Tate & Lyle Plc · LSE:TATE
Tate & Lyle — H1 FY2015 Earnings Presentation
44 slides from Tate & Lyle's earnings presentation, Nov 6, 2014
Slide 1: Results for six months ended 30 September 2014
Results for six months ended 30 September 2014 London, 6 November 2014 © Tate & Lyle 2014
Slide 2: Agenda
Agenda Headline Results and KPIs Javed Ahmed Operating Review and Outlook Javed Ahmed Financial Review Nick Hampton Progress Update Javed Ahmed © Tate & Lyle 2014 2
Slide 3: Headline Results
Headline Results Six months ended 30 September 2014 Change 2014 2013 Change at constant (£1=US$1.68) (£1=US$1.54) currency Adjusted operating profit1 £117m £187m (37%) (31%) - SFI down 37% in constant currency - BI down 10% in constant currency Adjusted profit before tax2 £104m £173m (40%) (34%) Adj
Slide 4: Key Performance Indicators
Key Performance Indicators Six months ended Change at KPI Measure 30 September constant 2014 2013 currency Growth in Speciality Adjusted sales1 £446m £519m (7%) Food Ingredients Financial Profitability Adjusted operating profit2 £117m £187m (31%) performance Working capital Lengthened by Cash conver
Slide 5: Operating Review and Outlook
Operating Review and Outlook Javed Ahmed, Chief Executive Officer © Tate & Lyle 2014 5
Slide 6: Two major issues impacted the Group's performance
Two major issues impacted the Group’s performance Operational and SPLENDA® Sucralose Supply Chain Continued extremely Low opening inventory competitive market Singapore unplanned Price erosion extended shut down impact of £18m Increasingly global/complex supply chain Review of end-to-end demand, sup
Slide 7: Speciality Food Ingredients
Speciality Food Ingredients Key Highlights Volume up 2% with strong growth in emerging markets Speciality Food Ingredients Adjusted sales1 £446m – Growth estimated to have been held back by c.4 percentage points by supply chain constraints Food Systems (21%) Adjusted sales1,3 7% lower at £446 mi
Slide 8: Speciality Food Ingredients: Product categories
Speciality Food Ingredients Product categories Starch-based speciality ingredients – Volume up 1%, strong demand in emerging markets – Strong demand for speciality food starches from Asia and speciality sweeteners from Latin America – Completed acquisition of polydextrose business in China – Launc
Slide 9: Bulk Ingredients Key Highlights
Bulk Ingredients Key Highlights Bulk Ingredients Steady performance excluding impact of supply Adjusted sales1 £934m disruption Co-products (24%) 222 Adjusted sales1,3 16% lower at £934 million Sweeteners (46%) 431 – Pass through of lower corn costs – Volumes 1% lower Industrial starches, 281 ac
Slide 10: Bulk Ingredients: Product categories
Bulk Ingredients Product categories Sweeteners EU Average White Sugar Selling Price vs. EU Spot Corn Price – Modestly lower unit margins in US 700 300 EU corn 280 – Lower selling prices in Europe mostly offset by lower 650 260 EU white sugar (€/mt) EU White Sugar 240 EU corn (€/mt) corn prices 600
Slide 11: Outlook for the Year ending 31 March 2015
Outlook for the Year ending 31 March 2015 Outlook remains unchanged from 23 September 2014 For the second half, we expect Speciality Food Ingredients excluding SPLENDA® Sucralose and Bulk Ingredients to continue to perform solidly, but this will be more than offset by a softer performance in SPL
Slide 12: Financial Review
Financial Review Nick Hampton, Chief Financial Officer © Tate & Lyle 2014 12
Slide 13: Overview
Overview Six months ended 30 September Adjusted Performance impacted by 4 factors: Operating Profit1 Impact SPLENDA® Sucralose pricing erosion £18m Operational and Supply Chain disruption £31m Increase in Central costs2 £5m Adverse foreign exchange £16m Total £70m 1 Including proportionate consolida
Slide 14: Income Statement
Income Statement Six months ended 30 September 2014 2013 At constant £m, unless stated (£1=US$1.68) (£1=US$1.54) currency Adjusted sales1 1,380 1,737 (13%) Adjusted operating profit2 - SFI 66 112 (37%) - BI 76 92 (10%) - Central (25) (17) (42%) Adjusted operating profit2 117 187 (31%) Adjusted net f
Slide 15: Speciality Food Ingredients
Speciality Food Ingredients Six months ended 30 September At constant £m, unless stated 2014 2013 Reported currency Impact of exchange Adjusted sales1 446 519 (14%) (7%) Sales £40m lower Operating profit £8m lower Adjusted operating profit2 66 112 (41%) (37%) Adjusted margin 14.8% 21.5% -6.7 ppt
Slide 16: Bulk Ingredients
Bulk Ingredients Six months ended 30 September At constant £m, unless stated 2014 2013 Reported currency Impact of exchange Adjusted sales1 934 1,218 (23%) (16%) Sales £102m lower Operating profit £8m lower Adjusted operating profit2 76 92 (18%) (10%) Adjusted margin 8.1% 7.5% 0.6 ppts 0.6 ppts
Slide 17: Interest and Tax
Interest and Tax Six months ended 30 September Interest £m, unless stated 2014 2013 At constant Reduction in net interest expense currency driven by favourable exchange Adjusted net finance expense1 (13) (14) (1%) Refinancing of $800m revolving credit facility on improved terms Tax At constant £
Slide 18: Business Transformation
Business Transformation Upgraded IS/IT platform successfully deployed in Europe in May 2014 North America and Singapore went live in August – Go-live was well managed Normal period of stabilisation expected to last until the end of December Now focused on further value realisation © Tate & L
Slide 19: Adjusted Free Cash Flow
Adjusted Free Cash Flow1 Six months ended 30 September £m EBITDA £170 million (16) 3 (9) 42 53 (79) (13) 190 (17) 117 81 Adjusted Dep'n / Exceptionals Working Pensions Share- Adjusted Capex & Net Tax Adjusted operating amort2 capital based operating intangibles interest Paid free cash profit payment
Slide 20: Movements in Net Debt
Movements in Net Debt1 Six months ended 30 September £m (11) (8) 81 (92) (383) (353) Net debt Adjusted Dividends Acquisitions & Disposals Exchange Net debt Mar 2014 free cash flow Sep 2014 1 Presented on proportionate consolidation basis © Tate & Lyle 2014 20
Slide 21: Integrated demand, supply and financial planning review
Integrated demand, supply and financial planning review To build a world-class integrated demand, supply and financial forecasting Objective capability in support of our evolving global business SCOPE DELIVERABLES 1. Operational and supply chain 1. Executional roadmap to deliver: planning Robust e
Slide 22: Progress Update
Progress Update Javed Ahmed, Chief Executive Officer © Tate & Lyle 2014 22
Slide 23: Strength of Tate & Lyle's business derives from four main areas
Strength of Tate & Lyle’s business derives from four main areas Attractive Resilient Global Markets Bulk Business Tate & Lyle SFI Platform Financial For Growth Discipline © Tate & Lyle 2014 23
Slide 24: Global SFI market continues to be attractive and we have a good base
Global SFI market continues to be attractive and we have a good base SFI Global Market Strong Foundational ‘Pillars’ ~US$42bn potential addressable market In 2010 we established three foundational Growing at ~4-5% p.a. platforms (Sweeteners, Texturants and Health and Wellness) each with: Att
Slide 25: Key drivers of SFI growth
Key drivers of SFI growth 1 Innovation 2 Capacity expansions 3 Emerging markets 4 Go-to-market 5 Acquisitions © Tate & Lyle 2014 25
Slide 26: Solid flow of high quality and commercially relevant products
We are bringing a solid flow of high quality and commercially relevant products to market....which are being steadily commercialised Enhanced New products with ‘clean label’ positioning innovation capabilities Platform New Product Key proposition Building a high quality pipeline Natural, no calori
Slide 27: Investing in new capacity for Speciality Food Ingredients
We are investing in new capacity for Speciality Food Ingredients to meet increasing demand Speciality food starches North America Speciality sweeteners New product from ICD pipeline Speciality food starches Netherlands CLARIA® ‘clean-label’ starches PromOat® Oat Beta Glucan Sweden PrOa
Slide 28: Building a greater SFI presence in emerging markets
We are building a much greater Speciality Food Ingredients presence in the emerging markets Growth in Latin America and Asia Pacific FY10-FY141 % of Volume2 Sales2 SFI sales1 11% to 14% 23% 20% CAGR CAGR H1 volume growth in high single digits despite volume constraints from operational and supply ch
Slide 29: Upgrading SFI customer-facing capabilities
We are significantly upgrading our Speciality Food Ingredients customer-facing capabilities Increased Sales, Applications and Sales and Technical Services resources by Technical Services around 25% in the last 3 years Commercial and Food Innovation Centre Infrastructure New regional Applicatio
Slide 30: We are actively pursuing inorganic growth
We are actively pursuing inorganic growth Progress Delivered three small but high quality acquisitions Pipeline remains healthy with active projects ~60% of pipeline in emerging markets ‘String of pearls’ approach most likely Key criteria An acquisition, whether large or small, should: – F
Slide 31: SPLENDA Sucralose
SPLENDA® Sucralose High quality ingredient New product launches by high intensity sweetener 2009-2013 Highly functional (e.g. taste, stability) Aspartame 6373 Incorporated in more new product launches Stevia Sucralose than any other high intensity sweetener 3633 Valuable part of our sweetener
Slide 32: Bulk Ingredients
Bulk Ingredients Bulk Ingredients Solid business Adjusted Operating Profit1 Operates in large, mature markets £172m Strong market positions 6% Some of the most efficient/scale assets in industry £136m CAGR Long-standing customer relationships Steady performance Business model configured to
Slide 33: Summary
Summary Tate & Lyle’s transformation to a more speciality-focused, global business continues – Innovation, customer-facing capabilities, emerging markets presence and bench strength on track – Challenges with our global supply chain are being fixed We continue to follow strong financial discipli
Slide 34: Questions
Questions © Tate & Lyle 2014 34
Slide 35: Supporting information
Supporting information © Tate & Lyle 2014 35
Slide 36: Key Financial Indicators
Key Financial Indicators Six months ended 30 September £m, unless stated 2014 2013 Adjusted profit before tax1 104 173 Adjusted effective tax rate2 22.0% 18.7% Adjusted diluted earnings per share1 17.3p 29.9p Adjusted operating cash flow 190 329 Net debt 383 336 Net debt/EBITDA1,3 0.9x 0.8x Interest
Slide 37: Profit before tax
Profit before tax Six months ended 30 September £m, unless stated 2013 Forex Activity 2014 - SFI 112 (8) (38) 66 - BI 92 (8) (8) 76 - Central (17) - (8) (25) Adjusted operating profit1 187 (16) (54) 117 Adjusted net finance expense2 (14) 1 - (13) Adjusted profit before tax3 173 (15) (54) 104 1 Inclu
Slide 38: Reconciliation of Adjusted Information
Reconciliation of Adjusted Information Six months ended 30 September Six months to 30 September 2014 Six months to 30 September 2013 Adjusting Adjusting £m, unless stated Reported Adjusted2 Reported1 Adjusted2 items items Sales 1,200 180 1,380 1,516 221 1,737 Operating profit 68 49 117 139 48 187 Ne
Slide 39: Exchange Rates
Exchange Rates Six months ended 30 September £m 30 September 2014 30 September 2013 Change Closing rates US$ 1.62 1.62 0% Euro 1.28 1.19 8% Used to translate Balance Sheet Average rates US$ 1.68 1.54 9% Euro 1.24 1.18 5% © Tate & Lyle 2014 39
Slide 40: Exchange Sensitivity
Exchange Sensitivity £m impact per US 1¢ movement Speciality Food Ingredients 0.6 Bulk Ingredients 0.6 Central - Impact on adjusted operating profit1 1.2 Adjusted net finance expense2 (0.2) Impact on adjusted profit before tax3 1.0 Estimated annual movement caused by a one cent movement in the US$ o
Slide 41: Balance Sheet
Balance Sheet £m, unless stated 30 Sept 2014 30 Sept 2013 31 Mar 2014 Goodwill, intangibles, fixed assets and investments 1,406 1,381 1,351 Working capital (including non-debt derivatives) 338 308 373 Pension deficit (189) (232) (220) Other provisions (23) (29) (22) Other 31 28 28 Net operating asse
Slide 42: Change in Working Capital
Change in Working Capital Six months ended 30 September £m, unless stated 2014 2013 Decrease in inventories 111 151 (Increase)/decrease in receivables (99) 32 (Increase) in US margin calls (8) (3) Increase/(decrease) in payables 49 (46) Movement in derivatives and non-pension provisions (11) (20) Ch
Slide 43: Debt Maturity Profile
Debt Maturity Profile As at 30 September £m, unless stated 2014 2013 Average net debt in period 347 439 £m Effective interest rate on gross debt 3.6% 3.9% 900 Undrawn committed 800 bank facilities At period end 700 Drawn committed Average maturity of total gross borrowings 4.7 yrs 4.1 yrs bank facil
Slide 44: Adoption of IFRS11 – Joint Arrangements
Adoption of IFRS11 – Joint Arrangements Six months ended 30 September 2014 Adjusting items Exceptional Net Retirement Amort'n of Acq'd IFRS 11 £m, unless stated Reported Adjusted Items Benefit Interest Intangible assets Adjustment Sales 1,200 - - - 180 1,380 Operating profit 68 9 - 4 36 117 Net fina