Tate & Lyle Plc · LSE:TATE
Tate & Lyle — H1 2012 Earnings Presentation
41 slides from Tate & Lyle's earnings presentation, Nov 3, 2011
Slide 1: Welcome to results for six months ended 30 September 2011
Good morning and welcome to the presentation of Tate & Lyle’s results for the six months ended 30 September 2011.
Slide 2: Agenda
Turning to the agenda. First, I will briefly run through the key results for the Group and our Key Performance Indicators before handing over to Tim to take you through the numbers in more detail. I will then take you through the operational highlights for each business unit and provide a brief upda
Slide 3: Key Results and KPIs
Key Results and KPIs Javed Ahmed, Chief Executive TATE R LYLE
Slide 4: Key results for the half year
As we talk through the numbers, we will refer to results for the continuing operations only, adjusted for exceptional items and amortisation of acquired intangible assets, unless specifically stated to the contrary. Starting with our key results. As you will have seen from our statement this morning
Slide 5: Key performance indicators
Moving on to our KPIs. Sales in the Speciality Food Ingredients division grew by 12% to £450 million with growth across all major product categories. Group operating profit increased by 19% driven by profit growth within Speciality Food Ingredients and Bulk Ingredients of 11% and 17% respectively, a
Slide 6: Handover to Tim
Thank you Javed, and good morning. 6
Slide 7: Income statement for continuing operations
Starting with the income statement for the continuing operations, sales at £1.5 billion were 19% higher than the comparative period in constant currency. Most of this sales growth is driven by the increase in corn costs from the time we booked the contracts for calendar year 2011. Adjusted operating
Slide 8: Speciality Food Ingredients results
Volumes and sales grew by 8% and 12% respectively with adjusted profit up 11% to £116 million. Against a backdrop of rising corn input costs we managed to maintain broadly stable margins at 25.8% compared with 26.1% in the comparative period. Exchange translation reduced profit by £4 million. Going
Slide 9: Bulk Ingredients results
Moving on to Bulk Ingredients: Adjusted profit at £96 million was £11 million or 17% higher than the comparative period, helped by a better performance from industrial starches particularly in Europe and exceptional returns from co- products. Exchange translation reduced sales by £39 million and pro
Slide 10: Co-product income
We earned an additional £19 million from co-products in the US during the first half. With over 80% of corn grind going into Bulk Ingredients, this division takes the vast majority of the benefit. At the time of our pre-close announcement towards the end of September, I expected the additional incom
Slide 11: Net interest charge
The interest charge was £20 million lower at £14 million. In order to understand more about the underlying movement in interest expense, it is worth reminding you about two unusual items. The first item relates to post retirement benefit plans where we took a charge of £2 million in the prior year p
Slide 12: Tax rate and earnings per share
The effective rate of tax on continuing operations based on the full year is estimated at 17.1%. The reduction from 20.4% at this stage last year reflects the change in the geographic mix of profits, particularly as a result of the lower interest charge in the UK. Looking forward, the rate remains s
Slide 13: Exceptional items
In exceptional items we recognised a net credit of £66 million for continuing operations with a credit of £73 million for the reversal of impairment charges and the release of closure costs relating to the restart of the McIntosh, Alabama SPLENDA® sucralose facility, partially offset by a charge of
Slide 14: Business transformation projects
Coming back to the Business Transformation projects - these are the major initiatives that underpin the ‘fix’ element of ‘focus, fix and grow’ and Javed will expand on these later. During the first half, we incurred £6 million as exceptional cost, and spent £8 million of capital on these projects. A
Slide 15: Cash flow
Moving to the cash flow, we generated free cash flow of £128 million. EBITDA was £240 million. Working capital was an outflow of £69 million, which includes a payment of £22 million into the main UK pension scheme following the conclusion of the triennial valuation to the end of March 2010. Most of
Slide 16: Net debt and dividends
From the free cash flow of £128 million we paid out £79 million in dividends. After the cash inflow from the discontinued operations and a £13 million adverse movement due to exchange translation, net debt reduced by £54 million to £410 million. The average maturity of gross debt at the end of Septe
Slide 17: Balance sheet
Moving to the Balance Sheet: Net Operating Assets are broadly in line with the position at the year-end. Fixed assets increased during the period reflecting the reversal of the impairment of the McIntosh Sucralose facility. Inventories at £343 million were over £100 million lower than at March. We h
Slide 18: Summary of financial performance
So, to sum up the financial performance in the first half: Operating profit grew by 19% over the comparative period, of course helped by the exceptionally strong co-product returns, and earnings per share grew by 41% while net debt reduced further in the six months to £410 million. With that, let me
Slide 19: Operating Highlights
Operating Highlights Javed Ahmed, Chief Executive TATE R LYLE
Slide 20: Speciality Food Ingredients and global trends
Thank you Tim. I will now talk to some of the drivers behind our financial results, followed by a brief update on our Focus, Fix, Grow programme. Starting with Speciality Food Ingredients. As Tim has gone through the financials I will talk more about the global trends that are driving growth in this
Slide 21: Starch-based speciality ingredients
In starch-based speciality ingredients, volumes increased by 8% and growth in this category reflects the global trends I just highlighted. In speciality food starches, we saw good volume growth in Europe and Latin America, and to a lesser extent in the US. Given the continuing high and volatile pric
Slide 22: High intensity sweeteners and McIntosh
Within high intensity sweeteners volumes were up 17% and sales up 10% to £108 million, with increased demand for SPLENDA® Sucralose seen across all regions. Profits for the period were ahead of last year driven by the higher volumes. In Asia and Latin America we saw particularly strong volume growth
Slide 23: Food Systems
Before I move on to talk about our performance in Food Systems, let me remind you of some of the key drivers and characteristics of this business. Within Food Systems we are able to leverage our applications, blending and technical expertise to help customers reformulate products without compromisin
Slide 24: Bulk Ingredients strategy
Moving on to Bulk Ingredients where volumes were down by 1% and sales up by 22% due to higher corn prices. As we have said before, our strategy for Bulk Ingredients is to maintain our competitive position and to continue to serve our customers through the provision of high quality food and industria
Slide 25: Bulk Ingredients sweeteners performance
In terms of Bulk Ingredient’s performance during the period, in Sweeteners we again experienced strong seasonal demand for corn sugars in the US and continued growth in sales to Mexico. Operating profits from Almex, our Mexican joint venture, were up on the comparative period, reflecting higher volu
Slide 26: Industrial starch, ethanol and acidulants
Industrial starch volumes fell by 3% overall. In the US, lower volumes reflected our strategy of switching a small proportion of corn grind into Speciality Food Ingredients. In Europe, as we have already heard, a general tightening in market conditions and a reduced supply of alternative starch crop
Slide 27: Focus, Fix, Grow: Update
Focus, Fix, Grow: Update TATE R LYLE
Slide 28: Focus, fix, grow programme update
Let me now give you a brief update on our focus, fix, grow programme. The ‘Focus’ as I mentioned in May is largely complete following the disposals we made in the last year with the exception of the sale of our Vietnam sugar interests which we expect will complete in the second half of this financia
Slide 29: Summary
So, to summarize. Overall, the business is performing well with the good underlying operating performance in the first half further enhanced by exceptional co-products returns. And following the hard work over the past two years, the balance sheet is now in much better shape. The programme we set in
Slide 30: Outlook
Outlook Javed Ahmed, Chief Executive TATE R LYLE
Slide 31: Full year outlook
Finally, moving on to the outlook for the remainder of the financial year. Within Speciality Food Ingredients, we expect to deliver good profit growth for the full year driven by higher volumes and sales growth across all product categories. Profits in this division are expected to be weighted towar
Slide 32: Questions and Answers
Questions and Answers TATE R LYLE
Slide 33: Tate & Lyle
TATE LYLE 33
Slide 34: Operating Profit
Operating Profit Six months ended 30 September 2011 2010 shqiunless stated (£1=US$1.62) (£1=US$1.52) Adjusted profit before tax - continuing operations’ 180 136 Amortisation of intangible assets acquired (5) (7) Exceptional items - continuing operations 66 (25) Adjusted profit before tax - discontin
Slide 35: Income Statement
Income Statement Six months ended 30 September 2011 2010 £m, unless stated Cont'd Discont'd Total Cont'd Discont'd Total Sales 1,540 50 1,590 1,348 482 1,830 Operating profit’ 194 3 197 170 10 180 Net finance costs (14) - (14) (34) 4 (33) Exceptional items 66 = 66 (25) (55) (80) Amortisation () - (5
Slide 36: Key Financial Indicators
Key Financial Indicators Six months ended 30 September £m, unless stated 2011 2010 Profit before tax’? 180 136 Effective tax rate - continuing operations’? 17.1% 20.4% Diluted EPS - continuing operations* 31.5p 23.5p Operating cash flow - continuing operations” 176 228 Netdebt aH Net debt/EBITDA '°
Slide 37: Change in Working Capital
Change in Working Capital Six months ended 30 September Continuing operations’ £m, unless stated 2011 2010 Decrease / (increase) in inventories 60 (51) (Decrease) / increase in payables (25) 42 (Increase) / decrease in US margin calls (16) 11 (Increase) / decrease in receivables (29) 9 Movement in d
Slide 38: Debt Maturity Profile
Debt Maturity Profile September 2011 £m ~ Undrawn committed 800 bank facilities ~ Drawn committed bank 700 facilities ~ Bonds and other 600 500 400 300 200 100 <tyr 1 to 2 yr 2to 3 yr 3to4 yr 4to 5S yr >5yr Average maturity of gross debt 5.3 years Undrawn committed facilities £513m Cash and cash equ
Slide 39: Exchange Sensitivity
Exchange Sensitivity’ Six months ended 30 September Estimated annual movement caused by a one cent movement in the US$/€ on the translation of profits £m impact on PBITEA US$ EUR Bulk Ingredients 0.7 - Speciality Food Ingredients 09 0.2 Central (01) « Interest (0.1) - 1 Excluding the results of disc
Slide 40: Pensions
Pensions £m, unless stated = pe Net asset / (liability) UK 96 US (134) Other (4) US healthcare (97) Exchange Movements 30 Sept 2011 84 (199) (6) (112) 40
Slide 41: Energy Costs
Energy Costs Six months ended 30 September Continuing operations’ £m, unless stated 2011 2010 Gas 32 33 Electricity 35 35 Coal and other 17 clita At constant currency (1%) 5% 11% 1 Excluding the results of discontinued operations in both periods TATE LYLE 41 a