Tate & Lyle Plc · LSE:TATE
Tate & Lyle — FY2009 Earnings Presentation
53 slides from Tate & Lyle's earnings presentation, May 28, 2009
Slide 1: Full Year Results Presentation
Full Year Results Presentation Iain Ferguson, Chief Executive 28 May 2009 Good morning and welcome to the presentation of our results for the year ended 31 March 2009. You will have seen last week’s announcement that I will be retiring as Chief Executive later this year and that the Board of Directo
Slide 2: Agenda
Agenda Key Results Iain Ferguson Financials Tim Lodge Business Environment Iain Ferguson Outlook Iain Ferguson 2 But moving back to today’s agenda: First of all, I will introduce the key results for the year and will briefly recap on how we are taking the tough management decisions to best position
Slide 3: Key Results
Key Results Years to 31 March Change at Continuing operations 1 2009 2008 Change constant currency Profit Before Tax 2 £247m £253m -2% -18% Core Value Added Food Ingredients £107m £89m +20% +3% Operating Profit Diluted EPS 2 38.0p 34.6p +10% -8% Dividend 22.9p 22.6p +1.3% +1.3% Net Cash Generated 3
Slide 4: Year to March 2009: Managing in Turbulent Times
Year to March 2009 Managing in Turbulent Times Apr 08 Jul 08 Oct 08 Jan 09 Apr 09 1H strong performance Corn price peak Good EU corn harvest Customer destocking Paper starch decline Exchange rate volatility US Ethanol capacity higher than RFS Difficult sugar market, UK retail sugar very competitive
Slide 5: Decisive Management Action
Decisive Management Action To maximise cash flow and defend short term profitability y Accelerated existing cost reduction projects y Launched new cost reduction projects y Actions to date: - Initiatives to reduce working capital - Pay freeze at all levels - Delayed completion and commissioning of F
Slide 6: Financials
Financials Tim Lodge, Group Finance Director 28 May 2009 Thank you Iain and good morning. 6
Slide 7: Income Statement
Income Statement Years to March Continuing operations 1 2009 2008 At constant £m (£1=US$1.80) (£1=US$2.01) currency Sales 3 553- 2 867- 8% Adjusted operating profit 2 298- 295- -15% Net finance expense (51) (42) -3% Adjusted profit before tax 2 247- 253- -18% Exceptional items (119) (59) Amortisatio
Slide 8: Sales and Operating Profit
Sales and Operating Profit Years to March Continuing operations 1 At constant Operating At constant £m Sales currency profit 2 currency Food & Ind. Ingredients, Americas 1 797- 9% 181- -19% Food & Ind. Ingredients, Europe 539- -1% 51- 7% Sugars 1 048- 13% 12- -66% Sucralose 169- -4% 72- -4% Central
Slide 9: Operating Profit
Operating Profit 1 Year to March 2009 Continuing operations 2 £m 56 42 13 3 24 3 295 298 £1=$2.01 £1=$1.80 2008 Currency TALFIIA TALFIIE Sugars Sucralose Central costs 2009 1 Before exceptional items and amortisation of acquired intangible assets 2 Excluding the results of International Sugar Tradin
Slide 10: Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Americas Years to March Sales Operating profit 1 Margin £m At At 2009 constant 2009 constant 2009 2008 currency currency Primary Food 878- 16% 95- 3% 10.8% 11.7% Primary Industrial 393- 4% 3- -93% 0.8% 13.6% Value added Food 369- 6% 83- 5% 22.5% 23.2% Value added Indus
Slide 11: Food & Industrial Ingredients, Europe
Food & Industrial Ingredients, Europe Years to March Continuing operations 1 Sales Operating profit 2 Margin £m At At 2009 constant 2009 constant 2009 2008 currency currency Primary Food 170- -16%- 27- 72%- 15.9%- 8.3%- Primary Industrial 163- n/a- -- n/a- n/a- 4.3%- Value added Food 206- 15%- 24- -
Slide 12: Lower European corn prices
Food & Industrial Ingredients, Europe Lower European corn prices Spot Prices May 2007 to May 2009 240 € per tonne / delivered Rouen 200 160 120 80 May 07 Aug 07 Nov 07 Feb 08 May 08 Aug 08 Nov 08 Feb 09 May 09 • Second half 2009 benefited from a bumper harvest and lower net corn costs Source: Reuter
Slide 13: Sugars
Sugars Years to March Continuing operations 1 Sales Operating profit 2 Margin £m At At 2009 constant 2009 constant 2009 2008 currency currency Products 711- 14% (11) -165% -1.5% 2.5% Molasses 269- 16% 18- 32% 6.7% 6.4% Value added 68- -7% 5- -14% 7.4% 6.8% 1 048- 13%- 12- -66%- 1.1% 3.8% • Oversuppl
Slide 14: Sucralose
Sucralose Years to March Sales Operating profit 1 Margin £m At At 2009 constant 2009 constant 2009 2008 currency currency Value added 169 -4% 72 -4% 42.6% 44.6% • Volumes increased 6% over prior year: average selling prices lower • Continuing good growth in Europe • Breakthrough in manufacturing yie
Slide 15: Energy Costs
Energy Costs Years to March Continuing operations 1 At % of % of £m 2009 2008 constant cost usage currency 2009 2009 Gas 119 88 21% 58% 46% Electricity 61 46 14% 29% 14% Coal and other 28 21 9% 13% 40% Total 208 155 17% • Price was main driver of 17% change in constant currency • 70% of FY2010 energ
Slide 16: Central Costs
Central Costs Years to March At constant £m 2009 2008 currency Total (18) (31) 42% • Underlying costs in FY2009 reduced by £4 million in addition to £3 million achieved in FY2008 16 Moving on to central costs. These reduced by £13 million in the year. This decrease reflects a £4 million reduction in
Slide 17: Interest, Tax and EPS
Interest, Tax and EPS Years to March Continuing operations 1 At constant £m, unless stated 2009 2008 currency Interest (51) (42) -3% Tax 2 (68) (84) 33% Effective tax rate 2 27.3% 33.2% Earnings per share 2 - Basic 38.2p 35.0p -8% - Diluted 38.0p 34.6p -8% 1 Excluding the results of International Su
Slide 18: Exceptional Items
Exceptional Items Years to March £m 2009 2008 Exceptional items (continuing operations) Ingredients Americas Write-down of assets (24) -- Settlement with Mexican government 11- -- Citric / Astaxanthin impairments -- (12) Sucralose Mothballing of McIntosh plant (97) Sugars Israel impairment (9) -- In
Slide 19: Free Cash Flow
Free Cash Flow Year to March 2009 £m 5 31 117 224 451 56 298 17 154 Adjusted Dep'n / amort Working capital Share-based Operating cash Capex Interest Tax Free cash flow operating profit payments flow 19 Moving on to free cash flow from our continuing operations. After adding back depreciation and int
Slide 20: Change in Working Capital
Change in Working Capital Years to March £m 2009 2008 Decrease / (increase) in inventories 113- (151) Decrease / (increase) in receivables 77- (69) US margin calls (70) 34- (Decrease) / increase in payables (44) 112- Decrease / (increase) in derivatives 6- (18) Decrease in provisions & other (51) (6
Slide 21: Movements in Net Debt
Movements in Net Debt Year to March 2009 £m Net cash generated £245m 378 154 57 140 104 2 57 1 231 1 041 Net debt Free cash Cash from Cash from Dividends Other Trade FX Net debt April 2008 flow incl. disc ops disposals finance & March 2009 capex other 21 This slide sets out the movements in Net debt
Slide 22: Debt Maturity Profile
Debt Maturity Profile March 2009 £m 1200 Undrawn committed bank facilities Drawn committed bank facilities 1000 Bonds and other 800 600 400 200 0 < 1 yr 1 to 2 yr 2 to 3 yr 3 to 4 yr 4 to 5 yr > 5 yr Average maturity of gross debt 4.8 years Undrawn committed facilities £524m 22 Let me remind you of
Slide 23: Balance Sheet
Balance Sheet As at year end 31 March 31 March £m 2009 2008 Goodwill, intangibles and fixed assets 1 969- 1 538- Inventories 538- 562- Trade and other receivables 728- 686- DFI (non-debt related) (80) 2- Trade and other payables (549) (515) Other, including provisions (243) (159) Net operating asset
Slide 24: Pensions
Pensions 31 March Net 31 March £m 2008 Exchange Subtotal movements 2009 Net asset / - (liability) UK 49- (2) 47- (2) 45- US (64) (35) (99) (58) (157) Other (1) -- (1) (4) (5) Subtotal (16) (37) (53) (64) (117) US healthcare (75) (26) (101) 7- (94) Total (91) (63) (154) (57) (211) £m 2008 2009 P&L ch
Slide 25: Financial Position
Financial Position Continuing operations 1 • Adjusted diluted EPS up 10% (down 8% in constant currency) • Effective tax rate on adjusted profit 27.3% (2008: 33.2%) • Cash generated £245m; net debt / EBITDA 2.4 times • Proposed final dividend maintained; for year increased 1.3% 1 Excluding the result
Slide 26: Business Environment
Business Environment Iain Ferguson, Chief Executive 28 May 2009 Thanks Tim. I would now like to talk a bit more about the actions we have taken to ensure that we are well placed to deal with the current challenges and to emerge as a stronger business when the market situation improves. 26
Slide 27: Food Ingredients: Working with customers in challenging times
Food Ingredients Working with our customers in challenging times Consumer Trends • Lower cost: no compromise on taste or quality • “Value for money” alternatives to branded products • Health & Wellness Food Producer and Retailer Response • Value-focused own-label product offerings • Streamlined prod
Slide 28: CORE Solutions still relevant today
Food Ingredients CORE™ Solutions still relevant today C TATE & LYLE CREATE® Innovations in taste, texture, form, coating, etc X-PAND’R® O TATE & LYLE OPTIMIZE® Maximising efficiency and reducing costs & LYLE REBALANCE® HAMULSION® R TATE Reformulating into new competitive positions Stabilizer Systems
Slide 29: US ethanol and gasoline spot prices
Food & Industrial Ingredients, Americas US ethanol and gasoline spot prices 4.5 Spot Prices - March 2006 to May 2009 4.0 3.5 US$ per US gallon 3.0 2.5 2.0 1.5 1.0 Ethanol Chicago Wholesale Unleaded Gasoline 0.5 Jun06 Jul06 Nov06 Jun07 Jul07 Nov07 Jun08 Jul08 Nov08 May06 Aug06 Jan07 May07 Aug07 Jan08
Slide 30: Long term demand increases underpinned by RFS legislation
Food & Industrial Ingredients, Americas Long term demand increases underpinned by RFS legislation Demand for ethanol based on corn RFS Effective Corn RFS Minimum y RFS legislation allows refiners to carry Blend wall forward up to 20% of following year’s 16 volume obligation Current Blend Wall @10% 1
Slide 31: Sugars: well-placed for market post-EU reforms
Sugars Tate & Lyle well-placed for market post-EU reforms y Signs of improving balance between supply and demand y New raw sugar supply arrangements - Negotiations on track y Differentiation through Fairtrade - Retail and industrial y Differentiation through lower carbon footprint - Cane significant
Slide 32: SPLENDA Sucralose: transformation in manufacturing yields
SPLENDA® Sucralose Benefiting from a transformation in manufacturing yields >25% YIELD y Breakthrough yield improvements of over 25% IMPROVEMENT y Made possible by: Yield - Investment in pilot plant - Investment in analytical research to support patent estate - Two plant footprint which enabled full
Slide 33: High intensity sweetener market shares
SPLENDA® Sucralose High intensity sweetener market shares Global HIS Market by Region – Year to 31 March 2009 US $m Global North America Latin America EMEA Asia Pacific TOTAL HIS 1,178 427 114 278 359 Growth in year -11% -6% +1% -20% -12% SPLENDA® Sucralose 294 189 25 45 35 Growth in year -2% -6% 0%
Slide 34: Sucralose Product Launches
SPLENDA® Sucralose Sucralose Product Launches – Q1 2004 to Q1 2009 (Calendar) Pepsi Max Danone Activia Coke Zero in in China in Colombia ASPAC region 450 +12% +13% -3% +7% 400 388 371 343 347 341 350 332 327 316 319 280 300 253 255 258 256 242 237 236 237 234 250 215 191 200 150 100 50 0 04 05 06 07
Slide 35: Outlook
Outlook Iain Ferguson, Chief Executive 28 May 2009 Moving onto our outlook for the coming year… 35
Slide 36: Outlook
Outlook y Near term outlook - Relative resilience in sales to food and beverage customers - Industrial starch demand remains weak - Customer demand and net corn costs will be key factors y Key factors which will impact the second half of 2010: - Pricing in EU sugar market - 2009 corn harvests - Timi
Slide 37: Sustaining the health of our business
Sustaining the health of our business Building a strong platform for future growth PRIORITIES FOR FY2010 Maintain no Maximise Implement Implement Aggressively higher revenue by zero-based reduced reduce costs priority than total focus on capital working and optional safety customer expenditure capit
Slide 38: Question and Answers
Question and Answers Please wait for the microphone and state your name and that of your organisation 38 So, we will now take your questions. As usual, please could you wait for the microphone and state your name and that of your organisation. 38
Slide 39: Appendix
TATE S LYLE Appendix 39
Slide 40: Key Financial Indicators
Key Financial Indicators Years to March £m, unless stated 2009 2008 Profit before tax 1,2 247 253 Effective tax rate 1 - total operations 27.8% 31.7% - continuing operations 2 27.3% 33.2% Diluted eps 1 - continuing operations 2 38.0p 34.6p Operating cash flow - continuing operations 2 451 246 RONOA
Slide 41: Income Statement
Income Statement Years to March 2009 2008 £m Continuing1 Discont’d Total Continuing1 Discont’d Total Sales 3 553- 852- 4 405- 2 867- 951- 3 818- Operating profit 2 298- 1- 299- 295- 36- 331- Net finance costs (51) (2) (53) (42) 1- (41) Profit before tax 2 247- (1) 246- 253- 37- 290- Exceptional item
Slide 42: Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Americas Years to March Continuing operations At constant £m 2009 2008 currency Sales Primary Food 878 651 16% Primary Industrial 393 309 4% Value added Food 369 293 6% Value added Industrial 157 133 n/a 1 271 526 960 426 9% 42 42
Slide 43: Food & Industrial Ingredients, Europe
Food & Industrial Ingredients, Europe Years to March Continuing operations At constant £m 2009 2008 currency Sales Primary Food 170 168 -16% Primary Industrial 163 138 n/a Value added Food 206 155 15% 333 206 306 155 -1% 43 43
Slide 44: Sugars
Sugars Years to March Continuing operations At constant £m 2009 2008 currency Sales Products 711 596 14% Molasses 269 203 16% Value added Food 68 73 -7% 980 68 799 73 13% 44 44
Slide 45: Product Analysis – Sales
Product Analysis – Sales Years to March Continuing operations (at actual rates) 2009 2008 Value Total Value £m Primary Primary Total added added Sugars - Products 711 68 779 596 73 670 - Molasses 269 -- 269 203 -- 202 980 68 1 048 799 73 872 Ingredients Americas 878 369 1 247 651 293 944 - Food 393
Slide 46: Product Analysis – Operating Profit
Product Analysis – Operating Profit Years to March Continuing operations (at actual rates) 2009 2008 Value Total Value £m Primary Primary Total added added Sugars - Products (11) 5- (6) 15- 5- 20- - Molasses 18- -- 18- 13- -- 13- 7- 5- 12- 28- 5- 33- Ingredients Americas - Food 95- 83- 178- 76- 68-
Slide 47: Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Americas Years to March At reported At constant £m 2009 2008 rates currency Sales 1 797 1 386 30% 9% Adjusted operating profit 1 181 186 -3% -19% Margin 1 10.1% 13.4% Operating cash flow 293 195 1 Before exceptional items and amortisation of acquired intangible assets
Slide 48: Food & Industrial Ingredients, Europe
Food & Industrial Ingredients, Europe Years to March Continuing operations At reported At constant £m 2009 2008 rates currency Sales 539 461- 17% -1% Adjusted operating profit 1 51 41- 24% 7% Margin 1 9.5% 8.9% Operating cash flow 102 (45) 1 Before exceptional items and amortisation of acquired inta
Slide 49: Sugars
Sugars Years to March At reported At constant £m 2009 2008 rates currency Sales 1 048- 872- 20% 13% Adjusted operating profit 1 - Products (6) 20- -130% -126% - Molasses 18- 13- 38% 32% Total 12- 33- -64% -66% Margin 1 1.1% 3.8% Operating cash flow 10- 109- 1 Before exceptional items and amortisatio
Slide 50: Sucralose
Sucralose Years to March At reported At constant £m 2009 2008 rates currency Sales 169 148 14% -4% Adjusted operating profit 1 72 66 9% -4% Margin 1 42.6% 44.6% Operating cash flow 70 62 1 Before exceptional items and amortisation of acquired intangible assets 50 50
Slide 51: Effective Tax Rate
Effective Tax Rate Years to March 2009 2008 £m Continuing Discont’d Total Continuing Discont’d Total Profit before tax 113- (23) 90- 182- 97- 279- Tax (19) (1) (20) (76) (16) (92) Reported tax rate 16.8% -3.9% 22.2% 41.8% 16.5% 33.0% Adj. profit before tax 1 247- (1) 246- 253- 37- 290- Adjusted tax
Slide 52: New Product Analysis Q1 2004 – Q1 2009
New Product Analysis Q1 2004 – Q1 2009 Global - New Launches Sucralose as a % of total HIS launches 50.0% 40.0% 30.0% 20.0% 10.0% Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- 2004 2004 2004 2004 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2
Slide 53: Total HIS Product Launches Q1 2004 – Q1 2009
Total HIS Product Launches Q1 2004 – Q1 2009 -7% -1% - -9% 1200 1000 987 1000 926 919 868 863 839 899 892 829 831 798 783 800 724 724 682 697 693 603 623 584 600 400 200 0 04 Q 05 Q 06 07 Q 08 Q 09 04 Q 05 06 Q 07 Q 08 04 Q 05 06 Q 07 Q 08 04 Q 05 Q 06 07 08 20 20 20 20 20 20 20 20 20 20 20 20 20 20