Tate & Lyle Plc · LSE:TATE
Tate & Lyle — H1 FY2011 Earnings Presentation
45 slides from Tate & Lyle's earnings presentation, Nov 4, 2010
Slide 1: Results for Six Months to 30 September 2010
Results for Six Months to 30 September 2010 4 November 2010, London Good morning and welcome to the presentation of Tate & Lyle’s results for the six months ended 30 September 2010. 1
Slide 2: Agenda
Agenda Key Results and Operating Highlights Javed Ahmed Financial Review Tim Lodge Outlook Javed Ahmed Focus, Fix, Grow: Update Javed Ahmed 2 The agenda for today’s presentation is on the screen. I am pleased to report that our results for the first six months of the financial year were encouraging
Slide 3: Key Results and Operating Highlights
Key Results and Operating Highlights Javed Ahmed, Chief Executive Moving to our key results. 3
Slide 4: Key Results
Key Results Six Months to September Continuing operations 1 Change at 2010 2009 Change constant (£1=US$1.52) (£1=US$1.60) currency Adjusted operating profit 2 £170m £144m 18% 13% Speciality Food Ingredients £108m £82m 32% 27% adjusted operating profit Bulk Ingredients £85m £75m 13% 8% adjusted opera
Slide 5: Operating Highlights
Operating Highlights Strong performance in Improved performance in Speciality Food Ingredients Bulk Ingredients •Higher sales volumes and improved •Strong seasonal demand for corn product mix sugars in US and continuation of firm demand patterns in Mexico •Full benefits from single plant Sucralose m
Slide 6: KPI Progress
KPI Progress Six months to 30 September KPI Measure 2010 2009 Growth in Speciality Sales £414m £403m Food Ingredients Financial Adjusted operating Profitability £170m £144m performance1 profit Working capital Cash conversion 33 days 43 days efficiency cycle Financial Net debt / EBITDA 1.4x 2.4x Bala
Slide 7: Corn Prices
Corn Prices US corn prices – ¢/bushel European corn prices – €/tonne 600 220 550 200 500 180 450 160 US ¢ per bushel 400 140 € per tonne 350 120 300 100 250 80 200 150 60 100 40 50 20 0 0 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Oct-09 Nov-09
Slide 8: Speciality Food Ingredients
Speciality Food Ingredients Adjusted Operating Profit1 (+32% reported, +27% constant currency) Starch-based High Intensity Food Systems Speciality Ingredients Sweeteners Volume increases across all Robust volume growth Volume growth driven by major product lines offset by lower selling increases
Slide 9: Bulk Ingredients
Bulk Ingredients Adjusted Operating Profit1 (+13% reported, +8% constant currency) Sweeteners Industrial Starches, Co-products Acidulants & Ethanol In Americas, lower unit Higher industrial starch Increase in co-product margins offset by firm demand volumes offset by lower unit income, driven by
Slide 10: Financial Review
Financial Review Tim Lodge, Chief Financial Officer Thank you Javed, and good morning. 10
Slide 11: Income Statement
Income Statement Six Months to September Continuing operations 1 2010 2009 At constant £m, unless stated (£1=US$1.52) (£1=US$1.60) currency Sales 1,348 1,298 - Adjusted operating profit ² 170 144 13% Net finance expense (34) (37) 13% Adjusted profit before tax ² 136 107 21% Exceptional items (25) (5
Slide 12: Sales and Operating Profit
Sales and Operating Profit Six Months to September 2010 Continuing operations 1 Adjusted At constant At constant £m, unless stated Sales operating currency currency profit ² Speciality Food Ingredients 414 - 108 27% Bulk Ingredients 934 - 85 8% 1,348 - 193 18% Central costs (23) (77%) 1,348 - 170 13
Slide 13: Speciality Food Ingredients
Speciality Food Ingredients Six Months to September Continuing operations 1 At At £m, unless stated 2010 2009 reported constant rates currency Sales 414 403 3% - 1 Adjusted operating profit 108 82 32% 27% 1 Margin 26.1% 20.3% Operating cash flow 105 92 Volumes increased by 7% Exchange translatio
Slide 14: Bulk Ingredients
Bulk Ingredients Six Months to September Continuing operations 1 At At £m, unless stated 2010 2009 reported constant rates currency Sales 934 895 4% - 1 Adjusted operating profit 85 75 13% 8% 1 Margin 9.1% 8.4% Operating cash flow 143 247 Strong demand in Mexico for corn sugars Sales affected by
Slide 15: Interest, Tax and EPS
Interest, Tax and EPS Six Months to September Continuing operations 1 At constant £m, unless stated 2010 2009 currency Interest reported (34) (37) 13% - add back pension interest 2 9 - add back net hedge unwind 5 - Underlying interest (27) (28) Tax ² (28) (23) (22%) Effective tax rate ² 20.4% 21.5%
Slide 16: Discontinued Operations
Discontinued Operations Six Months to September £m, unless stated 2010 2009 Sales 482 604 1 Adjusted operating profit 10 3 Cash proceeds from disposals 212 (9) Cash disposed (5) - Cash absorbed by discontinued operations (65) (6) Total discontinued cash flow 142 (15) 1 On profit from discontinued op
Slide 17: Exceptional Items
Exceptional Items Six Months to September £m 2010 2009 Discontinued operations Loss on disposal of European Sugars (55) - Exceptional charges from discontinued operations (55) - Continuing operations Closure and restructuring costs (25) (55) Exceptional charges from continuing operations (25) (55) T
Slide 18: Business Transformation
Business Transformation Anticipated Exceptional Items and Capital Expenditure £m Exceptional charges Commercial and Food Innovation Centre 20 Global shared services and common IS/IT platform 21 Exceptional charges relating to Business Transformation 41 Capital expenditure Commercial and Food Innovat
Slide 19: Free Cash Flow
Free Cash Flow Six Months to September 2010 4 4 50 26 22 18 228 170 162 Adjusted Deprn. / Working Share- Operating Capex Interest Tax Free cash operating amort. capital based cash flow flow profit payments from cont. ops. 19 If we move to the free cash flow in the period, £220 million of EBITDA was
Slide 20: Change in Working Capital
Change in Working Capital Six Months to September Continuing operations 1 £m, unless stated 2010 2009 (Increase) / decrease in inventories (51) 75 Increase in payables 42 8 US margin calls 11 26 Decrease in receivables 9 13 Movement in derivatives, provisions and other (7) (1) Change in working capi
Slide 21: Movements in Net Debt
Movements in Net Debt Six Months to September 2010 Net cash generated £251m 49 162 4 142 23 814 540 Net debt Free cash Dividends Cash from Other cash FX, fair value Net debt Sept March 2010 flow dicont'd flows & other 2010 21 So, coming back to net debt and the movement over the period: Net cash gen
Slide 22: Balance Sheet
Balance Sheet As at £m, unless stated 30 Sept 2010 30 Sept 2009 Goodwill, intangibles and fixed assets 1,341 1,802 Inventories 358 443 Trade and other receivables 325 550 DFI (non-debt related) 6 (23) Trade and other payables (388) (485) Other, including provisions (390) (367) Net operating assets 1
Slide 23: Pensions
Pensions 31 March Net 30 Sept £m, unless stated Exchange Subtotal 2010 movements 2010 Net asset / (liability) UK 5 - 5 1 6 US (154) 6 (148) (46) (194) Other (7) (1) (8) 2 (6) Subtotal (156) 5 (151) (43) (194) US healthcare (101) 4 (97) (13) (110) Total (257) 9 (248) (56) (304) £m Sep-09 Sep-10 P&L c
Slide 24: Summary of Financial Position
Summary of Financial Position Adjusted operating profit up 13% in constant currency Adjusted diluted EPS up 21% in constant currency Cash generated £251m; net debt / EBITDA 1.4 times Standard & Poor’s revised outlook from negative to stable 24 So let me summarise: The Group delivered an enco
Slide 25: Outlook
Outlook Javed Ahmed, Chief Executive Thank you Tim. Moving now onto our outlook for the full year to 31 March 2011. 25
Slide 26: Outlook: Year to March 2011
Outlook Year to 31 March 2011 Speciality Food Ingredients Bulk Ingredients •Anticipate ongoing steady demand •Anticipate continued firm demand for patterns corn sugars in Mexico alongside modest ongoing decline in US •Full benefits of single plant Sucralose manufacturing footprint •Industrial starch
Slide 27: Focus, Fix, Grow: Update
Focus, Fix, Grow: Update Javed Ahmed, Chief Executive In May I took you through the key strategic, operational and organisational challenges facing Tate & Lyle. At that time, I outlined a number of actions we were going to take to ‘focus fix and grow’ the business. Today, I want to give you a brief
Slide 28: 1. Focus
1. Focus Starting with the focus. 28
Slide 29: Focused Business
Focused Business What The leading global provider of speciality food ingredients and solutions By Sold EU Sugars − Disciplined focus on growing speciality food Update Sale of remaining ingredients business Sugars assets to plan − Driving bulk ingredients business for sustained cash generation to fue
Slide 30: Streamlined Operating Model – A Clean Platform for Future Growth
Streamlined Operating Model – A Clean Platform for Future Growth Customers Global business units Speciality Bulk 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 pl
Slide 31: 2. Fix
2. Fix Today, we are heavily focused on ‘fixing’ our business. This consists of 3 main areas: •the ‘front end’ or customer-facing part of our business; •the ‘back end’ or operational capabilities of our business; and •the culture of our business including our organisational bench strength. 31
Slide 32: Fixing the ‘Front End’
Fixing the ‘Front End’ Restructure Increase focus on go-to-market organisation customers and innovation Re-organised sales force into New Commercial and Food bulk and speciality teams Innovation Centre in Chicago Appointed dedicated Centre of excellence for global Account Managers speciality food i
Slide 33: Fixing the ‘Back End’
Fixing the ‘Back End’ Common, global IS/IT platform − Project scoped 2-year project to transform Global support services operational capability − Project team in place − Locations being evaluated Capital allocation − New process embedded within organisation − All investments being evaluated ag
Slide 34: Fixing the Culture
Fixing the Culture Revamped performance management system Moving employees across businesses Restructured to promote High incentive system global mindset performance culture Developing Established existing talent / common metrics bringing in new skills across business and knowledge 34 The third part
Slide 35: 3. Grow
3. Grow Finally, the ‘grow’. 35
Slide 36: Creating a Platform for Long-term Growth
Creating a Platform for Long-term Growth − Innovation and Commercial Development group established Innovation − Process for new product launches overhauled − New state-of-the-art Food Innovation Centre in Chicago New − Go-to-market approach being developed customer − Establishing new teams to grow i
Slide 37: Conclusion
Conclusion So to conclude. 37
Slide 38: Solid Progress to Date
Solid Progress to Date Cleaner, simpler business model Increasing focus and investment on customers and innovation Applying stronger operational and financial disciplines Driving a culture of high performance and accountability Building the platform to deliver long-term growth Focus Fix Gr
Slide 39: Questions and Answers
Questions and Answers With that let me open up the floor to questions. Please wait for the microphone and state your name and company before asking your question. 39
Slide 40: Appendix
Appendix TATE LYLE 40
Slide 41: Key Financial Indicators
Key Financial Indicators Six Months to September £m, unless stated 2010 2009 1,2 Profit before tax 136 107 Effective tax rate1 - total operations 19.9% 23.8% 2 Effective tax rate - continuing operations 20.4% 21.5% 2 Diluted EPS - continuing operations 23.5p 18.0p 2 Operating cash flow - continuing
Slide 42: Income Statement
Income Statement Six Months to September 2010 2009 £m, unless stated Cont'd1 Discont'd Total Cont'd1 Discont'd Total Sales 1,348 482 1,830 1,298 604 1,902 2 Operating profit 170 10 180 144 3 147 Net finance costs (34) 1 (33) (37) - (37) 2 Profit before tax 136 11 147 107 3 110 Exceptional items (25)
Slide 43: Effective Tax Rate
Effective Tax Rate Six Months to September 2010 2009 £m, unless stated Cont'd 1 Discont'd Total Cont'd 1 Discont'd Total (Loss) / profit before tax 104 (44) 60 45 3 48 Tax (8) 21 13 1 (3) (2) Reported tax rate 7.9% 45.9% (20.3%) (2.2%) 105.6% 5.4% 2 Adj. profit before tax 136 11 147 107 3 110 2 Adju
Slide 44: Energy Costs
Energy Costs Six Months to September Continuing operations 1 At % of % of £m, unless stated 2010 2009 constant cost usage currency H1 2011 H1 2011 Gas 33 43 23% 39% 39% Electricity 35 34 3% 41% 17% Coal and other 17 16 - 20% 44% Total 85 93 11% 11% reduction in constant currency driven by both pri
Slide 45: Debt Maturity Profile
Debt Maturity Profile September 2010 £m 700 Undrawn committed bank facilities 600 Drawn committed bank facilities 500 Bonds and other 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 5.3 years Undrawn committed facilities £636m Cash and cash equi