Steve, good morning, everyone. As Steve highlighted, the group delivered an excellent financial performance in the first half of the year, building on the record performance seen in 2021. Sales increased to over GBP 1.1 billion and were up by 21% against the prior year, 18% in constant currency terms. Adjusted operating profit increased by 24% to GBP 300 million and EBIT return on sales improved by 70 basis points and is now approaching 27%. Adjusted profit for tax rose by 26% to GBP 289 million. With the tax rate broadly flat against the prior year of 24%, adjusted earnings per share increased by 25% to GBP 1.55.
We've declared an interim dividend of GBP 0.47, an increase of 8% continuing a 30-year track record of unbroken dividend growth. Free cash flow reduced to GBP 21 million in the period, with significant investment in working capital reflecting the strong sales growth. Turning now to the IFRS reconciliation, exceptional items and intangible amortization total GBP 13 million. We delivered a profit on divestment of the PTIC business of GBP 361 million. As a result, on an IFRS basis, profit before tax more than tripled to GBP 637 million. The PTIC divestment concluded on the 30th of June, so the first half year includes a full period of PTIC reported in the usual way as continuing operations. Turning now to the sales bridge for the first half.
The chemical sector has seen significant inflation for some 18 months, which continued through the first half of 2022. We've continued to fully recover cost increases, demonstrating the strength of Croda's business model. Price mix added 22% year-on-year, of which the successful recovery of cost inflation through higher selling prices is estimated to have contributed 20% of the points. This was supported by a 2% improvement in mix. Volume declined by 5% year-on-year. The first half of last year had been characterized by strong consumer demand, coupled with significant customer restocking. This restocking was a function of customers not wanting to be short of product as the post-COVID recovery took off, combined with the uncertainties around global supply chains and rising supply prices.
As a result, we were serving the high demand last year from both production and existing stocks. The first half of 2022 has seen supply chains and service levels improve, with the result that customer ordering patterns have been normalized. Nevertheless, consumer demand has remained strong, and our capacity does remain tight in some chemistries. As a result, we have demarketed some lower margin product. This has been reflected in the slightly lower volume, but the higher margin we see. In addition, overall acquisitions added 1% and currency translation a further 3%, giving reported sales growth in the first half of 21%. I've also shown what the impact of the PTIC divestment would have been had it occurred on the 1st of January.
Taking account of sales retained by Croda and the impact of a new supply agreement to Cargill post-divestment, revenue would have been GBP 191 million lower. This next slide unwraps the cost inflation further. The left-hand side shows the breakdown of sales. Raw materials make up 35% of our sales value, labor 19%, and energy and freight 3% each. 9% is in other costs and 31% is our EBITDA margin. Raw materials saw a 25% increase on average over the first half year compared with the fourth quarter of 2021. With a broad basket of raw materials, mostly grown commodities, it was unprecedented to see so many different materials increasing together. The conflict in Ukraine added further to the existing inflation. Now we don't hedge raw material prices, but we buy on a quarterly basis.
Our operating model ensures that we get successful recovery of this cost inflation as it occurs. Freight costs continue to inflate after a challenging 2021 for global distribution systems. We're up 14% in the first half. Energy costs were up by 47%, though this benefited from a degree of forward cover, which we take on a rolling basis. Energy costs constitute a relatively small proportion of our cost base, but have been recovered through selling prices. Given our manufacturing footprint, we don't anticipate any material exposure to potential gas shortages in Europe from the current forward uncertainty, although some of our petrochemical material suppliers may see some impact. As we look forward, we see signs of smaller price increases to many materials, but we will continue to recover inflation as and when it occurs, protecting profit in line with our operating model.
Growth was strong across all regions, with double-digit % growth on both a reported and underlying basis, that is excluding the impact of currency translation and M&A. Reported sales growth was particularly strong in Asia at 31%, including in China, where sales grew even in April, the worst of the COVID lockdown months. Sales in North America continued to grow strongly, and in Latin America, reported sales growth of 35% was driven by excellent demand in Crop Care. In Europe, reported sales grew by 13% despite a small adverse impact from the conflict in Ukraine. Sales impacted by the conflict are just 1% of the group's total revenue. Turning now to look at how the sectors performed. Consumer Care grew sales by 24%, while adjusted operating profit was 34% higher.
As a result, return on sales increased 200 basis points to 26.6%. Life Sciences continues to grow. Sales were up 14% with adjusted operating profit 4% higher against a record prior year performance that included peak COVID-19 demand. Life Sciences delivered a best-in-class return on sales of 36%. The combined performance of Performance Technologies and Industrial Chemicals saw sales grow by 24% and profit by 61%. Industrial markets reached top of the cycle during the period, with prices for commodity byproducts particularly strong, delivering an overall return on sales of over 17%. Sales began to slow somewhat in the second quarter. There was broadly similar performance between the business we divested and the part that we've retained.
As already noted, at the group sales level, sales were up 21% and adjusted operating profit 24% with return on sales of 26.6%. As in previous years, return on sales is impacted by the level of our variable remuneration charge. This particularly reflects the impact of the share price and the mark-to-market value of our global employee share plans. The lower share price due across the first half year saw a benefit of 1.5 percentage points to both sector and group return on sales. Now let's look at each of the sectors in turn. Consumer Care was the standout performer in the first half year. Underlying sales increased by 18%.
Price mix was up 22%, driven by successful cost inflation recovery, and volume was marginally lower, reflecting the strong prior year comparator, which benefited from the post-COVID resurgence in demand and the associated customer restocking that I mentioned. This combined with some selective demarketing of low-margin business to manage capacity limitations, with underlying consumer demand volume remaining robust. The prior year acquisitions of Alban Muller in Beauty Actives and Parfex in F&F added 3% to sales growth. Currency translation also added 3%, resulting in overall reported growth for Consumer Care of 24%. We saw sales growth across all four business units. Beauty Care was the strongest, a noteworthy performance given this was the business where growth had been inconsistent back in 2018 and 2019.
Consumer demand for sustainable ingredients such as eco-surfactants and our enhanced formulation capability for customers are driving growth and creating greater resilience. Alongside Beauty Care, the Beauty Actives business continued to strengthen with the integration of Alban Muller and complementary natural actives. Home Care continues to accelerate its customer rollouts in high-value proteins for fabric care. The F&F business saw some improved growth in emerging markets alongside good progress in synergy capture. Consumer Care return on sales increased by 200 basis points to 26.6%. Following an outstanding year for Life Sciences in 2021, with a rapid expansion of healthcare following the Avanti acquisition and COVID vaccine sales, the first half of 2022 saw further progress consolidating on this exceptional performance. Underlying sales growth was 12%, with price mix up 1 and volume growth of 11.
Currency translation added 2%, resulting in reported sales growth of 14%. Volume growth was driven by a standout performance in favorable market conditions for Crop Protection. The lower average pricing in Crop also reflects in the lower price mix for Life Sciences and in its slightly lower return on sales of 36%. This Crop growth builds on a strong second half of 2021, so the headline growth will slow in the second half this year, but the outlook remains strongly positive with high commodity prices driving great demand. Health Care consolidated on a stellar 2021 with gross growth across all of its platforms other than lipid systems. Recent investment in capacity expansion in Patient Health drove continued growth in specialty excipients and in vaccine adjuvants. We're starting to see lower demand for lipid systems as COVID vaccine use declines from its peak.
2021 saw total lipid system sales of about $230 million, of which $190 million was for COVID-related vaccines and the balance, the Avanti R&D lipids business. The first half of 2022 saw $90 million of total lipid system sales. Looking forward, we expect a further second half decline to give full year sales this year around $150 million, with then $120 million in each of 2023 and 2024 as COVID demand stabilizes at this lower level. After this, total lipid sales should return to growth from 2025 as clinical opportunities in mRNA and nucleic acids develop and convert into commercial scale projects, leveraging Croda's wider scale-up capability and Avanti's great pharma R&D access.
It's important to remember that this was our rationale for acquiring Avanti to develop this new patient healthcare delivery platform with exciting new technologies. It's also good to be approaching the bottom of the curve from the initial COVID sales, and important, I think, to see the profit growth we will still be delivering in 2022 despite an $80 million decline in total EBITDA sales. We're building a strong foundation for Croda in drug delivery, which will deliver exciting growth in the future, and Steve will share some of the exciting pipeline programs later. In PTIC, first half performance was strong with underlying sales growth of 22%. Price mix increased by 32%, reflecting the most significant cost inflation seen across the group, but volume declined by 10% against a strong comparator and as industrial markets peaked in the second quarter.
On the 30th of June, we completed the principal PTIC divestment with gross proceeds of EUR 775 million, with a potential subsequent sale of Sipo in China subject to reaching an agreement with our local partner. The retained business will now form the new Industrial Specialties sector and play a critical role supporting the efficiency of the Consumer Care and the Life Sciences sectors on common manufacturing sites. In the first half, the combined PTIC business delivered GBP 343 million of sales and GBP 61 million of operating profit. Had we made the divestment on the first of January, the impact on the group overall would have been to reduce sales by GBP 191 million and adjusted operating profit by GBP 39 million, as shown in the table.
This includes sales from a new supply agreement with Cargill and the impact of stranded costs across all three sectors, which we expect to mitigate over time through future growth. Going forward, we expect the Industrial Specialties business to operate with a return on sales at or just above 10%. I'll turn into cash flow. EBITDA grew strongly. Working capital increased by GBP 184 million, primarily reflecting the impact of inflation on inventory value and receivables. The bar chart shows that about 2/3 of the working capital increase reflects the simple pro rata impact of inflation at constant days cover. 1/3 reflected investment for growth, primarily into higher receivables. We expect working capital to reduce in the second half of the year, particularly if raw material inflation starts to recede as expected.
Net proceeds from the divestment was GBP 613 million, reducing half-year net debt to GBP 331 million, a leverage ratio of 0.6x EBITDA. This next slide shows how we intend to use those proceeds. Our capital allocation policy remains unchanged, and the divestment will allow us to deploy more capital in line with this policy to support expansion in higher growth, higher returning Consumer Care and Life Sciences markets. We have a rich seam of growth opportunities, and we'll prioritize organic capital expenditure to drive value creation through new capacity, product innovation, and expansion in attractive geographic markets. This will be complemented with targeted acquisitions in technology adjacencies in line with our preferred approach to buy and build.
This is demonstrated by our recent investments in Patient Health, where we have secured new technology platforms like vaccine adjuvants in Denmark and lipid systems in the U.S. through modest acquisition spends and then built global scale through organic investment. Our typical capital investment spend is gonna be around 6% of annual sales or just over GBP 100 million currently. We believe this is sufficient to maintain our asset base and deliver target organic growth rates. In addition, we're investing GBP 160 million over four years to access fast growth pharma opportunities, which Steve will cover shortly. We're also committed to pay a regular dividend, to shareholders with the 8% increase that I mentioned earlier. In addition, we monitor leverage against our target policy of 1-2x EBITDA, returning surplus capital to shareholders when identified.
I'll now hand you back to Steve to look at our strategic opportunities.
Many thanks, Jez. For the first time in our history, Croda is now solely comprised of eight growth businesses supported by industrial specialties. We expect each of them to deliver sales growth of at least 1.5x GDP, with return on sales above 20% and ROIC over 2 x the cost of capital. 10 years ago, you would be investing in our business, one business, and it was called Actives. Now you can take your pick. You might choose to invest in us because of our personal care, our F&F business, or even our crop franchise. Or maybe you invest in Croda because of the emerging healthcare platforms that we've got. There is a much broader breadth and depth to our growth than in the past.
We also no longer have exposure to industrial markets to worry about, and the portfolio has rich innovation in each area. This increased focus makes our future growth much more resilient, even in a more uncertain environment. In Consumer Care, Beauty Actives is still the leading innovator in the skincare market with a strong position with prestige and masstige brands. Beauty Care is a stronger, broader business with multiple revenue streams, and growth is being driven by a structural shift in behavior by customers and consumers towards sustainable ingredients. F&F has significant exposure to fast growth markets underpinned by a highly flexible and responsive business model. While Home Care is concentrated on fast-growing niches, that should be broadly unaffected by the macro.
Consumer Care has a much broader portfolio today than we had two years ago. Turning to Life Sciences, we expect all the businesses to be pretty immune to any deterioration in the macro environment. People don't compromise on health, and farmers continue to look for ways to protect their crops and get more output from their land. As consumers think more and more about their impact on the wider environment, our customers want us to deliver novel, sustainable ingredients, and this has become a real differentiator for us. We're leading in four areas. Firstly, our target is for the raw materials that we use to be 75% bio-based by 2030. By continuing to move away from petrochemicals, we're helping our customers to meet their own commitments to fossil-free formulations.
Secondly, by ensuring that our raw material sourcing has a positive impact on communities in our supply chain, giving our customers an even stronger platform from which to market purpose-driven brands. Thirdly, by decarbonizing our operations and supply chain to meet our 1.5 degrees Science-Based Target. We expect to reduce our product carbon footprint by 35%, and we're developing a Scope 3 index so our customers can see how our actions are benefiting them. Fourthly, with R&D projects that help to transition our portfolio and enable our customers to meet their own sustainability goals. We're combining leadership on sustainability with market-leading innovation to deliver sustainable growth. Our focus is on niche areas, developing next-generation products. R&D is driving growth in our Beauty Actives business. Recent launches have included an innovative retinol and anti-aging active.
By encapsulating the active, we've improved skin penetration by more than nine times, creating the most sustainable retinol-containing complex on the market. Beauty Care is delivering more consistent top-line growth, particularly in the higher value sun and hair care markets. Sales of eco bio-based surfactants continue to accelerate and both in Beauty Care and Home Care, where they have doubled in the past first half year. In F&F, we have launched encapsulated fragrances, one of the first on the market, and expanded our presence in Indonesia and South Africa, as well as launching in Brazil. Innovation, as you all know, is Croda's lifeblood and the bedrock of our future growth. We continue to make significant investments in R&D and are taking bigger bets with more ambitious projects.
Our pipeline is being strengthened by our biotech investments, such as Nautilus expertise in blue ocean marine biotech, and we're using microorganisms found on the ocean floor to find new ways of treating dandruff, skin aging, and inflammation. Our new biotech-derived surfactants have expanded the options available to customers. They're helping to increase our bio-based portfolio and meet our ambition to eliminate petrochemical-derived surfactants globally by 2030. Biotechnology is opening up new approaches to making fragrance ingredients, one of the ways in which we're making our F&F portfolio more sustainable. Investments in organic expansion form part of the redeployment of capital from the PTIC divestment into innovative fast growth markets. We're growing our IP with more specialist scientists coming into the business, and we're expanding sustainable technologies, building on growth in areas like sulfate-free surfactants and ingredients that double the life of fabrics.
We're also increasing geographic coverage, particularly in China. These investments are delivering results and strengthen our platform for growth for the future. The vast breadth of the Consumer Care portfolio is at an all-time high. Tens of thousands of products focused on fast growth, high-value markets. Our pipeline is getting stronger, responding to both current and future trends, creating next-generation technology, replacing petrochemical formulations along the way. We're winning by focusing on premium, share, agility, and fast-growing and sustainability-driven niches. Consumer Care has developed very significantly to become an even more resilient growth platform underpinned by a strong pipeline and focused investment. Turning to Life Sciences, you know, growth is being driven by demand for high-value delivery systems to enable the latest biological drugs.
Biologics is a huge market, accounting for 70% of the top 20 selling drugs, enabling doctors to treat diseases when they could previously only treat the symptoms. Going across the three areas that you will be familiar with, growth in excipients is being driven by expansion in injectable drugs using biological APIs, such as monoclonal antibodies with 5,000 clinical trials currently underway. Adjuvant demand is being driven by new vaccines, greater adjuvants used to enhance the body's reaction to vaccine protection and WHO programs to expand vaccine take-up in developing countries. Vaccines are also increasingly being used to trigger an immune response to an already contracted disease, to treat HIV, for example. There are 1,500 clinical trials for these therapeutic vaccines underway globally.
While lipid systems have played a critical role in COVID vaccines, they offer significant potential beyond COVID-19 as the preferred delivery system for nucleic acid therapeutics. The mRNA market is expected to reach $35 billion over the next 15 years, and 180 clinical trials are already underway for applications across preventative and therapeutic vaccines and therapeutic drugs. Biologics also has the potential to revolutionize crop science. With our innovative delivery systems, Croda is well-positioned to benefit from the move into biopesticides, which are growing at twice the rate of traditional crop care. Our biopharma pipeline is very exciting indeed. We're partnering with major pharma brands to provide specialty excipients for monoclonal antibodies.
Applications range from oncology to combating macular degeneration, a condition that affects people's vision. With the only aseptic manufacturing site for vaccine adjuvants globally, we are the gold standard for aluminum adjuvants used in a third of preventative vaccines. We have a strong sales pipeline across a variety of vaccines, including flu, pneumonia, shingles, and HIV. Therapeutic vaccines promise even faster growth rates, enabling the treatment of diseases such as HIV with a new vaccine that is in phase III trials in Africa. Our lipid systems are being used in preventative vaccines for flu and RSV, a common virus seen in schools during the winter, and in therapeutic vaccines for cancer. All of this highlights how we're involved in helping to treat some of the biggest diseases in the world, creating more and more opportunities for Croda.
Similar to Consumer Care, our innovation pipeline in Life Sciences is extremely strong. Here are some examples of applications that use our current generation delivery systems, but illustrate more importantly the focus of our future innovation. The first one uses one of our specialty high-purity excipients, which is being developed for APIs that require superior solubility performance. They will help enable diabetics, for example, to take insulin orally rather than by injection, and this project is currently in phase III clinical trials in the U.S. Our vaccine adjuvants are being used in a novel personalized immunotherapy for the treatment of patients with melanoma, lung cancer, and bladder cancer as well. Phase II clinical trials are underway in Denmark at the moment.
Most exciting of all, our lipid systems are being used by customers which recently completed the world's first dosing of a patient with a gene editing therapy and as part of a clinical trial for the treatment of heart disease. We are truly applying our purpose of smart science to improve lives in all of these opportunities. Again, we're driving growth through focused investment. As Jez said earlier, our preferred approach here is to adopt a buy and build model, securing new technology platforms and knowhow through modest acquisition spends, then building site expansion from within. We have already doubled capacity at our specialty excipients plant in Pennsylvania and are rapidly expanding our adjuvant systems factory in Denmark.
Our priority here is continuing to build our knowledge base in lipid systems too, so we are investing in our R&D and preclinical capabilities at Avanti and in a second scale-up site in Pennsylvania to augment current commercial scale-up capacity at Leek in the U.K. Between 2021 and 2024, we will invest up to GBP 160 million of new capacity to deliver on the exciting pharmaceutical platform we're building. Complementing our own investment, the U.S. and U.K. governments are co-investing up to GBP 75 million too, recognizing the importance of new generation delivery systems to drug discovery. These are already some of the highest returning investments in our portfolio, and the expansion will drive accelerated growth.
We're going to go into a lot more detail at our investor day in October, but our pipeline in biopharma will be a significant growth engine for Croda, and it's getting bigger. In the first half, we secured 30 new customers and 80 new clinical and pre-clinical programs, bringing the total to 330. More than three-quarters of these programs are for non-COVID-19 applications, up from two-thirds just six months ago. The pie chart in the middle shows the proportion by each product class. Monoclonal antibody and oncology programs make up the majority of our specialty excipient pipeline, as well as immunosuppressants. In vaccine adjuvants, in addition to our continued focus on fighting against WHO listed diseases, immunotherapy applications such as the personalized cancer treatment I mentioned earlier are becoming increasingly important.
In lipid systems, all of the new programs in the first half were for non-COVID applications. In this business, we're now involved in more oncology and gene editing trials than we are for COVID, and new mRNA vaccines beyond COVID are a particular area of focus. Finally, coming to outlook then. With stronger profits than anticipated in the first half, full year profit before tax will be modestly ahead of our previous expectations. That is despite growth moderating in consumer markets in the second half and full year lipid sales reducing to $150 million versus $230 million last year. Our improved overall outlook reflects the things I've talked about today, a more resilient growth platform in Consumer Care, ongoing demand in Crop, and continued overall growth in healthcare.
In summary, Croda's powerful operating model, its increased focus, the greater innovation, and exciting pipeline underpin our resilience, ensuring we're even better equipped for future growth. Now, Jez and I are very happy to take your questions. Over to you.
We'll now move on to the Q&A section of the event. As a reminder, if you're on the webcast, please type your question into the relevant box and I'll read it on your behalf. For analysts on Zoom, please raise the Use Hands function. You'll then be invited to unmute your audio and video if applicable, introduce yourself and your institution, then go ahead and ask your question. The first question over the webcast comes from Gareth Haywood, who asks, "What businesses are now in Industrial Specialties? And what's going so right at Crop Care?
Oh, hi Gareth. Morning to you as well. We were just talking about Nottingham Forest earlier, by the way, everybody. David's team just got promoted but, anyway, back to business. Yeah, I mean, Industrial Specialties is still a significant business for Croda. I mean, we've reduced our industrial portfolio in that, the small businesses which are in the core sites that we couldn't, they're either product streams rather than wider businesses that we couldn't really sell as part of the Cargill deal. Things like water treatment, fabric and fiber protection, and there's a bit of electronics in there. There's a bit of emulsion dispersions in there. Of course, on top of that, there's a supply agreement with Cargill, which is our big customer.
We've got transitional service agreements with them, but we will be supplying them, you know, on a long-term basis. All of that in the round is in there. I mean, in terms of crop, I mean, crops had an outstanding year. I mean, there's three things in the crop results. You know, you've got this big macro positive, which I think you all know about, you know, these big crop prices are higher for longer. The Ukraine events, unfortunately, prolonged those, you know, when you think about it from the disaster point of view. But from a crop point of view, you know, prices are gonna stay longer for a while. You clearly got a helping hand in the macro. You've also got two other things.
There's a big move into sustainability. It's not just in Home Care and Beauty Care. It's in Crop. We're partnering up probably more so now than we've ever done with the big crop players. That's gaining more traction, more business. I think the other thing is the innovation. You know, we've got world-class platforms in there. You tend to think about us in terms of Beauty Care and Actives and pharma, but the Crop innovation platform is great. You've got those three things together that's driving a really strong performance in Crop. I think our view on Crop generally is that that will continue well into next year as well.
You know, clearly there's some tougher comparators in the second half, but we're expecting the dynamics of crop to remain positive like that for quite some time to come.
Thanks, Steve. We'll now move on to analysts, starting, I think, with Matthew Yates. You're just on mute there, I think, Matt. Yeah. Still, we'll have to come back to you. Can we go to the next analyst, please? We're not getting any audio in the room at the moment.
Yes, if you can hear me? I can.
Yes, we can hear you now, Gunther. Please introduce-
Oh, that's great.
yourself and go ahead and ask the question.
Sorry to jump you, Matthew. I hope you get to go next. I'll start with two then. Firstly, Steve, Jez, on the LNP business, sorry to start on that point, but it seems that the visibility of the business you have there has improved significantly with the forecast you're giving out, or the projections you're giving out to 2025. My question is, what has structurally or contractually changed in that business? I think Pfizer was more a quarterly rolling visibility. That seems to be quite a step function to the better. That's the first one. The second one is, like all of us, I'm elated that we only have to deal with earnings twice a year now and not with Q1 and Q3.
I'm sure a lot of my sales side colleagues share that feeling. Can you give us an indication of the volume decline in the second quarter versus Q1 and the exit run rate out of the second quarter? If there's any differences by business, then that would be helpful as well. Thank you.
Yeah, thanks, Gunther. Somebody beat you to it for the first question. That's unusual, isn't it? Yeah, I mean, just on the LNP, I mean, you know, the way we look at that is we've done a lot of work since we last spoke with you on the pipeline. I think that's the important point. You'll hear a lot more about that, the innovation pipeline. We've got a sales pipeline and an innovation one. You know, we're mapping every project to our you know risk-weighted approach and on average in terms of the you know the size of that pipeline, and we can monitor that more closely. Again, you're gonna hear a lot more about that in early October. I think there's two or three things in this.
Clearly, there's the moderation that we would expect and you would all expect from the vaccine rollout to be more getting into a, what I'd call a natural rhythm. We feel like with our partner there and others, that we can call that more sensibly now than we've had in the past. That we're now in a natural relationship with them where, you know, the first year we were chasing our tail, as were they, just to get product to market. Now they're in a good position where they've got stock on the ground, and we have as well. We're in a normal rhythm to that relationship. I think it's easier to call the future than it was six, twelve months ago.
Although there's still a bit of risk involved in that upside, as well as potentially downside. It's much more certain now than it was probably about 6-12 months ago. I think it gives us more confidence. I think the other thing to point out, though, is you know, this GBP 120 in 2023, more than half of that revenue will be in non-COVID projects. In 2024, more than two-thirds of those projects in sales value will be non-COVID. You know, I think the point we're trying to make is it's the innovation pipeline that we're mapping that's driving that assurance and confidence in those numbers in the next two or three years.
You know, COVID, as we've always said, by 2024, 2025, you know, the large portion of this is gonna be non-COVID related. We're supporting, you know, a huge stream, as you can see with some of the examples of treatments. You know, from lung cancer to bladder cancer, from heart health to diabetes, from RSV to HIV. You know, lots of different treatments. You know, there's not one project in here, there's several projects. That's really the importance and the point we're trying to make is, you know, the assurance is not coming, it's coming more from the innovation pipeline. I mean, in terms of volumes, I'll kick off and then I'll get Jez to comment on that.
I mean, you can see in the, you know, we've had a bigger deviation in Industrial than we've had in Life Sciences. I think that's fair to say. Then somewhere in the middle is Consumer Care. If you look at Consumer Care, sort of, this minus 5% in the first half. When you look at that, there's three moving parts in that. Life Sciences is positive, and that's largely crop driving that. You know, we're talking about micro volumes, particularly in pharma. You know, the volume end is more the crop end plus the Consumer Care. The minus 5% in Consumer Care effectively is three different things.
If you remember last year, particularly in the first half of quarter two, there was a big surge in demand plus real demand plus restocking. The comparator last year, it was tough because of that restocking of the pipeline. That was one thing. I think the second thing is we haven't supplied everything we wanted. You know, we've still got some supply constraints. Outstanding orders are still in a higher position now than they normally would. We got one or two raw material constraints in Home Care and just supply issues generally in Beauty Care particularly that's not allowing us to satisfy all the demand. That's second. Then the third thing is this, you know, demarketing point. You know, Croda is very good at demarketing.
When capacity is tight, we tend to demarket at the lower end, which tends to be the more volume end. Actually, when you look at that in the round, we think the true volume decline in Consumer Care is about -1% to -2% in the round on an ongoing basis. You know, when you see the inflation in the business and the 20% in price in the mix, you know, a negative 1-2% on volume we think is perfectly acceptable given where we are. As you can see, profit growth ahead of value growth. You know, we're in a good shape there. That's the response to that.
Great. Thanks.
No, it's good, sir. I suggest we try Matthew again, please. Matthew, go ahead and ask your question. Sorry, still no audio. Apologies, Matt. We're gonna have to move on.
Well, Matt, if you can send an email to David just with your details, you know. The question, we'll read it out and we'll try and answer it for you.
Let's move to the next analyst, please.
Hello, can you hear me now? It's Charles Bentley with Morgan Stanley.
Hi, Charlie. Morning to you.
Brilliant. Well, I'm just gonna maybe follow up firstly on Gunther's question just around demand. Just thinking personal care, that underlying small negative obviously you saw in the first half. How do you think about the second half? Obviously, raw material inflation presumably is slowing, so the price component will be a little bit less in the second half. Presumably, demarketing doesn't carry on forever. The comps, like I said, are easier, right? Just how do you see the organic profile of Consumer Care in the second half? That'd be the first question. Just second question around the leverage position, obviously ending the half not been six times net debt to EBITDA.
As you talked about wanting to reinvest that in growth. You know, you see lots of exciting opportunities organically. How does the inorganic opportunities look at this stage? You know, where is that focused? You know, are there opportunities out there that you think are exciting? Maybe just any additional color around that would be very helpful.
Yeah. Great. I think in Consumer Care, I mean, the way we look at that is, you know, we're still very upbeat about Consumer Care. I mean, you know, L'Oréal being out today or last night and today as well. You know, our view has always been quite similar to them. You know, we've had two years of a pandemic, and let's not forget there's large parts of the world that are just coming out of the pandemic now. You know, we've started to see this resurgence in Asia, second quarter versus first quarter because of the unlocking of restrictions. Still not fully there as, you know, right across to China there. You know, there's this pent-up demand to socialize, and through travel, through just, you know, going out with friends.
That all helps to drive personal care. There's an indulgence in personal care that we haven't seen for two years, and we expect that to continue. You know, the appetite to purchase personal care products in the industry has never been stronger. I don't think, you know, in a recessionary environment is gonna significantly slow that down. Clearly there's gonna be areas around the edges that will moderate. I think they always do. We're not expecting in our forecast for a real cliff edge volume reduction in personal care. We expect it to sort of cool off a little bit.
You know, we're gonna get to sort of stock levels that you'd expect and demand may moderate a little bit, but we're not forecasting a sort of, you know, a cliff edge volume decline on the back of that. We'll manage that in the normal way. As you saw in the pandemic, I think if people saw Croda's figures in the pandemic, you know, the harshest probably trading environment we're ever likely to see, I think. You know, the personal care business stood up very strongly to that. I think we're optimistic. Innovation pipelines are strong.
You know, the more important thing for the group is making sure that those innovation projects move with pace so our customers don't reduce their investments in the innovation projects through any uncertain environment or recessionary environment. There's still a lot of pent-up demand there as well. Yeah, I mean, we're cautious with the second half in our numbers. We expect, you know, some moderation but not massive in terms of that. In terms of your leverage point, clearly we'd like to put that to use, the proceeds. We're in a brilliant position. You know, we've got strong trading. We've got a strong balance sheet. We've got plenty of optionality there, and we'll take our time.
You know, we're in no rush. We've appointed chief scouts in both of our big businesses, and they are some of our best business developers in the company. We're after target technologies rather than target customers, but the target technology leads us to that customer. We know what we're looking for, and our lists are probably very different to virtually everybody out there, so we have to be patient with them. They're not long lists, but they're interesting lists. You know, I think I've always said, you know, when you come into a recession, you come out of a recession, there's always great opportunities. Croda.
You know, I've lived through five recessions in 20 years in Croda, and the opportunities when you come out of a harsh trading environment like what we have done, there's normally more opportunities than you think. Let's just be there. We're flexible, we're open, but we're very sensible with our money. We don't feel like that there's a burning need to deploy it with speed. We'll do it in the right way.
That's really helpful. Just maybe following up on that point around raw material inflation for the second half versus the first half. Obviously you saw a lot of inflation in the first half. How do you see that in the second half, and what kind of, you know, reciprocal pricing would you expect to see to offset any residual inflation?
Yeah, I mean, I think our view is, it's probably about 2% in quarter three versus quarter two. You know, there's a mix. It's a mixed bag still out there, but, an extra 2% increase we're forecasting in quarter three. So we think it's peaking. You know, we expect it to peak in the second half of the year, raw material pricing. You know, and that's a significant part of everybody's inflation environment. So, we would expect that to moderate and therefore the need for further increases is very much more targeted now on individual products rather than sort of across the board.
We're not expecting to put full scale, you know, across the board increases through, because we, you know, as I said, we're expecting raw materials are sort of plateauing now. Jez, any additional point?
I think that's fair. I think, yeah. Raw material is probably somewhere in that 2%-5% region, maybe sales price nearer the 2%. You know, we did call it out in March, and we sort of got it wrong then because of Ukraine. It certainly feels after six quarters, seven quarters now of some increases, that we're getting to the end of that period and that we should start to see commodities generally coming off, obviously, particularly given that we see a little bit of softening on the more industrial side of markets. That should be helpful.
Fantastic. Thank you very much.
Thanks, Charlie.
Thanks, Charlie.
There are two questions here from Matthew Yates of Bank of America, one of which is a follow-on to Charlie's question. Jez mentioned that there might be some working capital release in H2 if raw materials fall. From a profitability perspective, when you have that sort of cost deflation, would you be passing it all on to customers, or would you plan to keep some of the savings and drive up your own profitability, particularly in Consumer Care? Matthew's second question is in relation to healthcare. Steve, you kindly gave the number of 330 projects in the healthcare pipeline, but I've no idea what to do with that in terms of translating it into financials. I'm sure there must be a huge variation in project value and likelihood of making it through to clinical trials.
At the risk of front running your planned seminar after the summer, is it reasonable to think this business is running a bit ahead or substantially ahead of the targets you first outlined in 2019, and that's reflected in this, in the sustained high level of CapEx to support that growth? Perhaps turning to raw materials, first of all.
Yeah. Well, let me. We'll both answer that. I mean, the first bit commercially, I'll let Jez talk about working capital unwind and things like that. I mean, you know, we're not forecasting in the model a massive deterioration in raw materials very quickly. So the issue with raw materials, I think they'll plateau. You know, and if they did come crashing down, which we're not expecting, then we will of course pass that, pass some of those reductions back. But what you tend to find in our model is in rapid raw material inflation or deflation, we tend to hold onto a bit more margin at the edges because of, you know, we're up quickly to pass prices through as we've demonstrated in the first half.
You know, there's no lag there from us. When we come down, we'll just be a bit slower to pass the increases on. We will pass a significant amount of those on. Net-net, it's sort of a slight margin, a margin improvement story for the group. Well, Jez, the working capital's a slightly different.
Yeah. I mean, from the working.
From a working capital point of view, I mean, clearly we've seen very sustained increases in working capital over the last 18 months. Almost exclusively reflecting the higher values of inventory and of receivables in there. You know, certainly given our sort of view that we should be seeing a more stable period, at least on raw material inflation, then we'd expect to see, yeah, a stabilization of working capital. Then obviously if we see prices coming down later in the year, then that will be reflected in working capital. But I think we're probably through that peak in working capital in the same way that we're probably through the peak in raw materials at the moment. But you know, we keep the number of days constant and just manage our business.
We've probably added couple of weeks of inventory over the last 18 months because of supply chain disruption, particularly caused by global disruptions. We'll keep that in as a buffer to protect service, but the great thing has been to see that service has been improving steadily through the first half year, so we don't really need to do any more of that at this point.
Yeah. Just on your healthcare point. I mean, yeah, I mean, you know, you make a good point and, you know, $64 million question, what does it all mean? You know, we didn't want to give you too much information today because we've got Capital Markets Day in early October and, as I said, the feature of that will be it'll be exclusively the pharma business of Croda, new team, and fresh information. But a lot of that will be around, you know, bringing to life the innovation pipeline as we know it. We're very reluctant to go out too early with numbers that might overexcite people. You know, we've got to make sure ourselves, as you say, they're all in different stages of clinical programs.
Some are much bigger than others, but in the round, you know, the fact it's the sheer breadth of the treatments that we're following and the sheer breadth of the products that we have in there, which are the really big, important things, you know. Since we last spoke with you, we've picked up another 80 programs in the first half of the year. We're now, you know, at 330 customers across these three platforms. You know, in the round it's all shaping up nicely. What we need to do is try and guide you and educate you and bring to life that not just in examples, but in the framework.
I think what you're gonna see in October is certainly the innovation framework and how that's linked to the wider strategy and breaking that down into three component technology platforms. You know, there's more about that in the future.
I think, Matthew, you make a good point as well about the CapEx.
Yeah
Pipeline development does give us the confidence in the CapEx. If we were critical of ourselves in the past, it would be that we're sometimes a bit slow to put the CapEx in. In the case of the specialty excipients platform, we're probably surprised by the rate of growth that we saw, that we covered in the 2019 capital markets day, and then had to put capacity in, and we were probably constraining demand somewhat while we were building that capacity. We inherited the same situation with the vaccine adjuvant business in 2018, and we've been willing to put capital in to expand that because we've seen, you know, that business sort of double since we acquired at the end of 2018.
On the lipid systems platform, we wanna make sure that we're fully prepared for what we see as really that market taking off commercially from 2025. Notwithstanding obviously the COVID demand that there's been up to now. That's what gives us the confidence about spending the GBP 160 million of additional CapEx over the four years from 2021 to 2024, because we can see that pipeline coming through, and we wanna be able to serve those markets as the growth comes.
There's a follow-up question from Chetan Udeshi on the webcast, who says, "Is there a risk that there'll be excess capacity in three years' time?
Yeah, I don't know whether that's in relation to lipids or is that in relation to just generally for the group?
I think principally in relation to the healthcare and pharmaceutical capacity.
Yeah. Unlikely we would say, but I mean, there may be, but, you know, let's be honest, you know, we don't need to run our assets at 100% utilization. You know, we're not a continuous process built company. You know, we work in batches and it's, you know, it's purity and quality in pharma which is the most important thing. So what we have to make sure of is that eventuality when some of these products hit the market and they're more significant than we expected or they're earlier than we expected, that we've got a multipurpose set of like a chemistry and a biochemistry set on our sites that allow us to cater for that demand. As I said, the interesting thing is there's multiple products now in the pipeline.
There's three, you know, hanging around three big technology platforms. We have to be able to have that breadth and that capacity to cater the demand for that. Effectively, you know, it's as Jez says, we're, you know, it's our thinking about a 5-year planning program that we're moving into now. We're moving 3- to 5-year planning. Part of that is to really imagine where this growth's gonna be in three and five years' time and invest now. You know, I think we're doing all the right thing for you and for us. It's, as you say, in terms of the overall spend for the group, it's trivial, it's modest compared to the potential, you know, the potential performance benefit we get with the results.
The return on capital we achieve from our organic program is the best that we can achieve. We don't have to pay away goodwill and intangibles. We can get a very strong return on capital. It's still the best place for us to deploy capital. We're still seeing 10%-30% growth in the existing two, you know, the prior two healthcare platforms. You know, everybody knows that mRNA demand is gonna really drive lipids. You know, that market's gonna grow very rapidly.
I think the other thing as well, you know, the bigger disappointment if we were here talking to you all about, you know, the frustration because we've got big demand and we don't have the supply. You know, that would be remiss of us so as well. We're just trying to bake in some contingency and insurance. We might, you know, have got it wrong, but if we've got it wrong, we'll still have a great return because we'll probably got it wrong on the downside, and we need to invest a little bit more. Yeah, we're in good shape. As you say, you know, using that wisely is probably the best use of our capital right now.
Thank you. We're ready to take the next analyst question on Zoom, please.
Hi, good morning. Just checking you can hear me.
Yeah. Hi, Charles. Younger version of Stotty, which is good.
Indeed. Morning, everyone. Thanks for the questions. Just two from me. Firstly, on Life Sciences, given the commentary on the momentum in the other components of the division sort of outside of lipids, it feels like sales in the division might be able to be held flat or even grow modestly in 2023. Is that a fair conclusion, I guess, sort of net of that GBP 30 million drop in lipid sales you're guiding to? My second question is a follow-up on the leverage commentary and the inorganic opportunities. Jez, maybe to talk to you. Is there a net cash level which would see you say, "Okay, it's time to return some of this to shareholders, either through buybacks or special dividends as you've done in the past"?
Was that not really in the thought process, at all at this moment? Thank you.
Yeah. Yeah, Life Sciences, I mean, yeah, the way, I'll let Jez do the leverage. The way we should look at that is, you know, you've got the numbers now that you can program in for the lipid systems. I mean, the rest of the business we'd expect to continue to trade 7%-10%. You know, it's demonstrating that even in a harsher trading environment, we think the opportunities are still there. You know, when you model that in your system, I think you'll get there, you know, to a Life Sciences profitability around last year, maybe a little bit more.
Yeah. Charles, I think you're right. I mean, we're only expecting a $30 million reduction from this year to next year on the lipid platform. I think the important thing, as Steve said in the commentary, was that, you know, we've come down $80 million year-on-year, and yet we've still grown the profit and in sales and Life Sciences and of course, for the group overall in significant terms. Yeah, absolutely. I think our point today is there's only another $30 million to come out of that platform in our view before we normalize. Therefore, yes, definitely the Life Sciences growth in crop and the other healthcare platforms will more than offset that.
Yeah, I think we'll see positive growth just be constrained slightly by the lipid reduction that we see. In terms of return on capital, look, we're very disciplined in terms of the approach that we take to deploying capital. You know, we don't wanna deploy capital into marginal products, projects. We want to deploy capital in projects that are at least 2-3 times cost of capital, you know, 'cause that's the Croda way. It's about keeping special and valuable, not just becoming big. We do see the additional opportunities at the moment to deploy capital organically. We're spending about GBP 100 million annually on capital, and then we have this GBP 160 million program on top over four years. This year, probably about GBP 150 million.
I know it was quite light in the first half, but we've got the partially government-funded project starting in the second half. I think we'll spend about GBP 150 million organically, and that will continue through 2023, 2024 as we go through these healthcare programs. As Steve said, you know, we're looking for what are likely to be bolt-on, you know, adjacent acquisitions, you know, across Consumer Care and Life Sciences. That said, we're probably still gonna generate, yeah, much more capital than we need, and so we'll keep that capital allocation under review. We were very clear when we did the announcement of the disposal last December. We start with where we can deploy capital, and I think investors would like us to deploy capital in high-return opportunities rather than give it back.
The discipline is there, but we're not looking, you know, at that short term. But it's very much part of our capital allocation discipline.
Yeah.
Very clear. Thanks, both. Appreciate you not mentioning my football team, Steve, so thanks very much.
Well, we could, but we'd embarrass everybody, Charles, wouldn't we?
Thanks, Charles. Okay. Next question. Morning, Mubasher.
Morning. Hopefully you can hear me.
Yeah, we're fine.
Yeah. Morning. Morning, guys. Couple of quick ones, please. Can you provide an update on the Iberchem side of things? How did that perform in the H1? I know it's still relatively early days on the synergy side of things, but just a couple of comments around that would be helpful. Then on the Avanti sales, so you've given the top line outlook. Is that coming in at the same profitability as it was for the last year and kind of first half, or is it dropping in profitability as well? Just some comments around that would be helpful. Finally, are you seeing a slowdown in July, which is driving your cautious outlook?
Are you just being conservative given where the macro is and kind of taking a bit more of a cautious approach?
Yeah, a few questions in there. I'll do Iberchem and Jez can do the second one, if he can remember it, and I'll do the third one. Yeah, I mean, Iberchem trading well and improving. You know, it's quarter two better than quarter one. It's, you know, reported revenues are in the teens. The organic underlying is probably like for like, high single digits. You know, we're really pleased with that good shape to the growth. They've been trading in a difficult environment as well, as you know, with raw material prices at sort of 10-year highs. You know, we've been, we're pleased there.
I mean, we're continuing to invest, so, you know, we've started the synergy capture as everybody knows, and we're investing in Brazil, South Africa, Indonesia. You know, as each three months, six months goes by, you know, it's getting more integrated part of part of Croda in our thinking. So, you know, very pleased with where they are. You know, 83% of their sales, as a reminder, is in emerging countries. So, you know, once the emerging countries start to fully unwind with no lockdown restrictions, then, you know, that we're pleased the headwinds, one or two of the headwinds that they've had sort of go away. So, you know, we're pleased with that. In terms of what was your third? I'll take your third question.
July outlook.
Yeah, July outlook, and I'll go back to Jez. Yeah, I mean, we're cautious naturally, like everybody is. I think you'd be surprised if we weren't, given the noise around. We're not really seeing the exit rates in the. It's best to look at it regionally rather than by sector. You know, the exit rates in quarter two are strong everywhere, with the exception of some moderation in America. You know, we've seen a couple of months of trading, which is a bit softer, but still positive, but softer than it was in the first three or four months. You know, we're trying to forecast into the second half that continued moderation.
Maybe a little bit of moderation elsewhere. You know, people forget, but you know, people are just coming out of lockdown as well as you know, the disposable income squeeze as well. You know, you've got a number of different trade-offs out there, and it's very difficult to call. Our general view is one of caution, for the right reasons. We don't wanna get ahead of ourselves, and neither do you. You wouldn't believe us anyway. I think that's right. Jez, on the other one.
Yeah. Hi, Mubasher. I guess we tend to use the sort of Avanti and Lipid Systems language a little interchangeably. If I could just sort of start there. The Lipid Systems platform obviously has at its heart the Avanti business that we acquired two years ago now. Then we have the second site in the U.K., which is the scale-up site which Croda already owned. We recently announced that we're gonna create another scale-up site, in this case, and this time in the U.S., partly supported by the U.S. government. I guess, you know, Avanti is the core of that, but it's the Lipid Systems platform really that we're focusing on. Within that Lipid Systems platform, you've probably got three components.
First of all, you've got the business that has been built up over 50 years, which is the Avanti R&D business, and that's serving 3,000 customers in preclinical and clinical stages. That's one of the excitements about originally acquiring Avanti, was it gave us that access to R&D in pharma that we haven't had before through our existing pharma platforms, which tended to be late stage and commercial. That Avanti business continues to trade really well. A $40 million business roughly when we acquired it. Good profitability, and that's expanding as it expands its R&D presence. Second part of the platform is clearly the COVID piece around principally the principal customer contract. That profitability has come down a little bit.
We indicated that the year one profitability for that contract was higher than the year two and year three profitability. That just really reflects the fact that you get better at what you're doing, you get more efficient. Overall profitability in that contract, similar level, to where we were before. Then the third component, of course, is the pipeline of opportunities developing from the Avanti R&D engine. We'd expect the profitability levels in that to be at least as good as the, as what we've seen in the COVID experience. Long answer to basically saying, no, the overall profitability of the Lipid platform is consistent, and the profitability of that platform in the rest of healthcare is also quite consistent as well. Yeah, it's. We're not seeing sort of significant erosion or anything like that.
It's in a good place, and all of these important projects coming through for mRNA are gonna keep the profitability very good in that platform.
Helpful. Thank you, guys.
Th anks.
Next analyst, please.
Hi, guys. Just on lipids. I understand that there's a greater proportion of non-COVID sales, but what gives you the confidence over the longer-term sales forecast, given that you've effectively just cut the H2 contribution by 50, best part of 50%? And a related question just on stocking. Sort of how much visibility do you have over inventory levels at Pfizer? And are we likely to see a situation where as demand comes off, you get a destocking situation from them as well?
Yeah. I mean, we've sort of tried to answer that with the other questions. Look, I mean, it's all around the pipeline, the innovation pipeline. You know, as a reminder, next year more than half of this revenue will be in pipeline projects, you know, non-COVID projects. All of those are very, you know, from our point of view, we can forecast with more, with quite a lot of accuracy. Clearly they can move. In 2023, you know, two-thirds of these projects. The innovation pipeline has got a lot of discipline to it, and it's mapped by individual projects. That gives us the sort of the comfort and confidence of where we're going.
I think the point we're trying to make to your Pfizer thing is, Pfizer becomes less. You know, not less important, but it's less of the weighting of the lipid systems in 2023 and 2024. It becomes, you know, well less than half and well less than, you know, around a third, potentially less than that in 2023. A lot of that is because-
2024.
2024. A lot of that is because of, you know, that reaching a natural rhythm. I think we're not far from reaching a natural rhythm. That's why we're calling out with Pfizer the 2023 and 2024 numbers now. Because the difficulty in 2021 was because you're chasing your tail and it's going out as quickly as you're making it, and same for them, it's very difficult to sort of really guesstimate and get an accurate forecast on that. That was Pfizer's comment.
Now with this natural rhythm around the world where they've got, you know, a reasonable amount of government contracts, that they have visibility on, they can work back through that, and they've got a stable stock position, then it's more, you know, more forecastable in our way and in their way. That's why we're sort of coming out with those numbers. It's a combination of the business settling down to a natural rhythm with Pfizer and the innovation pipeline projects becoming more targeted from Croda and better understanding the nature of those. As I said, you know, repeating what I've said in the past, you'll hear a lot more about that in early October at the Capital Markets Day.
Thanks, guys.
Thanks, Sam.
Next question, please.
Hi. Good afternoon. Thank you. I just have one, please. You've mentioned in the past that you would slowly phase out the PTIC business by growing in other areas, especially Life Sciences. How should we think of the phasing of the remaining GBP 200 million in the next five years? Also, are you happy with Croda's size in the consolidating industry?
I mean, I think we haven't said it's gonna reduce to nothing, and it won't reduce to nothing. The IS business that's still with Croda is with us because there's lots of moving parts in there, and they're core assets. Now, in terms of the industrial question. In terms of a footprint in three to five years' time, it might be a little bit smaller, but it won't be nothing. It's still an important part. We'll treat it as very much an important part of Croda, and it's got good margins. You know, there are quite a number of products in there with margins that wouldn't disgrace the Consumer Care portfolio.
You know, there's some good margins in there. Our job there is to run it in the right way. The point we're trying to make is with the strategic divestment, it's to allow us to use those funds to invest, you know, 100% into Life Sciences and Consumer Care to turbocharge the growth there. We've got these eight growth businesses, and all of them, you know, Jez and myself will look at, they've all got growth in them, and our job is to, yeah, invest in them in the right way, whether that's people or CapEx. Or inorganic growth. We've got the choice. We won't invest the same in each of the eight, but we'll be investing in them because, you know, they're in growth markets with trends supporting our innovation.
Our job then is just to allow them the environment to grow by continued investment. Industrial not shrinking to nothing. It's gonna moderate, but not a huge amount.
Yeah. Isha, I'd probably add just to that, also in the Industrial Specialties business is the supply agreement.
Yeah.
Clearly the business we've sold to Cargill is bigger than the four sites, four manufacturing sites that we've sold. We've also agreed a 5-year agreement to supply some other products from other retained Croda sites. Again, that business we would expect to be, you know, reasonably consistent over five years. Clearly it might drop off completely at the end of that 5-year period. It might slow down during that 5-year period as Cargill transfers some of that product technology into their own business as well. You will have the supply agreement within Industrial Specialties. Yeah, initially it's gonna be a business of getting on for GBP 300 million of revenue and, you know, we certainly expect its profitability to be, you know, low double digit, just above 10% probably.
Thanks, Isha.
Next question.
Hi. Thanks, David. It's Georgina from Goldman Sachs. Two questions left. The first is, you've got the ECO surfactant growth CAGR to 2025 of 75%. If you can give an idea of the path, is that linear over the coming years? My second question, it was a really interesting comment that you made, Steve, about lipid systems not being continuous process. Therefore, you know, pricing in lipid systems is not going to be driven by asset utilization rate. If I think about more batch process chemicals, I've got paints coming to mind, and pricing is usually driven by raw materials. I'm assuming that's not the case in lipid systems. Just wondering if you could talk about therefore what are the key price drivers in lipid systems. Thanks.
Yeah. Well, we'll do the lipid system one first, and then I'll bring Jez in on the eco one. I mean, look, you know, the Croda model is about maximizing value in front of customers through knowledge, not commercializing the capacity. It doesn't matter whether it's a continuous process or a batch process as far as I'm concerned. It's how much knowledge have we got that we can commercialize. You know, what you never wanna do is be disconnected with your customer. We wanna be in with lipids, we're in really critical ingredients, you know, a step ahead of where the Actives business is in personal care. And the job there is to add great value. So our customers want the product, they need the product. They're gonna make a lot of money out of the products.
Our job is to make sure we get a fair value with that as well, and we're balanced with that. The interesting thing in lipids is, you know, as we see with more and more of these treatments, they're gonna be more niche treatments. They look like, particularly in mRNA, they need a lot more mRNA in them relative to the current vaccines, but they need bespoke ingredients and delivery systems. I don't think there's a panacea for a standard number of products here that are gonna be commoditized. We don't expect that, and that's why we're investing in it. It all chimes to maximizing value. And when you start thinking about pounds per gram rather than pounds per kilo, you know, you get to a different figure.
The chief exec loves pounds per gram. You know, if we can have more and more of our business on pounds per gram. You know, we're not a chemical company. You know, we don't think like a chemical company. We think like an IP company, and we want more and more of our knowledge commercialized, and you just get to better margins. I wouldn't worry about how we manufacture it. I'm more bothered about the use of the product in application and how much value we can get from that. We'll get some interesting numbers.
I think the other thing though is, you know, with this capacity that we're putting in, you know, it doesn't change profitability if we're running it at 50%, or 40% or 70% in real terms. I mean, obviously, the higher, the more profit we get. But the overhead issues in there are sort of nonexistent for us because it's, you know, it's small scale. We're not building petrochemical refineries. We're building, you know, refinement purification units rather than that. So in the end, it's about adding value through pricing power and valuing your intellectual property correctly. I think the other thing in pharma as well is it's not just the product margin.
On top of that, there's royalty potential payments, licensing agreements, profit shares, and that's something that we're alert to. You know, it's still early days, but we think some of these pipeline projects, there's no reason why we can't get two margins out of them rather than just one.
Of course, the lipid systems, when we say it's a batch process, I mean, that's like all of Croda's processes. Your other question is about our only continuous plant, which is the Bio-EO production. Yeah, where we are is we've obviously transferred all of the existing products onto Bio-EO, but the eco piece is really about which of those products are sold under the bio label as opposed to just happening to have bio content that the customer may or may not be currently concerned about. That's where that growth should get faster and faster as we go.
Because of course, it's really about customers launching new products with using the bio credentials or relaunching their existing products and substituting their existing petrochemical supply with the bio feedstock. Then wanting to make the label claim and therefore requiring the certification from us and so on. That clearly is quite slow at first. You have a couple of launch customers, particularly in Home Care, into product areas like Ecover and so forth, and then it's into more rapid acceleration as you get more and more customers to convert. As Steve said, you know, the exciting thing of the last 18 months has been the performance of the Beauty Care business within Consumer Care, which is really where a lot of these products fit, together with Home Care.
That's undoubtedly being driven by both the consumer's move to sustainability and wanting sustainable products and the customer making their sustainable commitments about moving to bio-based material, as we see with customers like L'Oréal and Unilever. I think that growth should just accelerate. We're EBITDA positive now. You know, we should be moving to EBIT positive in due course and then really driving the returns through the more volume that we can drive through that plant because it is our one continuous plant in the whole group.
Great. Thank you.
Thanks, Georgina.
We've got two analysts in the queue, so Chetan and then Martin. As we're over time, we'll then wrap it up. Chetan.
Hi, Chetan.
Sorry, we can't hear your audio. Apologies.
Is this better now?
Yeah.
Yeah.
That's better.
Okay. Hi. I just had one question maybe for Jez. If I look at the outlook, it suggests maybe the second half EBIT on a continuing operations basis should be closer to GBP 100 million. I mean, which seems a decent step down from, you know, the underlying number ex PTIC somewhere around GBP 250 million or so. I was just wondering if you can give us some sort of bridging items from first half into second half. Also, sorry, just one more to squeeze in. You know, the CapEx was a little lighter in first half at least versus the run rate. Do you think you can catch up all of the, you know, to get to GBP 160 million for full year?
Is that likely now for this year, or do we see some of that being pushed out into next year?
Chetan, it's in terms of the bridging items from first to second half year. I guess you've already called out the impact of the divestment, which we estimate had we done the divestment on the first of January would have been GBP 39 billion. So that's two or 250 as you refer. I think the other two adjusting items would be the variable remuneration charge benefit that we had in the first half year. So that's essentially a function of we have a lot of share-based schemes across the group. Most of our employees are share owners and participate in share schemes. Save As You Earn, you know, performance share plans, et cetera, restricted share plans as well. Every half year, we have to mark those to market.
There's a number of shares outstanding, we have to mark them to market. Obviously at the year-end, we were marking at GBP 100, and at the half year we were marking at GBP 65. That gave us credit of around about GBP 17-18 million sterling, which I wouldn't obviously anticipate for the second half year. You've got a one-off benefit in the first half year of GBP 17-18 million pounds in the first half P&L. Then the final component is the lipid step down. You know, we did $90 million of lipids in the first half year. We're expecting $60 million in the second to take us to $150 million.
Yeah, that 30 million of lipids, you know, you can convert to sterling and then take a typical healthcare margin, and that will give you a number probably not too far away from GBP 10 million as an adjustment. Those are really the three bridging items between first half and second half performance. You've got our normal seasonality, and we typically do, you know, around. I think if you look over the last three, four years, typically, we've been around 53% first half, 47% second. That's really a function of holiday timings, particularly in the European business, which mean that second half is always a quieter one for us because there are fewer, you know, working days, I guess, in there. I think if you do the math then, you know, then that gives you.
Clearly we're not setting a specific expectation, but I think that gives you the modest growth that we expect for the full year. On CapEx, yeah, it was a bit lighter, but we do have the part government funded project starting up in the lipid expansion, the U.K. expansion, part funded by the U.K. government and the U.S. expansion, part funded by the U.S. government. They'll be kicking off as well. It's just really phasing of projects. I'd expect us to be at GBP 100 million-150 million for the full year, so about GBP 90 million to spend in the second half. That's consistent with our view of GBP 100 million as a base to grow the business at organic rates and to replace existing assets.
There'll be about GBP 50 million from the healthcare program of 160 over four years. Yeah, about GBP 150 for this year, and about the same probably going forward for 2023, 2024.
Thank you, Chetan. The final question I think from Martin Evans at HSBC. Hi, Martin.
He always gets to the final one, Martin?
I always do. Thanks, David. Thanks, Steve. Just a quick one. I don't wanna preempt October 5 with information on Life Sciences, but as one of the numbers on the slide 28, I think you've mentioned it before as a new opportunity, is this $300 billion biologics drug market. Steve, you've referred several times to monoclonal antibodies as an area you're working on. I mean, in simple terms, I mean, it's obviously a huge market if you was to get a share of it. From a Croda perspective, is it essentially the same chemistry? Is it the specialty excipients delivery systems that sort of fast tracks absorption of the protein?
Is this what you're doing with these customers you're working on these projects with?
Yeah. I mean, primarily that fits into it. It's the continuation of these, you know, we call them specialty excipients with you. There's a lot of specialty excipients that are gaining traction. It's, you know, a lot of that's established chemistry. There's one or two new chemistries from Avanti that are coming through as well that you'll hear about. In principle, it's a continuation of development from where we are. I mean, what you're gonna hear, you're gonna hear a lot more about that. It's not monoclonal antibodies that the chief exec sometimes says. You know, you got to get these words right now. Also there's things like nucleic acids, and things like that.
I think you're gonna hear a bit more of a new narrative from Croda as we develop the story in pharma in October. Also, you know, the central theme there is gonna be about how do we sort of figure all of this out from the individual projects that we've got in terms of sort of future revenue streams to try and give some guide to that through the three platforms. Yeah, so it's nothing completely different. This is more a continuation of where we are.
Okay. Thank you.
Thank you, Martin.
Thanks.
Thanks for the advertisement. We're hosting an investor seminar on the afternoon of the 5th of October at the London Stock Exchange and virtually on our healthcare business. Over to you, Steve, just to wrap up.
Yeah, no, great. Thanks, everybody. You know, lots of questions. You know, it's been an excellent first half where we've demonstrated growth across all aspects of the business. You know, we're really pleased with where we are. Actually, the business now is in rude health, and certainly for any any uncertainties in the future, we're much better equipped to deal with that through the you know, the sustainability leadership and innovation leadership we've got and all these eight growth businesses, you know, moving in the right direction. You know, we'll stop there. Hopefully by October the 5th, Sunderland will be top of the Championship as well. You know, he's still hoping that as well. What's for certain is we'll be there on October the 5th as well.
Maybe Sunderland might not be, but, we'll see you then. Thank you.