4 a kilo. Some of the Avanti products, you're into hundreds of thousands of Pounds a kilo. You're talking about a different ballgame, which is great. We'll certainly, once we've got the selling global reach, we'll certainly learn how to price the product correctly in this space as well. We think we're good, but we can be better. I think that's going to be great as well. Yeah, lots of good opportunities, but we just want to get them on board and really get them working with the rest of Croda.
Jez has just got an additional point for you as well.
Yeah. Hi, Tom. From the investment side, it's a well invested site in Alabama. As it happens, we're already well into the expansion, obviously of the main site in Pennsylvania, the Croda manufacturing site. We have the two other sites in the U.K. and in Japan, and we have expansions already underway in those. Generally to just broaden the volume of the specialty excipients and drug delivery systems that we can do. I think that's already part and parcel of our plan, and these expansions are typically between GBP 10 million-GBP 20 million each. They're quite modest in the scale of expansions and things that we can cope with in the normal program, really. It's just about getting the capacity in place in time to meet the market growth.
Great. Thank you both.
Thank you.
We have no further questions. Back to you, David.
Let me just wrap up. What I didn't do at the start, my mistake was not to welcome David Bishop to the organization. Despite him being a Nottingham Forest fan, we think he's going to do really well for us. You've all probably had conversations with him now, use him like you did with Connal, I'm sure you'll get the responses that you want. I think just in summary, a resilient performance. I think more than that is we're investing in the business. We're accelerating our investment where we can. We've got these refreshed strategic priorities, which I think are going to be very important to us over the near medium term to capture new growth. Of course, we're investing in R&D and digital, we're investing in acquisitions as well.
We feel like we're coming out of this stronger than we were going in, and that bodes well for certainly in the near and medium term for the group. Thanks very much for your questions, and we'll see you when we see you.