Hello, welcome to the Croda Q3 trading update call. Throughout this, all participants will be in listen-only mode. After, there will be a question and answer session. Just to remind you, this call is being recorded. Today, I am pleased to present Steve Foots, Group Chief Executive, and Jez Maiden, Group Finance Director. Please go ahead.
Thank you, everybody. Morning to you all. Many thanks for joining the call. As usual, I'm with Jez and Conor as well. A quick introduction from me as usual. Then we'll take the questions. The main takeaway from today's update is that after a strong first half, we've seen continued momentum through the third quarter. Performance has been very much in line with our expectations and the guidance we provided back in July and at the outset of the year. Constant currency sales are up a healthy 4.5% for the core businesses in the quarter, which is bang in line with 4.7% year-to-date. Trading well. This growth is driven by mix and volume improvements and not by raw material pricing. As a reminder to you all, we're in natural economics, not petrochemical economics. There's no raw material inflation in our numbers.
This is underpinned by record levels of innovation, with NPP at 28.4% of total sales and a strong result in our consumer businesses, both Personal Care and Life Sciences. Margins have remained solid with the group's year-to-date margin slightly ahead of last year. Just turning briefly to each of the sectors. In Personal Care, another very strong performance was up 4.9% and 7.8% year-to-date. Growth was exactly in line with what we said in July. You'll recall the comparative period was when we started to see a recovery in sales. Tougher comps too. We continue to see 4%-5% as more sustainable growth going forward. Growing 1.5 times the market is our ambition for the business in the near term. We saw healthy demand across all three segments, led by Beauty Actives.
Underlying trends were consistent with what we've seen all year, with multinationals growing alongside our regional and local customer base. All customer categories growing well. All regions were ahead too, with Asia and North America being the strongest performers. Latin America continued its recovery. I think the most impressive performance in Personal Care has been the NPP pipeline, double-digit sales growth again this quarter. We have an excellent pipeline. We're delivering very well with our clever products. Life Sciences was the pick of the core businesses and a very impressive performance. Constant currency headline sales were up 8.5% in the quarter, 9.3% if you exclude the exit of the North American API business. The API exit impact was smaller in quarter three.
To remind you, quarter four is the final quarter we're impacted by the contract exit and we'll see probably about 4% sales headwind in Life Sciences in quarter four as expected. Healthcare was especially strong as we continue to see good demand for high-purity excipients for complex drug delivery systems, and we benefit from further expansion into new drug markets. It's all about drug delivery and healthcare. Crop was a little slower, which mirrors recent published data from the majors, but we continue to outperform the sector with growth in small customers. Incotec had a good quarter as we continue to invest in that business. Plant Impact is still early stage, but with sales development actively supported by Croda's global sales team now, that will help to drive sales going forward.
Performance Technologies was up 1.8% in the quarter, in line with growth of 1.7% year-to-date. Sales growth is less of a reflection of how this business is performing, as you know, and we continue to see good price mix improvements there. Volumes declined, reflecting our ongoing efforts to shed the low margin business, and NPP began to increase as expected. Lots of positive trends, not least good demand for biodegradable lubricant additives as customers look for ways to improve the sustainability of their products by using Croda ingredients. Over and above all of this progress, we continue to implement initiatives to stretch the growth. The biosurfactants plant is up and running in North America. This will support the growth of our ECO range and meet the increasing demand for more sustainable products.
As you'd expect, there's lots of innovation across the business with some major product launches in each segment, which will start to benefit from 2019. Our pipeline of new opportunities is very exciting. As I say, another strong, consistent quarter of growth. Very encouraging to see ongoing momentum in our consumer businesses. Further value over volume progress in Performance Technologies and plenty of rich innovation across the group. We're on track for the full year. Enough from me, and let's take your questions now.
Thank you. Ladies and gentlemen, if you have a question, please can you press zero and then one on your phone keypad now in order to enter the queue. Then after I announce you, just ask that question. If you find that question has been answered before it's your turn to speak, just press zero and then two to cancel. There'll be a brief pause while the questions are being registered. Okay, I see our first question is from the line of Tom Wrigglesworth at Citi. Tom, please go ahead. Your line is now open.
Thank you very much. Morning, Steve. Morning, Conor.
Good morning.
I have a couple of questions. Firstly, could you just provide a little bit more color around how the excipient growth might proceed going forwards? Is that going to be a margin positive for Life Sciences? Or is this just a one-time effect kind of running through the system? Secondly, in Performance Technologies, could you give us an indication of what the growth would be X the bottom slicing? How do you see the kind of growth in the other businesses going forward?
Excipient growth can mean healthcare and Crop Care, but I think your question is around healthcare, if I'm correct. I think on the healthcare side, we've been very clear this year to strip out the impact of the API contract. Everything else you should see as normalized growth. We screen pretty well in healthcare for high single-digit sales growth is how we should look at that going forward. If you look back to look forward, the last two or three quarters have been at those levels as well. We've had in quarter one and quarter two more API sales than we've had in quarter three. It sometimes matches the underlying demand. No, it is the fastest growing technology in the group, bar none. We've got some good technologies there.
This move to drug delivery is gathering pace, no doubt about it. We're really pleased with that. We're tuned into that, and we expect that to grow. As a reminder on the back of that, we've just put a big capital expenditure through on our plant in the U.S. to just future-proof capacity planning for those products, and that comes on stream in the not-too-distant future. We've got plenty of capacity to grow as well, which is good. Performance Technologies points around 2%. In Performance Technologies run rates, if I look at stripping out demarketing, and we'll see where that goes. The most important thing in Performance Technologies is the quality of the business. It's about innovation-led growth. It's margin improvement, supporting sales growth as well. A compounding effect to drive the profit there.
I'll just pass to Jez who's going to add to those comments.
Yeah. Hi, Tom. Just other thing worth noting is that first half-year Performance Technologies is up just under 2%. That was about -8 volume and about +10 price mix, primarily mix, caused by the demarketing program. That's about halved in the third quarter because we started this program in the third quarter last year. We're about -3 on volume and about +5 on price and mix. The same 2%, but you can see obviously as we lap that, the demarketing impact will have less of an effect and you'll start to see the reported sales number or the constant currency sales number for Performance Technologies should start to tick up as we go forward towards next year.
Very helpful. Thank you. Just as a follow-up, Life Sciences growth for next year, do you think you can do what, 4%-5% is a reasonable base of assumption for 2019?
We think it'll probably be a little bit more than that. We expect it to be. We screen in Life Sciences, without Crop, and if you look at the run rate this year, it's mid to high single digits. Mid to high thirds, 6%, 7%, something like that, is where we would have that. Yeah, we're very pleased with 2018 performance and see no reason why that can't continue next year.
Okay. Very helpful. Thank you, gentlemen. Thank you.
Okay, just to remind all participants that if you have a question, please press zero and then one on your phone keypad now. There'll be a further pause while any other further questions are being registered. Okay, at this stage, there seem to be no further questions in the queue. Can I please pass it back to you for any closing comments? Okay. Sorry. Can you please repeat the closing comments?
Sorry.
At this stage there seem to be no further questions. Back to you, please.
Okay. All right. Yes, well, you've seen the update from the group. We're pretty pleased with performance. We're seeing no slowdown in growth in quarter three from what we've seen in the first half. We're ticking along pretty well. We'll stop there, and we'll see you again in February.
Okay, this now concludes the call. Thank you all very much for attending. You may now disconnect your line.
Hugh, just hold on a minute, please. Sorry.
Yeah.
Can you check this? I think there might be people trying to ask questions.
Okay.
I've had a couple of messages from a couple of analysts. I think there appears to be a problem on the line.
Okay. Can you give me the analysts' names, and I'll see if I can identify them?
Walsh and Evans.
Okay. Walsh, if you can press star and then zero, and I'll identify you and open up your line.
Also Mr. Alexander. There's actually quite a few, Hugh.
I don't know what's happening. Yeah, okay. If it comes to you, just hand it over.
Andrew. Hi, Andrew. Please go ahead. Your line is now open.
Morning. Can you hear me?
Yes, we can now. I think there's obviously some problem getting questions through to us.
Morning to everybody. Just a couple of things. Firstly, just trying to work through on the margin side, the moving parts the second half, and just check that we're sort of on plan. The losses from Plant Impact and the first contribution from Atlas Point, which I guess is for about four months. I'm just trying to think how those numbers affect the EBIT for the second half. When you say the headline in your outlook statement that you're on track, I guess that's an endorsement of consensus. I wanted to check that. The margin growth comment, you say slight, and I think in the past, you've defined slight as sort of 50 basis points or so, and I just wanted to check your definition for saying that.
Well, I'll just do the first one. The other two, I mean, slight is what you say. It's a little bit more than flat. The definition hasn't changed. The most important thing for the group is PBT. We look at PBT against consensus, and we feel very comfortable with the year-end. We will leave it at that. We're not here to give profit forecasts. We've seen October, and we've got two months left, and effectively, we've got the orders in the system now for the rest of the year. We're comfortable to make that statement, so we're fine with that. Jez, do you want to go into the moving parts? Try and answer Andrew's point on the moving parts.
Sure. Morning, Andrew. In terms of Plant Impact, it's mostly a cost to us this year. The sales we picked up from the acquisition are pretty low. We've been guiding across the nine months that we'll have owned it to the year-end, that we were expecting a loss of about GBP 3 million-GBP 4 million on that. I think that'll be nearer GBP 5 million. That's simply a function of lower sales than we had anticipated. What we've seen, clearly, we've said that we've taken out the local sales force. We've integrated that now into the Croda selling network, and we really like the technology that we've found in that business. We're very excited by it. We do have a strong view about the performance, about significantly reducing the loss next year and then getting into profit.
We like very much the technology we've seen, but there will be a slightly larger loss in this year. Having said that doesn't change our view around our expectations or consensus, because clearly, the rest of the business is performing very well. We're talking about very small variations in one acquisition being offset by the strength of the rest of the business. Yeah, I'm comfortable with where people are expecting us to be and where we expect it to be. In terms of the ECO plant, the biosurfactant plant at Atlas Point, yeah, effectively contributing from October, three months. Obviously, the initial focus is around transferring all of the downstream products that we make, all of our [inaudible] from the petrochemical raw material onto the bio raw material. That's our focus over the next three months.
We get a bit of margin pick-up on that, which will be worth a small number of millions of pounds, I would expect next year. We'll get a pro rata share of that. Again, just a relatively small contribution this year. The real exciting part with the ECO plant comes from getting customers, enabling customers to be able to launch green-based products. We have those samples out now with the market. We have the range launch now. We have our very first orders of people deliberately buying green. That won't be meaningful this year, but as next year develops, that's where we'll be working to develop the new growth in sales, which is really the core reason for building that plant.
Margins, what we've said is, look, we're looking to deliver mid-single digit sales growth overall in the core business on a constant currency basis and to support that by the increase in margin. Clearly, there's some margin dilution in Life Sciences this year caused by Plant Impact. We're happy with the broad margin level of Personal Care. The growth in margin is really a function of the improving mix and the value over volume strategy in Performance Tech, and that's what leads us to conclude that the return on sales overall for the year should continue slightly ahead of last year. Does that help put the moving parts together?
It does. That's great. Just one follow-up. On the trajectory for 2019, do we assume that those losses in Plant Impact are broadly eliminated in 2019, or you still think there'll be a small loss?
I think we still need to do that work. Our intention when we acquired in March was to get the business to break even in 2019. That is still our intention. Clearly, the actual sales we have within that business are low, so we need to do more work around how quickly we can bring the new products to market. We should see at least a significant reduction in that level of loss, which, as I say, even at GBP 5 million is not significant in the context of the group, but is a little bit worse than we were anticipating.
Yeah. I think just on Plant Impact, Andrew, we are really pleased with the technology. It is great technology. You see we have that note out due to the governance code change that we had to make a release last week around the fact that we are making some people redundant. That was all part of the plan. It is getting Croda salespeople in charge of selling the product. We know what happens when they do that. We are in a very good place. Our intention is to get it to as close to breakeven as we can next year. This should be a benefit from the trajectory and certainly a significant benefit from the trajectory from what we have seen this year. It is all about sales growth now, capturing the sales growth.
We have got the cost base where we want it. We expect sales growth to come through the course of next year.
I think it is also worth putting it in the context. We have done eight technology investments over the last 12 months. Why are we calling this one out? I guess it is an unusual technology investment for us. Normally, we are buying a business with a handful of scientists. The costs that we run in the first couple of years while we develop the business are off the radar, really. We just call out the Plant Impact because we acquired with about 60 people in that business and obviously no significant sales. That is why the Plant Impact one stands out. All the other technology acquisitions are working well. You just do not see the costs within the overall group results.
Got it. Thank you very much.
Thank you.
Okay, we now go to the line of Laurence Alexander. I'm just bringing him in. If you wait one second. If you wait one second, we'll just bring Laurence in. Okay, I'm afraid Laurence's line seems to have dropped out. If anyone else has any further questions at this stage, please do press zero and then one on your phone keypad now. Okay, that seems to be it. I do apologize. Please back to you for any-
We seem to be getting quite a few questions into conference here from the sell side. Do you want us to read the question out and answer it? Or there's-
Actually, yes, if you could, please. I do apologize. If you could, I'll see if I can do it at this stage at the end. Please read out the questions.
Okay. This is from Paul Walsh, talking about the Personal Care, Steve, can you discuss group in Q3? Has anything changed? What are you expecting from here? Any noticeable slowdown in China?
Well, in Personal Care, we're in very good shape. If you look at the run rates are exactly the same as they were in quarter one and quarter two. There's no reduction in run rates. If you look at 2017, the first half of 2017 sales were about minus 2% in Personal Care, the second half was about plus 8%. Now what you're seeing is, we're lapping the anniversary of some of the weak sales growth, we're coming back into strong sales growth from quarter three. If you remind yourselves, about a year and a half ago, we had two issues in Personal Care. One was multinational sales growth was pretty anemic. Sluggish, you would say. Also, the formulation business was broadly flat. Both of those have been corrected, both of those are in very good shape now. We reorganized about 18 months ago.
We've got three managing directors now running the Actives, Effects, and formulation businesses. They're all in very good shape, and they're all healthy and growing very well. We're really pleased with that. The effect of the move from 7%, 8%, 9% in the first half this year to 4.5%-5%, 4.9% quarter three, is purely down to strong comparators in the quarter three of last year. That's where we started. We're just lapping the anniversary. The business is in very good shape. We're really pleased and excited. I think the other thing I would say with Personal Care is you can see this flight to luxury in Personal Care is continuing. You can read that into all our customers' numbers that have been printed in the last few days. There's strong growth with a number of them, and that bodes well.
When you've got your customers growing well, our leading indicators around customer growth and also around our pipeline to new projects are very important. I would say the big step up over the last 2 or 3 quarters has been the strength coming back in the multinationals as well. We've got very good regional and local delivery through the smaller customers. The multinationals now is getting very exciting for us, and they are calling in 2 or 3 significant global product launches now with Croda ingredients, and that's great. We can't say too much about individual customers, but that's material and that will boost and help continue the sales growth through into 2019. Personal Care in very good shape. We really can't complain. Lots going on. China generally for the group is very strong.
We've looked at each of the quarters this year, Quarter 3 was the best quarter of the year so far. We've had double-digit sales growth in Quarter 3 in all 3 of our businesses, in our core businesses. There's no slowdown in China. If anything, it's accelerating. Again, a reminder to you all about China is, for the group, we're in small market share positions, so we're not really buffeted by macro or trade wars. Our job is just to give customers what they want, and the demand for that is increasing in China as we find new customers. Double-digit sales growth across all our core sectors in China in Quarter 3.
Hugh, I'll continue. I've got several other questions that have come through.
Before we do, is one of them from David Simmons at JPMorgan? No, it's not. Okay, well, I've got him. Can we take him first? David, your line's open. Please go ahead.
Yeah. Hi, this is actually Chetan Udeshi from JPMorgan. [Conor], you might already got my question because it's been a bit confusing with this call today, whether we are in or out. The question I had was, maybe Steve, can you give us some sense of the split in terms of Personal Care growth, in terms of volume versus mix and price? I think you had 5%-ish kind of volume growth in the first half. Maybe it will be useful to get some sort of sense in terms of volume price mix there.
Maybe Jez, a question around the finance expense line in the P&L for this year, because, I think the startup of the biosurfactant plant has been delayed, should we expect maybe the interest line to be lower this year than maybe what consensus has it, or what was thought to be the case previously? Maybe any updated thoughts on how should we think about the FX impact for this year now, given the pound has probably moved back from first half levels? Thank you.
If you wait one second, if I could please ask you to repeat that now. Your line is now open, Jez and Steve. Thanks.
Thank you. Okay. Apologies for the problems we're having this morning. On Personal Care, the constant currency growth of 5%, roughly in the third quarter is pretty equally split between price mix on the one hand and volume on the other, which is very consistent with what we saw in the first half of the year. The price mix is very much about mix and innovation-driven improvement. We haven't seen material changes in raw material prices that have needed recovering. Obviously, if we see a change in the individual component, then we will go and recover those increases in cost. Fundamentally, it's about improving the mix through innovation and new products, rather than being a raw material price recovery story. I think quality of growth-wise, we feel very positive about that.
The raw material market, while there are specific pockets of increases, overall has not been particularly difficult or aggressive. In terms of the interest line, in the first half year, we undoubtedly had a saving because we were required to capitalize the interest on the ECO plant during construction. Obviously it's a major project for us. We wouldn't normally capitalize interest, but on very large projects, clearly that is one or the only one, then we will capitalize an interest. We carried on doing that through the third quarter, but clearly we stopped capitalizing the interest on the fourth quarter. The impact of that is the interest line goes up in the fourth quarter, because obviously we have the debt. Instead of going to the balance sheet, it starts going to the P&L from the fourth quarter.
The interest line ticks up from the first half run rate that you saw for just half of the second half and then as we go forward into 2019. On the FX side, right now as we note in the statement, the translation impact is softening. You can see that in the first half year, we had 3.6% growth for the group sales in constant currency, but we're down 0.6%. We had about a 4.2% currency impact. You can see that softened to about a half a percent impact for the third quarter. Clearly, if currency remains roughly where it is at the moment, then we'll have a small adverse impact on the fourth quarter. Clearly it's becoming much flatter. Chetan, does that deal with your questions?
Yes. Thank you very much.
No problems.
Okay, if you could read out the other question, that would be great, please.
Yeah, sure. The next one is from Martin Evans at HSBC. Can you please comment on your expansion into regional drug markets such as India? What are the opportunities here, and which illnesses are being addressed, including presumably oncology?
Yeah. Thanks, Martin. Yeah, India is one of the worst target markets for our healthcare business. I think the big issue in the past has been to overcome the legislation barriers there. You have to declare a lot of information around your product, and we've been reluctant to do that for different reasons, more on intellectual property than anything else. Although those regulations have been relaxed more recently, which has allowed us to enter the market. We're starting to see good growth. I think it's broad-based growth. It's delivery systems for different type of drugs. It is oncology. As you probably all know, it's a big base in India for pharmaceuticals, for generic manufacturers particularly. We have products into lots of different applications, ranging from eye care drugs to chronic leukemia drugs, to cancer drugs as well. In lots of different areas.
The big thing we're seeing is we're penetrating new markets like India and China, too, follows the same legislation barriers, and we're overcoming those as well. We expect China, which is a very small market for the healthcare business, to expand. I think the big trend in healthcare is around the move to biologics and the move to, if you like, bulkier molecules, which means more difficulty in stabilizing them. They're looking at delivery systems that can be cuter and clever at stabilizing these systems. We've got a cocktail of these in our makeup, so we can deliver that. We're increasingly becoming the go-to company for these types of drug companies. If you don't mind, because there's some problems, Hugh. I think if we can ask ourselves if there are any other questions that we can't get through the normal system.
Okay. Hugh, the next one is from Gunther Zechmann at Bernstein. He's talking about margin expectations for 2019. It seems like all divisions should expand margins, Personal Care benefiting from the Atlas Point mix improvement, Life Sciences from the turnaround in Plant Impact, and Performance Technologies from demarketing moving towards 20%. Can you give a rank order or give numbers, please?
Okay. Hugh, is my line open?
Yes, it is.
Okay. Hi, Gunther. Look, I think that's a fair view around the performance in each of the cases. Clearly, the ECO plant actually is a benefit to all three sectors. It's not just a Personal Care business. We've got home care in there, and we've got Crop and some other business as well. That benefit will be spread. As I say, in 2019, the ECO benefit will be limited. A small number of GBP millions is what we're expecting, because that pickup is mostly from the margin that we pick up from basically making a feedstock that our suppliers used to make and avoiding the delivery costs that we pay to get that material historically from the Gulf of Mexico up to Delaware. There should be a limited impact.
The exciting part is clearly when we can get the additional sales from green products in the ECO space. You're right. We should then expect to see a reduction in the loss around Plant Impact, and we'll see the continued benefit of demarketing. We will always do some demarketing in Performance Technologies, I think we are coming towards the end of the main impact. Now we're turning our attention to improving the innovation pipeline, which is traditionally sort of lagged behind the other two sectors in terms of NPP level. That's more of a medium-term effect, but we've got some exciting projects in there which we think should start to come through. Yeah, overall, we would be positive around the outlook for margin next year.
I'm not going to put a rank order or numbers around that at this point, I'm sure you understand why.
Just following up again, Jez, from Gunther. Can you please give any color on cash generation and balance sheet?
Yeah, sure. Obviously with science, this is really a sort of sales update in the third quarter. Yeah, as you'd expect now, we had spent most of the CapEx around the ECO plant in the first half year. There's probably a residual in the third quarter of maybe GBP 5 million spend going through. What you'll see in the second half year is improving cash generation driven by lower CapEx. We expect to return to our more typical CapEx level, round about 1.5 times depreciation. That's probably about GBP 75 million-GBP 80 million. That clearly is going to be the key driver to cash generation improving.
That's happening as we speak, because we've finished the main CapEx. That will return Croda to its normal business of strong cash generation, therefore reducing debt, therefore optionality around are there any technology and bolt-on acquisitions that are of interest, or should we return cash to shareholders as per our policy? Yeah, that's very much the direction of travel we have at the moment across those two choices.
Okay. The next one we have is from Isha Sharma at MainFirst. Is it fair to say that Performance Technologies is a bit more cyclical than other segments? Do you see any impact of the general slowdown there?
Yeah, I'll take that one. It's a little bit more cyclical than Personal Care and Life Sciences, but in a very small way that if I look at the trading in that business, we're not really buffeted by anything macro, significantly macro. We tend to look in Europe for that when we see the numbers out from a lot of other industrial companies. Europe's holding up pretty well from what we can see in Performance Technologies. I think, as I said, the priority focus is around. The priority focus in the last two or three years is around specializing the business. When you specialize it, you're really looking at taking it more to a specialty and really truly specialty chemical model, then you're actually de-risking the cycles because you're looking at really good quality innovation in fast-growing niches.
We wouldn't expect to be buffeted too much by everything. It remains to be seen whether we do, we're not seeing that in our order intake or in our activities at the moment. You probably know better than we do about macro for next year. We're in a good place, trading well. As I said, it's PBT. We're interested in that business, it's less looking at the top line, it's more looking at the bottom line. It's a combination of sales growth and margin improvement that drives the performance of Performance Technologies for the group.
A couple of questions now from Laurence Alexander at Jefferies. In the ag sector, does order timing, end market issues in North America, and new product mix support a slingshot effect with accelerating sales in 2019? Or how is second half 2018 shaping up? The second one on Industrial Chemicals, should sales stabilize in 2019, or will bottom slightly continue? I'm not sure if that's Industrial Chemicals or Performance Technologies, but we want answers for both.
Okay. I'll do the Crop one, and Jez can do the Industrial Chemicals one. I mean, Crop's very good for Croda. It's in good shape, very good shape. First half, very strong. Quarter three, slightly just below last year in quarter three. Quarter four looks good from what we can see in Crop Care. If you look at it, you're always going to get some changes in the quarter in Crop, more so than any other business that we've got because of just the nature of Crop. We're in the northern hemisphere and the southern hemisphere as well, and if there's a drought in one part of the world, there's probably something else going on somewhere else and it sort of nets out.
Pound for pound, if I look every year in the last 10 years, it's grown every year and it will grow by the end of this year. As to the quantum in quarter four, that's difficult to say. As to the quantum in next year, the screens for, well, I won't say the screens for probably mid to high single digit sales growth. The Life Sciences business in itself has a very strong driver in healthcare, and it's got a very strong driver in Crop. I think the interesting thing for us is the MNC businesses, if I look year to date, have grown very well. The big five, six companies there, innovation levels are high, which is something that we really do look at. We're also picking up the faster growth rate, as you'd expect from Croda, is of the small and medium-sized customers.
The tier 2 and tier 3 customers. We're capturing growth there right around the world as our Crop Care sales team starts to focus on new customers. Crop Care, very good place. Who knows whether macro will improve for Crop Care next year. In many ways, we're still very much micro driven in Crop Care as well, and we'd expect that growth to continue. No sign of it slowing down.
Okay, on the Performance Technologies and Industrial Chemicals side. As we said, Performance Technologies is demarketing impact of a couple of % on the top line growth. That will have less of an impact as we go forward now, as we've lapped the program starting in the second half of last year. On Industrial Chemicals, we always say that the reason we strip out core business separately is that we're happy to see the sales number go down in Industrial Chemicals. A significant chunk of that business is by-product that we produce when we're producing main products for the other three sectors. Also there's some tolling contracts in there, which over time we are reducing.
So we're quite comfortable seeing industrial chemicals go down as we find ways to make less of the by-products by changing the chemistry or as we exit tolling arrangements that have been historical. So, the general direction of travel on industrial chemicals is likely to be continued reduction, but it has no real impact and generally we make more profit if we are making less industrial chemicals. So that's the direction. There will be a bit more industrial chemical volume coming on from the eco plant because there is a by-product on that stream that is produced in the ethylene oxide manufacture. So there might be a little bit of noise as the eco plant kicks into life, but generally the direction of travel is to try and reduce the proportion of sales in the by-products and tolling business in IC, and you could expect that to continue.
The next one is from Charlie Webb at Morgan Stanley. It's the first time in a while we've seen you comment on a large MNC product launch. Can you please remind us what scale of contribution you would expect from these type of launches, and should we expect more of these to come?
You'd be surprised to know, maybe not surprised to know, we can't talk about individual customers in any particular form. We're contracted to them. We're delighted with one or two. One big one that's been launched through, it's been six months in launch now, and it's been out in the market for six months, and it's rolling out globally. That's still rolling out, and it's got another 12 months to roll out. Top five brand in the world, and it's being managed by Croda Ingredients and managed by the R&D laboratories in Croda. We're delighted with that, and our relationship, as you'd expect with that customer is outstanding based on that. A lot of effort gone in marketing with our customer there. We're also starting to see one or two more coming through at the advanced stage of pipelines as well.
If you look back at the history of Croda, I've been in the company 28 years, over the last 10, 12, we've always been looking for one or two product customer launches like this, and you normally get them. You normally get one every two years. It looks like they're starting to come back now. I think the bigger point for Croda is it's getting our trust back with the MNCs and the growth is starting to come back. You can see this growth coming through our customers now in MNCs, and that's really exciting for us because they're innovating again, and they're doing a lot of innovation, and we're starting to pick up good growth as a consequence of that.
Okay. I think this is possibly the final one, and it's from Rikin Patel at Berenberg. The first one, is the moderation in crop protection seasonal or are there other factors at play? What is the growth trajectory we should expect here in 2019? The final one is, can you please quantify the NPP growth in Performance Technologies?
The first one, we've answered it really. It's about Crop. There was a question before around that. There's no moderation in Crop. Don't worry about quarterly fluctuations. Year-to-date Crop is in the positive, strongly positive. It will be by the end of the year, and no doubt it will be next year. I don't see any problem with that. It's very limited to macro effects. There is seasonality. You're always going to get seasonality here. Our big bases in Crop are, in geography terms, are Western Europe, North America and Brazil. They're the three big areas. Clearly, we've got opportunities to expand in Asia, and that's what we're trying to do. If you look at the three major regions, they balance each other out pretty well.
Normally it's the innovation power through our R&D over the last few years that takes us forward and ahead of industry average growth rate. We've seen now for, and it has been for 10 years, that we've outperformed the industry. It's a really good business, Crop Care, and I expect that to continue.
Shall I take the NPP?
Yeah
Question? Traditionally, we've had about 40% NPP in Personal Care, about 30% Life Sciences, about a bit under 20% in Performance Technologies. It's nice to see Personal Care moving well ahead of 40 now. On Performance Technologies, we've got a big medium term focus on making sure that we have richer innovation coming through, and therefore can drive that NPP number, because it's one of the things that supports margins in Performance Technologies. We remain a bit below the 20% level. We've seen some encouraging movements in that, supported of course, by our acquisition of IonPhasE in December last year into the smart materials area, which is a very innovation-rich business, which we are in the process of developing through our Croda sales network.
The key for us in the medium term, having done the demarketing in the short term, will be to drive that innovation pipeline in Performance Technologies and get the innovation levels up towards the consumer businesses.
Hugh, that's the end of the questions from our end.
Okay. Well, in that case, this now concludes today's call. Thank you all very much for attending, and you can now disconnect.