Tate & Lyle Plc · LSE:TATE
Tate & Lyle — FY2008 Earnings Presentation
52 slides from Tate & Lyle's earnings presentation, May 22, 2008
Slide 1: Preliminary Results Presentation
Preliminary Results Presentation Iain Ferguson, Chief Executive 22 May 2008 Good morning and welcome to our presentation of the preliminary results for the year ended 31 March 2008. 1
Slide 2: Agenda
Agenda Key Results & Strategic progress Iain Ferguson Financials John Nicholas Reshaping the business Iain Ferguson Outlook Iain Ferguson 2 I will introduce the results and the strategic progress during the year, and then John will take you through the financials. I will then give an update on how w
Slide 3: Key Results
Key Results Year to 31 March 2008 Continuing operations* vs FY 2007 Profit Before Tax1 £244m Down 7% Core Value-Added Food Ingredient Constant £89m Up 13 % Operating Profit currency Diluted EPS1 32.7p Down 8% Dividend 22.6p Up 1.1p, 5% Net debt £1 041m 16% higher 1 Before exceptional items and amort
Slide 4: Strategic Progress
Strategic Progress Calendar of significant events 2007 Apr Redpath sold May Jun 80% Hahn acquired Singapore SPLENDA® facility complete Jul Aug Production of Astaxanthin at Selby terminated Sep 5 European starch plants sold Sagamore expansion complete Oct Installation of sugar cranes at London refine
Slide 5: Financials
Financials John Nicholas, Group Finance Director 22 May 2008 I will hand you over now to John to take you through the Financials: Thanks Iain and good morning. 5
Slide 6: Income Statement
Income Statement Years to March Continuing operations* £m 2008 2007 At constant (£1=$2.01) (£1=$1.89) currency Sales 3 424 3 225 +10% Operating profit1 286 311 -4% Net finance costs (42) (36) Profit before tax1 244 275 -7% Exceptional items (59) (13) Intangible asset amortisation (12) (9) Profit bef
Slide 7: Sales and Operating Profit
Sales and Operating Profit1 Years to March Continuing operations* At At Operating £m Sales constant constant profit1 currency currency Food & Ingredients, Americas 1 386 +17% 186 +13% Food & Ingredients, Europe 461 +44% 41 -1% Sugars 1 429 -2% 24 -59% Sucralose 148 +6% 66 -3% 317 Central costs (31)
Slide 8: Operating Profit
Operating Profit1 Years to March Continuing operations* £m 21 1 12 35 2 4 311 286 £1=$1.89 £1=$2.01 2007 Currency TALFIIA TALFIIE Sugars Sucralose Central 2008 Costs 1 Before exceptional items and amortisation of acquired intangible assets * Excluding Redpath, Eastern Sugar, Occidente and TALFIIE (d
Slide 9: Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Americas Years to March £m Sales Operating profit1 Margin At At 2008 2008 constant constant 2008 2007 £m £m currency currency Primary Food 651 +27% 76 +39% 11.7% 11.2% Primary Industrial 309 +4% 42 +2% 13.6% 13.7% Value added Food 293 +13% 68 +0% 23.2% 25.3% Value adde
Slide 10: US Corn Prices
Food & Industrial Ingredients, Americas US Corn Prices Nearby Future Prices March 2006 to Mid May 2008 600 US cents per bushel 550 500 450 400 350 300 250 200 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Source: Chicago Mercantile Exchange 10 Let’s look at US corn prices. These hav
Slide 11: Ethanol profits still generate a good return
Food & Industrial Ingredients, Americas Ethanol profits still generate a good return Spot Prices March 2006 to Mid May 2008 5 Ethanol Chicago Wholesale Unleaded Gas 4 US $ 3 2 1 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 • Last year’s supra-normal profits back down to more normal
Slide 12: Food & Industrial Ingredients, Europe
Food & Industrial Ingredients, Europe Years to March £m Sales Operating profit1 Margin At At 2008 2008 constant constant 2008 2007 £m £m currency currency Primary Food 168 +19% 14 -49% 8.3% 19.4% Primary Industrial 138 +41% 6 +74% 4.3% 3.3% Value added Food 95 +19% 13 +12% 13.7% 13.5% 401 +26% 33 -2
Slide 13: European Grain Prices
Food & Industrial Ingredients, Europe European Grain Prices Spot Prices March 2006 to Mid May 2008 280 260 Corn Milling Wheat Feed Wheat € per tonne / delivered Rouen 240 220 200 180 160 140 120 100 80 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Source: Home-Grown Cereals Authorit
Slide 14: Sugars
Sugars Years to March £m Sales Operating profit1 Margin At At 2008 2008 constant constant 2008 2007 £m £m currency currency Refining 572 +24% 15 -35% 2.6% 5.4% Trading and Other 784 -16% 4 -88% 0.5% 2.8% Value added 73 +1% 5 -15% 6.8% 9.7% 1 429 -2% 24 -59% 1.7% 4.0% • Small EU refining profit exclu
Slide 15: Sucralose
Sucralose Years to March £m Sales Operating profit1 Margin At At 2008 2008 constant constant 2008 2007 £m £m currency currency Value added 148 +6% 66 -3% 44.6% 48.3% 148 66 • 6% sales growth after absorbing impact of customer destocking • Profits affected by higher fixed costs from Singapore and pat
Slide 16: Energy
Energy Years to March Continuing operations* At £m 2008 2007 constant currency Gas 84 83 +4% Electricity 44 42 +9% Coal and other 22 22 +9% Total 150 147 +6% • Continuing operations cost £150 million • Overall cover more than 50% • Current energy prices increase estimates an additional £35 million c
Slide 17: Central Costs
Central Costs Years to March At £m 2008 2007 constant currency Total (31) (35) +12% • Insurance credit of £7 million • Management change costs of £4 million • Underlying costs £1 million lower than prior year 17 Let’s talk about central costs. Our review of central costs led to a number of changes w
Slide 18: Interest and Tax
Interest and Tax Years to March Continuing operations* At £m 2008 2007 constant currency Interest (42) (36) -20% Tax (84) (88) +12% Effective tax rate1 34.4% 32.0% Earnings per share1 Basic 33.1p 38.1p -9% Diluted 32.7p 37.5p -8% 1 Before exceptional items and amortisation of acquired intangible ass
Slide 19: Exceptional items and Discontinued operations
Exceptional items and Discontinued operations Years to March Exceptional items - continuing operations £m 2008 2007 Restructuring costs (30) - Citric / Astaxanthin (12) (33) Orsan impairment (17) - Sucralose - 20 (59) (13) Discontinued operations £m 2008 2007 Operating profit 45 62 Interest and Tax
Slide 20: Cash Flow
Cash Flow Year to March 2008 103 270 7 286 126 264 34 247 75 Operating Dep'n / Working Share- Operating Capex Interest Tax Free cash profit amort cap based cashflow outflow payments 20 Moving on to cash flow. This chart shows the movement from operating profit to operating cashflow, and on to free c
Slide 21: Cash Flow by division
Cash Flow by division Years to March £m 2008 2007 TALFIIA 195 159 TALFIIE (45) 36 Sugars (11) 117 Sucralose 62 31 Central (75) (18) Operating cash flow 126 325 TALFIIA capital expenditure (150) (116) Other capital expenditure (114) (135) Operating cash flow less capital (138) 74 expenditure Interest
Slide 22: Net Debt
Net Debt Year to March 2008 247 308 159 28 55 36 106 1 041 900 Net Debt Free Net Dividends Share FX and other Net debt Discont'd Net Debt April 07 Cashflow disposals buyback disposed Ops March 08 including capex 22 …….you can see we had a net inflow of £308 million from M&A activity, which was parti
Slide 23: Balance Sheet
Balance Sheet As at 31 As at 31 RONOA % RONOA % £m Mar 2008 Mar 2007 2008 2007 Net operating assets TALFIIA 836 725 23% 25% TALFIIE 489 288 10% 14% Sugars 419 320 6% 17% Sucralose 275 264 23% 31% Global and financial 43 27 n/a n/a Total net operating assets* 2 062 1 624 15% 19% Other (71) 210 Net as
Slide 24: Key Financial Indicators
Key Financial Indicators Years to March 2008 2007 Profit before tax1* 244 275 Effective tax rate1 (%) – Total operations 31.7% 29.2% – Continuing operations 34.4% 32.0% Diluted earnings per share1 from continuing operations 32.7p 37.5p Operating cash flow from continuing operations 126 325 RONOA (%)
Slide 25: Preliminary Results Presentation
Preliminary Results Presentation Iain Ferguson, Chief Executive 22 May 2008 25
Slide 26: Reshaping the Business
Reshaping the Business Iain Ferguson, Chief Executive 22 May 2008 Let me talk now about where we have got to in our strategic reshaping of the business and more importantly, the base this now gives us for future growth. 26
Slide 27: Our Strategy
Our Strategy Our strategy is to build a stronger value added business on a low-cost commodity base We focus on five key business drivers: Serving our customers Operating efficiently and safely Investing in acquisitions and partnerships Investing in technology and people Growing the contribution from
Slide 28: Transforming Tate & Lyle: Investing for growth – October 2005
Transforming Tate & Lyle Investing for growth – October 2005 New SPLENDA® New SPLENDA® SPLENDA® Sucralose Sucralose facility in Sucralose facility in realignment Singapore announced Singapore completed SPLENDA® SPLENDA® Sucralose Sucralose expansion at McIntosh expansion at announced McIntosh comple
Slide 29: Transforming Tate & Lyle: Investing for growth – March 2008
Transforming Tate & Lyle Investing for growth – March 2008 New SPLENDA® New SPLENDA® SPLENDA® Sucralose Sucralose facility in Sucralose facility in realignment Singapore announced Singapore completed SPLENDA® Cranes SPLENDA® Sucralose installed and Sucralose expansion at McIntosh biomass boiler expa
Slide 30: Transforming Tate & Lyle
Transforming Tate & Lyle Peak in major capital expenditure programme Fort Dodge £140m European sugar cranes / bio-mass boiler £26m Sagamore & Loudon £100m £m DuPont T&L £30m 300 SPLENDA® Sucralose £140m 250 200 150 100 50 0 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09E Capex Depreciation Capex/ Depreciat
Slide 31: Transforming Tate & Lyle: Investing for growth – March 2008
Transforming Tate & Lyle Investing for growth – March 2008 New SPLENDA® New SPLENDA® SPLENDA® Sucralose Sucralose facility in Sucralose facility in realignment Singapore announced Singapore completed SPLENDA® Cranes Sold April 2007 SPLENDA® Sucralose installed and Sucralose expansion at McIntosh bio
Slide 32: Transforming Tate & Lyle
Transforming Tate & Lyle Investment Expenditure Net of Disposals Years to March £m 2006 2007 2008 2009E Total Ingredients, Acquisitions 36 36 Americas Major capex 35 78 106 51 270 Ingredients, Acquisitions 29 2 75 106 Europe Disposals (203) (203) Sugars Acquisitions 4 2 1 1 8 Major capex 3 13 10 26
Slide 33: Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Americas y Balance between “commodity flywheel” and value added y Acceptable range of predictability of profit y Cornbelt technology introduced at Loudon and Fort Dodge y Focus is delivery, especially on £270m major capex y Bio-materials give long term growth options V
Slide 34: Food & Industrial Ingredients, Europe
Food & Industrial Ingredients, Europe y Now five Eaststarch plants plus Netherlands, Greece and Morocco y Working with partners to optimise inherent volatility of unconnected corn and sugar markets y Focus on investing in value added and economies of scale y Cesalpinia and G. C. HAHN provide access
Slide 35: Sugars
Sugars y Significant progress on EU sugar reforms y Good progress in securing raw sugar supply from October 2009 y Superior economic basis for cane refining y Further differentiation of cane – Fairtrade and lower carbon footprint 35 Our EU sugar business has been operating in a highly competitive ma
Slide 36: Sucralose: High intensity sweetener market
Sucralose High intensity sweetener market Manufacturers' sales by product Total Global Market Value FY 2008 - $1.3bn FY 2007 - $1.0bn 4% 1% 1% 11% 10% 23% 28% 11% $302m $276m 21% 8% 9% 31% 42% Sucralose Aspartame Acesulfame K Saccharin Cyclamate Stevia Neotame Source: Company Data. Excludes non-food
Slide 37: Sucralose sales growth
Sucralose sales growth High intensity sweetener market shares by region Year to 31 March 2008 North Latin Asia US $m Global EMEA America America Pacific TOTAL HIS 1,324 455 113 349 407 Growth in year +32% +3% +25% +25% +113% SPLENDA® Sucralose 302 191 37 37 37 Growth in year +9% -3% +28% +37% +65% M
Slide 38: SPLENDA Sucralose: Elements of Competitive Advantage
SPLENDA® Sucralose Elements of Competitive Advantage SPLENDA® Sucralose brand Regulatory & Specifications Economy of Scale Technology Know-how Patents 38 I have shown you this slide before and it shows the different layers of protection and defines our formidable competitive advantage in the global
Slide 39: A stronger business with a strong management team
A stronger business with a strong management team Iain Ferguson Chief Executive Matt Wineinger Olivier Rigaud Karl Kramer, Ian Bacon Dr. Bob Fisher John Nicholas, Robert Gibber President, President, President Chief Executive, President, Group Company Secretary Food & Industrial Food & Industrial Suc
Slide 40: Transforming Tate & Lyle: Platform for further growth
Transforming Tate & Lyle Platform for further growth y Nearing completion of reshaping of our business y Implemented management change appropriate to the new shape y Platform to grow sustainable business and to achieve long term 20% RONOA target y Capex expected to stabilise at 1.25 x depreciation –
Slide 41: Significant longer term opportunities
Significant longer term opportunities Bio materials Expansion in Asia Pacific Region Custom Ingredients Expansion into Eastern Europe Cesalpinia ? 41 While delivering returns from this asset base is a key immediate priority, Tate & Lyle does have more to offer for the longer term. We continue to wor
Slide 42: Outlook
Outlook Iain Ferguson, Chief Executive 22 May 2008 So, coming back to the outlook for the financial year which will end in March 2009….. 42
Slide 43: Outlook for Year to March 2009
Outlook for Year to 31 March 2009 % of FY2008 Operating Division Outlook profit^ Ingredients, 59% Further progress anticipated Americas Ingredients, Profits in TALFIIE at current levels in H1; 13% Europe H2 determined by new harvest cereal costs EU sugar difficult H1 followed by market 7% Sugars rea
Slide 44: Conclusion
Conclusion • Successful implementation of business transition largely complete • Focus for management: deliver returns on the invested asset base • Significant longer term opportunities in pipeline 44 So, in conclusion: The successful implementation of our business transition is now largely complete
Slide 45: Question and Answers
Question and Answers Please wait for the microphone and state your name and that of your organisation 45 With that, can I take your questions? 45
Slide 46: Appendix
TATE § LYLE Appendix 46
Slide 47: SPLENDA Sucralose: Capacity Utilisation
SPLENDA® Sucralose Capacity Utilisation Singapore We expect to reach 70% facility utilisation 4 mechanically within 4 years Alabama complete 1H08 expansion = 3x 2H07 Bottlenecks = 2x 3 removed = 1.5x Capacity acquired in 2 April 2004 = 1x 70% 72% 1 84% 45% 100% 0 FY2005 FY2006 FY2007 FY2008 FY2012 C
Slide 48: SPLENDA Sucralose: US Tabletop Market Share
SPLENDA® Sucralose US Tabletop Market Share SPLENDA® Low Calorie Sweetener No.1 Brand in category in the USA Market Share % (US $ sales) 70 60 SPLENDA® 50 40 30 Equal® 20 10 Sweet’n’Low® 0 Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08
Slide 49: SPLENDA Sucralose: ingredient use breakdown
SPLENDA® Sucralose Little change in overall breakdown of ingredient use year on year FY2008 FY2007 Sales $302m Sales $276m 8% 9% 48% 48% 44% 43% Food Bev Pharma Food Bev Pharma % split by sales revenue Source: Company Data 49 49
Slide 50: Ingredient use in Food Sector remains strong
SPLENDA® Sucralose Ingredient use in Food Sector remains strong Global Food Sector sales by category US$131m US$143m (+9% YOY) 39% 36% 13% 12% 8% 9% 17% 21% 5% 4% 18% 18% % split FY2007 by sales revenue FY2008 Dairy Bakery Fruit preps Soups, Sauces and Dressings Confectionary Other (inc sales to McN
Slide 51: Sucralose Product Launches Q1 2003 - Q4 2007
Sucralose Product Launches Q1 2003 - Q4 2007 400 +39% +33% 358 +20% +28% 343 346 338 350 336 300 282 258 263 258 258 242 239 236 240 234 250 216 191 200 154 150 106 112 100 75 50 0 03 04 05 06 07 08 03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
Slide 52: SPLENDA Sucralose: Four drivers of growth
SPLENDA® Sucralose Four drivers of growth Light jam in Peru Whole grain bread in the United States New product lines which are difficult to Entry into new manufacture geographies with other HIS’s SPLENDA® Sucralose Substitution for Sweetener other HIS’s in optimisation – existing ranges nutritive bl