Tate & Lyle Plc · LSE:TATE
Tate & Lyle — FY2010 Earnings Presentation
70 slides from Tate & Lyle's earnings presentation, May 27, 2010
Slide 1: Presentation of Results for Year to 31 March 2010
Presentation of Results for Year to 31 March 2010 27 May 2010, London Good morning and welcome to the presentation of Tate & Lyle’s results for the year ended 31 March 2010 1
Slide 2: Agenda
Agenda Key Results Javed Ahmed Operating and Financial Review and Outlook Tim Lodge Business Review Javed Ahmed 2 Turning to the agenda. First, I will give a brief overview of how the company performed during the year. Tim will then take you through the operating and financial review of the year and
Slide 3: Key Results
Key Results TATE LYLE
Slide 4: Key Results
Key Results Solid performance in the face of challenging conditions in a number of markets Operating profits of £298m in line with the previous year1,2 Reported net debt reduced by over a third to £814m benefiting from free cash inflow of £540m (2009 - £154m) 3 Total net exceptional charges
Slide 5: Performance Against Financial Priorities
Performance Against Financial Priorities Zero-based Capex Capex to depreciation at 68% Reduce Working Working capital cash inflow of £291m Capital Costs Underlying costs reduced by £30m 5 You will remember that a year ago, recognising the need to act decisively and quickly in the face of the g
Slide 6: Fort Dodge
Fort Dodge Detailed analysis of end markets confirms no basis to complete and commission plant Changes in feed and energy markets, together with required reconfiguration and costs to remobilise, bring total costs to complete and commission to around £70m Risks associated with future returns le
Slide 7: Operating and Financial Review
Operating and Financial Review Tim Lodge, Group Finance Director Thank you, and good morning…. I will take you through a combined operating and financial review of the year and cover the outlook before handing back to Javed. 7
Slide 8: Income Statement
Income Statement Years to March Continuing operations 1 2010 2009 At constant £m, unless stated (£1=US$1.61) (£1=US$1.80) currency Sales 3,506 3,553 (6%) Adjusted operating profit ² 298 298 (7%) Net finance expense (69) (51) (25%) Adjusted profit before tax ² 229 247 (14%) Exceptional items (276) (1
Slide 9: Sales and Operating Profit
Sales and Operating Profit Years to March Continuing operations 1 At constant Operating At constant £m, unless stated Sales currency Profit ² currency Food & Ind. Ingredients, Americas 1,855 (2%) 178 (10%) Food & Ind. Ingredients, Europe 491 (15%) 54 4% Sugars 973 (10%) 30 100% Sucralose 187 4% 67 (
Slide 10: Operating Profit
Operating Profit 1 Year to March 2010 Continuing operations 2 23 15 2 20 7 13 298 298 £1=$1.80 £1=$1.61 £1=$2.01 £1=$1.80 2009 Currency TALFIIA TALFIIE Sugars Sucralose Central 2010 1 Before exceptional items and amortisation of acquired intangible assets. 2 Excluding the results of International Su
Slide 11: Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Americas Years to March Sales Operating Profit ¹ Margin At At £m, unless stated 2010 constant 2010 constant 2010 2009 currency currency Primary Food 982 7% 85 (18%) 8.7% 10.8% Primary Industrial 327 (21%) (8) (300%) (2.4%) 0.8% Value added Food 382 (2%) 98 9% 25.7% 22.
Slide 12: Food & Industrial Ingredients, Americas: Gross corn, gasoline and ethanol
Food & Industrial Ingredients, Americas Gross corn, gasoline and ethanol Net corn costs have remained low with expectation for good 2010 crop 3.0 . Ethanol (LHS) Gasoline (LHS) Gross Corn (RHS) 750 2.5 Ethanol & Gasoline Spot Prices ($/ga) Gross Corn Spot Prices (¢/bu) 650 2.0 550 1.5 450 1.0 0.5
Slide 13: Food & Industrial Ingredients, Europe
Food & Industrial Ingredients, Europe Years to March Sales Operating Profit 1 Margin At At £m, unless stated 2010 constant 2010 constant 2010 2009 currency currency Primary Food 133 (27%) 24 (11%) 18.0% 15.9% Primary Industrial 133 (23%) (3) (300%) (2.3%) - Value added Food 225 2% 33 32% 14.7% 11.7%
Slide 14: Lower European corn prices
Food & Industrial Ingredients, Europe Lower European corn prices Net corn costs have remained relatively low following good 2009 harvest European Corn Spot Prices - January 2007 to April 2010 280 260 € per tonne / delivered Rouen 240 220 200 180 160 140 120 100 Jan 07 May 07 Sep 07 Jan 08 May 08 S
Slide 15: Sugars: Bulk White Sugar Prices
Sugars Bulk White Sugar Prices Bulk White Sugar Prices - July 2006 to January 2010 700 FY2008 FY2009 FY2010 650 600 550 € per tonne 500 Bulk white sugar market price 450 Minimum EU selling 400 price 350 Minimum EU raw sugar reference price 300 Jul 06 Nov 06 Mar 07 Jul 07 Nov 07 Mar 08 Jul 08 Nov 08
Slide 16: Sugars
Sugars Years to March Continuing operations 1 Sales Operating Profit ² Margin At At £m, unless stated 2010 constant 2010 constant 2010 2009 currency currency Products 673 (7%) 14 240% 2.1% (1.5%) Molasses 228 (20%) 13 (32%) 5.7% 6.7% Value added 72 6% 3 (50%) 4.2% 7.4% 973 (10%) 30 100% 3.1% 1.1%
Slide 17: Sucralose
Sucralose Years to March Sales Operating Profit ¹ Margin At At £m, unless stated 2010 constant 2010 constant 2010 2009 currency currency Value added 187 4% 67 (9%) 35.8% 42.6% Mothballing of McIntosh completed ahead of expectations 14% volume growth in the year – Underlying growth and customer r
Slide 18: Sucralose: Share of global HIS market
Sucralose Share of global High Intensity Sweetener market increased from 25% to 26% Global HIS Market by Product - Years to 31 March 2009 - $1.2bn 2010 - $1.2bn 1% 1% 4% 1% 7% 1% SPLENDA® Sucralose 15% Aspartame 25% Acesulfame K 15% 26% Saccharin Cyclamate 18% Natural segment Neotame 17% 7% 30% 7% 2
Slide 19: Energy Costs
Energy Costs Years to March Continuing operations 1 At % of % of £m, unless stated 2010 2009 constant cost usage currency 2010 2010 Gas 98 119 (22%) 51% 58% Electricity 64 61 - 33% 29% Coal and other 31 28 7% 16% 13% Total 193 208 (11%) 11% reduction in constant currency driven by both price and e
Slide 20: Interest, Tax and EPS
Interest, Tax and EPS Years to March Continuing operations 1 At constant £m, unless stated 2010 2009 currency Interest (69) (51) (25%) Tax ² (47) (68) 46% Effective tax rate ² 20.4% 27.3% Earnings per share ² - Basic 39.1p 38.2p (2%) - Diluted 38.9p 38.0p (2%) 1 Excluding the results of Internationa
Slide 21: Exceptional Items
Exceptional Items Years to March £m 2010 2009 Exceptional items (continuing operations) TALFIIA Fort Dodge impairment (217) - Asset write off (28) (24) Settlement with Mexican government - 11 TALFIIE Reorganisation (3) - Sucralose McIntosh plant mothballing (55) - McIntosh plant impairment - (97) Su
Slide 22: Free Cash Flow
Free Cash Flow Year to March 2010 291 5 79 59 38 122 716 540 298 Adjusted Deprn. / Working Share- Operating Capex Interest Tax Free cash operating amort. capital based cash flow flow profit payments 22 If we move to the free cash flow in the year, we generated £540 million from the continuing operat
Slide 23: Change in Working Capital
Change in Working Capital Years to March £m, unless stated 2010 2009 Decrease in inventories 113 113 Decrease in receivables 95 77 US margin calls 35 (70) Increase / (decrease) in payables 80 (44) Decrease in derivatives 8 6 Decrease in provisions & other (40) (51) Change in working capital 291 31 2
Slide 24: Movements in Net Debt
Movements in Net Debt Year to March 2010 Net cash generated £347m 35 9 103 55 79 1,231 540 814 Net debt Free cash Cash from Dividends Other Fair value FX Net debt April flow incl. discont'd and March 2009 capex non-cash 2010 24 So, coming back to net debt and the movement over the year: Net cash gen
Slide 25: Balance Sheet
Balance Sheet As at year end 31 March 31 March £m, unless stated 2010 2009 Goodwill, intangibles and fixed assets 1,587 1,969 Inventories 409 538 Trade and other receivables 426 728 DFI (non-debt related) 16 (80) Trade and other payables (486) (549) Other, including provisions (320) (243) Net operat
Slide 26: Pensions
Pensions 31 March Net 31 March £m, unless stated Exchange Subtotal 2009 movements 2010 Net asset / (liability) UK 45 - 45 (40) 5 US (157) 5 (152) (2) (154) Other (5) - (5) (2) (7) Subtotal (117) 5 (112) (44) (156) US healthcare (94) 9 (85) (16) (101) Total (211) 14 (197) (60) (257) £m 2009 2010 P&L
Slide 27: Summary of Financial Position
Summary of Financial Position Adjusted diluted EPS up 2% (down 2% in constant currency) Cash generated £347m; net debt / EBITDA 1.8 times Proposed final and interim dividend maintained 27 So, to summarise: The Group delivered a solid performance in the face of challenging conditions in a numbe
Slide 28: Outlook
Outlook TATE LYLE 28
Slide 29: Outlook
Outlook Steady demand for value added food expected to continue Continued benefit from single Sucralose manufacturing base Anticipate progress in Expect continuing modest decline in sweeteners to be offset by increased demand from Mexico FY2011 as we maintain focus Industrial starch margins
Slide 30: Focus, Fix, Grow
Focus, Fix, Grow Javed Ahmed, Chief Executive Thank you Tim. Right, the theme today is about focusing, fixing, and growing, and I'll come back to that theme as we go through the presentation. I think, as most of you know, I started with Tate & Lyle in October last year. A few weeks after I started,
Slide 31: What I will cover today
What I will cover today Challenges Addressing them Measuring performance 31 So, what I plan to cover today is the following: I'm going to talk briefly, in summary form, about what I believe the challenges facing the Company today are. This is not going to be a surprise for most of you, but it'
Slide 32: JA Principles
JA Principles Clarity of Clear and simple purpose operating model Strong operating “Can do” and financial culture disciplines 32 Before we get into the specific issues, let me just lay out what I believe are the fundamental ingredients for success for any company. These are based purely on personal
Slide 33: Challenges
Challenges Let's talk about some challenges, and I'll address them on a couple of slides. I’ll talk first about what I believe are the strategic challenges, and then I'll talk more about what are the more internal operational and organisational challenges. 33
Slide 34: Need for clear choices
Strategic challenges Different markets with different characteristics and different needs – solid competitive position in some areas Need – follower in others for clear Inconsistency between strategic intent and investments choices and focus Limited exposure to / focus on longer term growth av
Slide 35: Some major fixes required
Operational and organisational challenges A legacy operating model – inefficient – complex – constrains delivery Some major fixes Weak operating disciplines and processes required Dated, non-standardised IS/IT infrastructure Some key organisational skill gaps Too many ‘silos’ vs. a strong,
Slide 36: 1. Focus
1. Focus So, what is it that we need to do? And this is about what and how are we planning to address them. And as I said, the “how-to” to me is as important, particularly in the case of Tate & Lyle, as any strategic direction. And I think there are three steps in order to reinvigorate the Company;
Slide 37: Clear focus
Clear focus What The leading global provider of speciality food ingredients and solutions By… Disciplined focus on growing our speciality food ingredients business – deeper customer understanding, continuous innovation and agility – stronger positions in high growth markets Driving our bulk ingr
Slide 38: Speciality food ingredients − The opportunity
Speciality food ingredients − The opportunity US$30 billion global potential addressable market Global Food Ingredients US$30bn – growing at 5% per annum Regional Split1 Increasing customer demand driven by strong, Rest of World 15% underlying consumer trends North America 30% – health and welln
Slide 39: Speciality food ingredients − why Tate & Lyle can succeed
Speciality food ingredients − why Tate & Lyle can succeed Competitive global market positions1 – #2 speciality food starches Strong – #1 crystalline fructose elements we – #1 high intensity sweeteners can build on Small position in emerging markets but growing strongly Strong relationships wit
Slide 40: 2. Fix
2. Fix Moving from the focus to the fix and I'm going to talk about fixing four things. It's about fixing the operating model; it's about fixing our operating disciplines; it's about fixing the organisation; and it's about fixing the investment strategy. 40
Slide 41: Tate & Lyle today − A legacy operating model
Tate & Lyle today − A legacy operating model Mix of regional and product based business units Support Support SAP 3 functions functions Bulk and speciality managed within same business units Food & Industrial – Go-to-market abilities compromised Ingredients, Sucralose Americas Difficult to int
Slide 42: Tate & Lyle in the future − A new operating model
Tate & Lyle in the future − A new operating model Three global business units – end-market focused teams Customers – stronger go-to-market skills Global business Speciality Streamlined support services units Bulk Sugars Food Ingredients Ingredients Global, standardised IS/IT systems Global sup
Slide 43: Fixing the operations
Fixing the operations Capital Review completed with external experts allocation Rigorous capital allocation process being rolled-out Working Introduced standard metrics for cash conversion cycle capital Included in bonus incentive system for the first time Operational Set up common perform
Slide 44: Fixing the organisation
Fixing the organisation De-layer and flatten organisational structure Structure Improve management’s ‘line of sight’ to business New Group HR Director joined in February Talent Clear recruitment criteria established Restructured incentive system Culture Revamped performance management sy
Slide 45: Fixing the investment focus
Fixing the investment focus Historical inconsistency between strategic intent and investment allocation Capital investment Future FY2007 − FY2010 capital investment Bulk Speciality Significantly greater focus on ingredients ingredients − speciality food ingredients Emerging − emerging markets ma
Slide 46: 3. Grow
TATE & LYLE 46
Slide 47: New focus on long-term growth
New focus on long-term growth New Innovation and Commercial Development group established Combines R&D, marketing and product management Close collaboration with customers worldwide Primary focus on speciality food ingredients Responsible for innovation pipeline Today Future Focus Develop
Slide 48: Key element of our new operating model
Key element of our new operating model Customers Global business units Speciality Bulk Sugars Food Ingredients Ingredients Global growth Innovation and Commercial Development unit Global Shared business services support and corporate functions services Global IS/IT Common IS/IT platform 48 So, it's
Slide 49: An experienced, international management team
An experienced, international management team Javed Ahmed Chief Executive Matt Wineinger Olivier Rigaud Ian Bacon Karl Kramer Tim Lodge Rob Luijten Robert Gibber President, President, President, President, Chief Financial Executive Vice Executive Vice Bulk Speciality Food Sugars Innovation and Offic
Slide 50: Measuring Performance
Measuring Performance Finally, looking at measuring our performance; the KPIs that we will use. 50
Slide 51: Our KPIs
Our KPIs KPI Measure Growth in Speciality Food Ingredients B Sales Financial Profitability B Operating profit / PBTEA performance Working capital efficiency B Cash conversion cycle Asset utilisation B ROCE Financial Net Debt / EBITDA strength Balance sheet B Interest Cover Corporate responsibility1
Slide 52: The future…
The future… So, finally, the future. 52
Slide 53: The future…
The future… Clear focus Management New operating model highly engaged Investment priorities realigned and committed Stronger operational and organisational foundations to deliver Creating a platform to deliver growth Focus Fix Grow Short to = Execution Long term = medium term premium Stead
Slide 54: Questions & Answers
Questions & Answers 54
Slide 55: Appendix
Appendix TATE LYLE 55
Slide 56: Key Financial Indicators
Key Financial Indicators Years to March £m, unless stated 2010 2009 1,2 Profit before tax 229 247 1 Effective tax rate - total operations 20.9% 27.8% 2 Effective tax rate - continuing operations 20.4% 27.3% 2 Diluted EPS - continuing operations 38.9p 38.0p 2 Operating cash flow - continuing operatio
Slide 57: Income Statement
Income Statement Years to March 2010 2009 £m, unless stated Cont'd1 Discont'd Total Cont'd1 Discont'd Total Sales 3,506 101 3,607 3,553 852 4,405 2 Operating profit 298 (2) 296 298 1 299 Net finance costs (69) (2) (71) (51) (2) (53) 2 Profit before tax 229 (4) 225 247 (1) 246 Exceptional items (276)
Slide 58: Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Americas Years to March Continuing operations At £m, unless stated 2010 2009 constant currency Sales Primary Food 982 878 7% Primary Industrial 327 393 (21%) Value added Food 382 369 (2%) Value added Industrial 164 157 (3%) 1,309 546 1,271 526 (2%) 58 58
Slide 59: Food & Industrial Ingredients, Europe
Food & Industrial Ingredients, Europe Years to March Continuing operations At £m, unless stated 2010 2009 constant currency Sales Primary Food 133 170 (27%) Primary Industrial 133 163 (23%) Value added Food 225 206 2% 266 225 333 206 (15%) 59 59
Slide 60: Sugars
Sugars Years to March Continuing operations 1 At £m, unless stated 2010 2009 constant currency Sales Products 673 711 (7%) Molasses 228 269 (20%) Value added Food 72 68 6% 901 72 980 68 (10%) 1 Excluding the results of International Sugar Trading and Eastern Sugar in both periods. 60 60
Slide 61: Sugars: Actual raw sugar supply significantly lower than forecast
Sugars Actual raw sugar supply significantly lower than forecast Actual Cumulative Sugar Imports from EPA and EBA countries vs. EU Commission Forecasts of 2,500 Cumulative Import Licence Applications - from 1 October 2009 2,000 Actual Imports EU Commission Forecast - April 2010 '000s metric tonnes 1
Slide 62: Product Analysis – Sales
Product Analysis – Sales Years to March 2010 2009 Continuing operations 1 Value Value £m, unless stated Primary Total Primary Total added added Sugars - Products 673 72 745 711 68 779 Sugars - Molasses 228 - 228 269 - 269 901 72 973 980 68 1,048 Ingredients Americas Sugars - Food 982 382 1,364 878 3
Slide 63: Product Analysis – Operating Profit
Product Analysis – Operating Profit Years to March 2010 2009 Continuing operations 1,2 Value Value £m, unless stated Primary Total Primary Total added added Sugars - Products 14 3 17 (11) 5 (6) Sugars - Molasses 13 - 13 18 - 18 27 3 30 7 5 12 Ingredients Americas Sugars - Food 85 98 183 95 83 178 Su
Slide 64: Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Americas Years to March At At £m, unless stated 2010 2009 reported constant rates currency Sales 1,855 1,797 3% (2%) 1 Adjusted operating profit 178 181 (2%) (10%) 1 Margin 9.6% 10.1% Operating cash flow 381 293 1 Before exceptional items and amortisation of acquired i
Slide 65: Food & Industrial Ingredients, Europe
Food & Industrial Ingredients, Europe Years to March At At £m, unless stated 2010 2009 reported constant rates currency Sales 491 539 (9%) (15%) 1 Adjusted operating profit 54 51 6% 4% 1 Margin 11.0% 9.5% Operating cash flow 109 102 1 Before exceptional items and amortisation of acquired intangible
Slide 66: Sugars
Sugars Years to March At At £m, unless stated 2010 2009 reported constant rates currency Sales 973 1,048 (7%) (10%) 1 Adjusted operating profit - Products 17 (6) 383% 525% - Molasses 13 18 (28%) (32%) Total 30 12 150% 100% 1 Margin 3.1% 1.1% Operating cash flow 143 10 1 Before exceptional items and
Slide 67: Sucralose
Sucralose Years to March At At £m, unless stated 2010 2009 reported constant rates currency Sales 187 169 11% 4% 1 Adjusted operating profit 67 72 (7%) (9%) 1 Margin 35.8% 42.6% Operating cash flow 109 70 1 Before exceptional items and amortisation of acquired intangible assets. 67 67
Slide 68: SPLENDA Sucralose
SPLENDA® Sucralose High intensity sweetener market shares Global HIS Market by Region – Year to 31 March 2010 North Latin Asia US $m Global EMEA America America Pacific TOTAL HIS 1,182) 412) 113) 268) 389) Growth in year 0%) (3%) (1%) (3%) 8%) SPLENDA® Sucralose 301) 185) 31) 44) 41) Growth in year
Slide 69: Effective Tax Rate
Effective Tax Rate Years to March 2010 2009 £m, unless stated Cont'd 1 Discont'd Total Cont'd 1 Discont'd Total (Loss) / profit before tax (61) (4) (65) 113 (23) 90 Tax 84 - 84 (19) (1) (20) Reported tax rate 137.7% - 129.2% 16.8% (3.8%) 22.2% 2 Adj. profit before tax 229 (4) 225 247 (1) 246 2 Adjus
Slide 70: Debt Maturity Profile
Debt Maturity Profile March 2010 £m 900 Undrawn committed 800 bank facilities Drawn committed bank 700 facilities Bonds and other 600 500 400 300 200 100 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 5.4 years Undrawn committed facilities £515m 70 70