Slide 1: Preliminary results for the year ended 31 March 2012
Good morning and welcome to the presentation of Tate & Lyle’s preliminary results for the year ended 31 March 2012.
Slide 2: Agenda
As you can see from the agenda, Tim and I will run through our key operating and financial results, I will give you a brief update on the business transformation programme, and then finish with the outlook for the year ahead. As we talk through the numbers we will refer to results for the continuing
Slide 3: Headline Results and KPIs
Headline Results and KPIs Javed Ahmed, Chief Executive TATE LYLE
Slide 4: Headline results for the year
You will have seen from our statement this morning, Tate & Lyle performed well in the year with steady growth across a number of our markets supported by exceptionally strong returns from co-products in the first half. I am particularly pleased with the significant progress we have been able to make
Slide 5: Key performance indicators
As you know, we have a number of KPIs which we use to measure our performance. These are set out on the screen and I don’t intend to talk through each one as Tim will cover these in some detail but, as you can see, each KPI with one exception shows improvement over the past year. The exception is ou
Slide 6: Financial review
Thank you Javed, and good morning.
Slide 7: Income statement, continuing operations
Starting with the income statement for the continuing operations, sales at £3.1 billion were 16% higher than the prior year on volumes that were broadly in line. The higher sales prices reflect mix improvements as well as growth above and beyond the recovery of higher input costs. Adjusted operating
Slide 8: Speciality Food Ingredients results
In Speciality Food Ingredients, sales increased by 12%, and are 29% of Group sales. Margins fell by 150 basis points, however absolute unit margins were almost the same, so the percentage reduction mainly reflects the pass-through of higher input costs. Operating profit rose 5% to £214 million with
Slide 9: Bulk Ingredients results
Moving on to Bulk Ingredients. Overall volumes were lower by 2% as we continue to divert grind to speciality food ingredients. Operating profits increased by 13% to £172 million, and that was largely down to this segment’s share of the exceptional co-product returns. Exchange reduced profit by £5 mi
Slide 10: Co-product returns and corn prices
I have extended the chart which I showed you at the interim results. The corn price has an impact on co-product selling prices. The corn price in the first half of the year – the first green line – was much higher than the average when we agreed contracts for the 2011 calendar year – that’s the red
Slide 11: Interest and tax
Moving now to interest and tax. The reported interest charge was £33 million lower at £25 million. There are the same two unusual items here that I strip out to give you an underlying reduction of £17 million to £33 million. The first unusual item is the £9 million lower net interest charge for post
Slide 12: Pension interest
Coming back to pension interest; I always spend a few moments each year splitting out the impact of post-retirement plans on the interest charge. Over the past four years, the movement in our pension interest has accounted for as much as 8% of profit before tax. The movement also affects the tax rat
Slide 13: Discontinued operations
Turning to discontinued operations, the adjusted operating profit was £5 million, reflecting a good performance from sugar in Vietnam. The sale process is advancing slowly towards the final regulatory approvals. In total the cash inflow from discontinued operations was £44 million. We received £19 m
Slide 14: Exceptional items
Moving to our exceptional items. In the year we reversed impairments and provisions of £76 million as we restarted our sucralose facility in McIntosh. We also reversed a smaller impairment of £7m as we have started to reuse a fermentation pilot plant for our bio-based material collaborations. We hav
Slide 15: Balance sheet
Moving to the Balance Sheet, net operating assets increased to £1.6 billion, primarily because of the investment in business transformation and the reversal of impairments and provisions because of the restart of McIntosh. ROCE increased to 21.6% as operating profit growth of 11% was higher than the
Slide 16: Cash flow
Moving to the cash flow, we generated free cash flow of £79 million. EBITDA was £439 million and we paid £80 million towards the pension deficit including a payment of £45 million into the main UK scheme following the conclusion of the triennial valuation to the end of March 2010. Other working capi
Slide 17: Working capital
Coming back to the working capital outflows of £121 million. I remain concerned about the supply-demand balance for US corn so we have again been planning to hold our inventories full until close to harvest and we had more working capital tied up at 31 March because of the higher corn price. At the
Slide 18: Net debt movements
So, coming back to movements in net debt. Free cash flow was £79 million and we paid out £112 million in dividends. After the cash inflow from the discontinued operations and £19 million cost for the purchase of shares into Treasury, net debt increased by £12 million from £464 million to £476 millio
Slide 19: Summary of financial results
So let me summarise: Operating profit was 11% higher. With lower interest and tax, diluted earnings per share increased by 25%, while net debt increased slightly to £476 million. With that, let me hand you back to Javed….
Slide 20: Divisional performance
Thank you Tim. I will now talk in more detail about the performance of each division followed by a short update on the progress we are making to build a platform for long-term growth. As Tim has just taken you through the numbers, I will talk more to the key drivers of performance.
Slide 21: Speciality Food Ingredients market and performance
In speciality food ingredients, we delivered profitable sales growth. While the food industry remains relatively resilient, it is not immune to fluctuations in the wider economy and, during the second half, the deterioration in the macroeconomic environment in Europe led to weaker demand within some
Slide 22: Speciality food starches, sweeteners and fibres
In speciality food starches, solid volume growth in the US and good growth in Latin America was somewhat offset by softer volumes in Europe driven primarily by lower packaged food demand. In Latin America, where the demand for convenience and packaged foods continues to grow, the addition of resourc
Slide 23: SPLENDA Sucralose and McIntosh restart
Continued strong volume growth in SPLENDA® Sucralose was driven largely by the two global trends I mentioned previously – the growing global incidence of diabetes and obesity and continuing volatile and high sugar prices. In light of the continuing strong demand for SPLENDA® Sucralose, in March 2012
Slide 24: Food Systems
In our food systems blending business, volumes increased marginally over the year. Softer volumes in March, particularly in Europe, led to volumes in the second half being slightly lower than the comparative period. This business faced a significant increase in the cost of raw materials during the y
Slide 25: Bulk Ingredients division
Moving on to the bulk ingredients division where sales increased by 18% with volumes down 2% overall, reflecting our strategy to gradually divert corn grind to speciality food ingredients. Adjusted operating profit increased by 13% to £172 million. Moving on to talk about the main categories.
Slide 26: Bulk sweeteners in the US and Europe
In the US, sales of bulk corn sweeteners increased by 16% as a result of higher corn prices with lower volumes from the switch of grind. As in the previous year, we experienced firm US domestic demand on the back of a more stable US carbonated soft drink market and continued to see robust demand fro
Slide 27: Industrial starches, acidulants and ethanol
Sales of industrial starches, acidulants and ethanol increased by 10% with volumes down 4%. In industrial starches, in the US, where we are able to contract for longer periods than Europe, lower volumes were offset by higher prices resulting in a better performance for the period. In Europe, increas
Slide 28: Building a platform for long-term growth
Let me now give you a short update on the progress we are making to build a platform for long-term growth.
Slide 29: Chicago Commercial and Food Innovation Centre
Two months ago, as planned, our new global Commercial and Food Innovation Centre in Chicago became operational. The opening of this Centre represents an important step in the transition of Tate & Lyle into a focused global provider of speciality food ingredients and solutions and I look forward to i
Slide 30: Chicago Centre as hub for support laboratories
In addition to its focus on new product development, the Chicago Centre will also act as the central ‘hub’ for our increasing worldwide network of applications and technical support laboratories. These support laboratories play an important role in providing our customers with local applications, fo
Slide 31: Emerging markets applications laboratories
The ability to provide technical and applications expertise locally is particularly important in emerging markets where taste preferences and formulation challenges can often be different to those in developed markets. Last year we opened two new applications laboratories in Latin America, one in Me
Slide 32: Operational transformation: shared services and IS/IT
The transformation of our operational capabilities remains on track. Our new Global Shared Services Centre in Lodz, Poland started operations in September, and I have been impressed with the quality and commitment of the team we now have in place there. We have successfully transferred all our US an
Slide 33: Organisation and culture
We continue to make steady progress on the organisation and culture. The process of refreshing, strengthening and diversifying our talent base as part of the business transformation programme is proceeding well, with 17% of all employees being new to the Company in the past year. That figure include
Slide 34: Summary of transformation progress
To summarise then – we have made good progress in the year and delivered against a number of the initiatives we put in place as part of the “Focus, Fix, Grow” transformation programme. • The new global Commercial and Food Innovation Centre in Chicago is operational, and our network of local applicat
Slide 35: Outlook
Outlook Javed Ahmed, Chief Executive TATE R LYLE
Slide 36: Outlook for year ending March 2013
With that, let me move to the outlook for the year ending 31 March 2013. In Speciality Food Ingredients we expect to achieve good sales growth, although operating margins in this division are expected to be slightly lower reflecting the additional fixed costs associated with the restart of McIntosh
Slide 37: Questions & Answers
Questions & Answers TATE R LYLE
Slide 38: Supporting information
Supporting information TATE LYLE
Slide 39: Key Financial Indicators
Key Financial Indicators Year ended 31 March £m, unless stated 2012 2011 Profit before tax’ 323 263 Effective tax rate - continuing operations'* 17.1% 18.5% Diluted EPS - continuing operations” 56.4p 45.7p Operating cash flow - continuing operations” 233 325 UNetdsbta8 Net debv/EBITDA'® 1.1x 1.1x In
Slide 40: Income Statement
Income Statement Year ended 31 March 2012 2011 £m, unless stated Cont'd Discont'd Total Cont'd Discont'd Total Sales 3,088 72 3,160 2,720 590 3,310 Operating profit’ 348 5 353 321 (2) 319 Net finance costs (25) 1 (24) (58) © (58) Exceptional items (5) (43) (48) Amortisation (12) (12) (13) (13) (72)
Slide 41: Sales - Segmental analysis
Sales - Segmental analysis Year ended 31 March £m 2011 Forex Activity 2012 SFI Sales ~ Starch-based speciality ingredients 434 494 - High-intensity sweeteners 185 197 - Food systems 186 196 BI Sales" - Sweeteners 898 1.017 - Industrial starches, acidulants and ethanol 641 677 - Co-products 376 507 1
Slide 42: Profit before tax
Profit before tax Year ended 31 March 2012 Continuing operations’ em 2014 Forex Activity 2012 - SFI 206 3) "1 214 -Bi 157 (8) 20 472 - Central (42) 2 Ge (38) Net finance expense (68) 1 32 (25) ' Before exceptional items and amortisation of acquired intangible assets TATE Ri LYLE 42
Slide 43: Exchange Sensitivity
Exchange Sensitivity Year ended 31 March Estimated annual movement caused by a one cent movement in the US$/€ on the translation of profits £m impact on PBITEA US$ EUR Speciality Food Ingredients 0.9 0.2 Bulk Ingredients 0.6 0.1 Central = = Interest (0.2) - * Excluding exceptional items and amortisa
Slide 44: Business Transformation
Business Transformation Year to Year to March March £m 2011 2012 Commercial & Food Innovation Centre 6 20 IS/IT & Global Shared Services P&L exceptional 10 14 Capital TATE Ri LYLE «4
Slide 45: Pension interest — additional information
Pension interest — additional information Continuing operations! Year to 31 March £m, unless stated 2009 2010 2011 2012 [Aeropored® —_ | —_ Ss Pension interest (charge)/credit (19) ‘Year on year movement in pension interest 7 (16) 15 9 Adjusted profit before tax 233 196 263 323 Movement as % of adju
Slide 46: Pensions
Pensions Balance sheet 31 March Cash Actuarial 34 March £m, unless stated 2011 Exchange Contributions’ Losses Other 2012 Net asset / (liability) UK 96 - 48 (17) 1 138 Us (134) 4 32 (63) (2) (166) Other (4) 2 2 (3) (3) (8) [sublet RH US healthcare (97) S 5 (4) (8) (104) 1 £7m service charge reported
Slide 47: Cash flow information
Cash flow information Year Ended 31 March 2012 £m 2012 2011 Profit before tax’ 379 245 Working capital (121) (41) Pensions (80) (46) Other adjustments 55 167 Interest and tax paid (24) (77) Capital expenditure (130) (70) Cash flow from discontinued operations 2 (107) Disposal proceeds 19 280 Investi
Slide 48: Debt Maturity Profile
Debt Maturity Profile March 2012 £m 20122014 Average net debt in period 454 661 Effective interest rate on gross debt 35% 4.0% 2 Disease ‘committed bank fm = Drawn committed bank At period end 800 faciities © Bonds and other Average maturity of total gross borrowings 4.9 yrs 4.8 yrs 700 Undrawn comm
Slide 49: Exchange rates
Exchange rates Year ended 31 March &m 2012 2011 Change Closing rates USS 1.60 1.60 = Euro 1.20 1.13 (6%) used to translate Balance Sheet Average rates US$ 1.60 1.55 (8%) Euro. 1.15 1.19 3% used to translate Income Statement TATE LYLE 49