Tate & Lyle Plc · LSE:TATE
Tate & Lyle — Investor Presentation (September 2011)
12 slides from Tate & Lyle's investor presentation, September 2011
Slide 1: Introduction to US Co-products
Introduction to US Co-products September/October 2011
Slide 2: What makes up a kernel of corn?
What makes up a kernel of corn? A bushel of corn weighs 56lbs Aside from water (which represents approximately 15% of the total weight), there are four end products resulting from the wet milling process: ¾ Starch which represents the largest component and is used to produce our main end product
Slide 3: Outputs from the corn wet milling process
Outputs from the corn wet milling process Starch is used to produce our starch- based products/ingredients CORN Speciality and Bulk Ingredients product categories as follows: ¾ Sweeteners ¾ Food starch ¾ Industrial starch KERNELS ¾ Ethanol STEEPWATER STARCH Corn Gluten Meal Corn Gluten Feed GERM
Slide 4: Corn Gluten Feed (“CGF”)
Corn Gluten Feed (“CGF”) Largest co-product by volume and used by dairy and beef cattle markets CGF is a 15-20% protein co-product of the wet milling process that is used in both dairy and beef cattle markets Tate & Lyle volume c. 1.3m short tons per annum Product sold continuously throughout
Slide 5: Corn Gluten Meal (“CGM”)
Corn Gluten Meal (“CGM”) Highest protein content co-product used in animal nutrition CGM is a 60% protein higher value co-product of the wet milling process used in various animal nutrition markets Tate & Lyle volume is c. 250k short tons per annum Product is sold throughout the year by Tate &
Slide 6: Corn Oil
Corn Oil Typically used by food producers Corn germ is processed to produce crude corn oil and a fiber portion (sold as Corn Gluten Feed) Crude corn oil is then refined and sold to customers Tate & Lyle volume is c. 300m lbs per annum Priced in cents per lb: c. 58* cents per lb vs c. 42 cent
Slide 7: US corn procurement and the use of hedging
US corn procurement and the use of hedging We contract for the sale of a significant proportion of our starch-based end products (sweeteners and industrial starches) during the October to December period for production and shipment the following calendar year Example for illustration Step 1 - wh
Slide 8: Relationship between co-product and end product pricing
Relationship between co-product and end product pricing $4.00 = gross cost of corn Net corn $2.60 Net Corn price = [Corn +/- Basis* – co-product credits] = [$4.00 - $1.40 = $2.60] Co-product 35%** $1.40 credit The contract price we negotiate with the end product customer is a function of the net c
Slide 9: Contracting period
Majority of corn hedging takes place during Oct to Dec Majority of hedging activity and long co- Contracting round. product position generated during Majority of hedging contracting round which usually takes activity takes place place during October through December Oct-Dec and a long co-product p
Slide 10: US corn prices have rallied over the last years
US corn prices have rallied over the last 2 years Contracting round for 2010 calendar year conducted against backdrop of $4 corn 850 US corn price 750 Corn price rises from c. $4 650 to c. $6.30 per bushel during calendar 2010 (c. Corn price cents per bushel Calendar 2010 +60%) contracting round con
Slide 11: FY2011 co-product gains
FY2011 co-product gains Intra-year corn price movements is what matters NOT absolute level of corn prices 800 As the corn price rallied during calendar 2010 US corn price so too did the prices at which we were able to sell co-products – the intra-year corn price 700 movement is what drove higher t
Slide 12: Other points to note
Other points to note The significant movements in co-products we have experienced in recent months is a function of the significant movement in corn prices. These movements are material when compared with history In tight markets, we have the ability to sell co-products forward in order to take