Tate & Lyle Plc · LSE:TATE
Tate & Lyle — FY2014 Earnings Presentation
47 slides from Tate & Lyle's earnings presentation, May 29, 2014
Slide 1: Results for year ended 31 March 2014
Results for year ended 31 March 2014 London, 29 May 2014 © Tate & Lyle 2014
Slide 2: Agenda
Agenda Headline Results & KPIs Javed Ahmed Financial Review Tim Lodge Operating Highlights and Outlook Javed Ahmed Strategy Update Javed Ahmed © Tate & Lyle 2014 2
Slide 3: Headline Results
Headline Results Year ended 31 March 2014 Continuing operations¹ Change 2014 20135 Change at constant (£1=US$1.59) (£1=US$1.57) currency Adjusted operating profit2 £349m £356m (2%) (1%) - SFI up 1% in constant currency - BI down 4% in constant currency Adjusted profit before tax3 £322m £327m (2%) 0%
Slide 4: Key Performance Indicators
Key Performance Indicators Year ended 31 March Change at KPI Measure constant 2014 20136 currency Growth in Speciality Sales £983m £947m 4% Food Ingredients Profitability Adjusted operating profit3 £349m £356m (1%) Financial performance1 Return on assets ROCE 19.2% 19.7% (50) bps Working capital Imp
Slide 5: Financial Review
Financial Review Tim Lodge, Chief Financial Officer © Tate & Lyle 2014 5
Slide 6: Income Statement
Income Statement Year ended 31 March Change at 2014 20134 £m, unless stated constant (£1=US$1.59) (£1=US$1.57) currency Sales 3,147 3,256 (3%) 1 Adjusted operating profit - SFI 213 213 1% - BI 172 182 (4%) - Central (36) (39) 8% 349 356 (1%) 3 Net finance expense (27) (29) 6% 2 Adjusted profit befor
Slide 7: Speciality Food Ingredients
Speciality Food Ingredients Year ended 31 March Change at £m, unless stated 2014 2013 constant currency Impact of exchange: Sales Sales 983 947 4% £2m lower; Adjusted operating profit 1 213 213 1% Operating profit £2m lower 1 Margin 21.7% 22.5% (70) bps Volumes and sales up 4% Operating profit 1
Slide 8: Bulk Ingredients
Bulk Ingredients Year ended 31 March Change at £m, unless stated 2014 2013 constant Impact of currency exchange: Sales £11m lower; Sales 2,164 2,309 (6%) Operating profit Adjusted operating profit1 172 182 (4%) £2m lower Margin1 7.9% 7.9% 10 bps Volumes 1% lower with sales2 down 6% due to lower co
Slide 9: Corn and co-products
Corn and co-products Co-product sales1 down 11% to £492 million US and European Corn – spot prices 900 300 800 250 US corn (c/ bu) EU corn (€/mt) 700 Significant reduction in US and European 600 200 corn prices in the summer of 2013 as a result 500 150 of a good corn harvest which eased tight 400
Slide 10: Interest and Tax – Continuing Operations
Interest and Tax – Continuing Operations1 Year ended 31 March Interest Change at Reduction in net interest £m, unless stated 2014 2013 constant expense driven by the currency repayment of our £100 Net finance expense1 (27) (29) 6% million bond in June 2012 Add back and lower interest rates on - Ne
Slide 11: Business Transformation
Business Transformation Total cumulative £m Year to costs to 31 Mar 2014 31 Mar 2014 IS/IT & Global Shared Services 46 124 P&L exceptional 14 47 Capital 32 77 Total 46 124 Successfully deployed upgraded IS/IT platform in Europe in May 2014 On track for implementation in US and Singapore over the
Slide 12: Adoption of IFRS11 – Joint Arrangements
Adoption of IFRS11 – Joint Arrangements Continuing operations Continuing operations £m, unless stated Year ended/at 31 March 2014 £m, unless stated Year ended/at 31 March 2014 Statutory View As currently As will be Management (adjusted) View As currently As will be reported restated reported restate
Slide 13: Free Cash Flow
Free Cash Flow Year ended 31 March £m EBITDA £457 million 38 108 8 (6) (14) (43) (159) (31) 440 (23) 349 227 Adjusted Dep'n / Exceptionals Working Other Pensions Share-based Operating Capex & Net Tax Free cash operating amort 1 capital non-cash payments cash flow intangibles interest paid flow profi
Slide 14: Change in Working Capital
Change in Working Capital Year ended 31 March £m, unless stated 2014 2013 Decrease/(Increase) in inventories 65 (47) Decrease/(Increase) in receivables 37 (52) Decrease in US margin calls - 14 Decrease in payables (57) (20) Movement in derivatives and non-pension provisions (7) (2) Change in working
Slide 15: Movements in Net Debt
Movements in Net Debt Year ended 31 March £m 227 29 35 (29) (12) 479 (124) 353 Net debt Free Dividends Acquisition, Net share Other Exchange Net debt March 2013 cash flow incl. minority disposals & purchases March 2014 interest discont'd © Tate & Lyle 2014 15
Slide 16: Operating Highlights
Operating Highlights Javed Ahmed, Chief Executive © Tate & Lyle 2014 16
Slide 17: Speciality Food Ingredients Highlights
Speciality Food Ingredients Highlights Speciality Food Ingredients Sales £983m Volume up 4% with sales1 also up 4% at £983 million – Good growth in Europe, Asia and Latin America Food Systems – Softer US market (19%) 190 Adjusted operating profit1 up 1% at £213 million – Good profit growth in al
Slide 18: Starch-based speciality ingredients
Starch-based speciality ingredients Sales1 increased by 7% to £595 million with volumes up 5% Speciality food starches – Growth in all regions, with especially strong performance in Europe and Latin America – European growth driven by convenience and dairy Speciality corn sweeteners – Volume gro
Slide 19: High-intensity sweeteners
High-intensity sweeteners Sales1 up 1% at £198 million with volume growth of 5% Global product launches including Good long-term growth potential for high-intensity high-intensity sweeteners sweeteners Sucralose Stevia Other – Strong calorie-reduction drive globally 21,879 27% – Tate & Lyle well p
Slide 20: Food Systems
Food Systems Profit well ahead with sales1 1% lower at £190 million and volumes down 6% Profit well ahead due to improved mix and lower costs Lower volumes reflects our decision to focus on higher margin blends Stronger customer interaction through recently expanded facility in Roggenhorst, Ge
Slide 21: Bulk Ingredients Highlights
Bulk Ingredients Highlights Bulk Ingredients Sales £2,164m Sales1 6% lower at £2,164 million due to pass through of lower corn prices with volumes down 1% Sweeteners Co-products Adjusted operating profit1 down 4% to £172 million (23%) 492 (48%) 1,037 – Modest increase in US sweetener margins in
Slide 22: Sweeteners
Sweeteners Sales1 down 5% to £1,037 million with volumes 2% lower US Carbonated Soft Drinks Volume2 (%) 13 weeks to 13 weeks to 13 weeks to 13 weeks to US sweeteners – sales1 6% lower at £889 million Jun 2013 Sep 2013 Dec 2013 Mar 2014 with volumes down 2% – Unusually cold spring reduced carbonate
Slide 23: Industrial starches, acidulants and ethanol
Industrial starches, acidulants and ethanol Sales1 3% lower at £635 million with volumes up 2% Industrial starches – Firmer pricing in US – More competitive European market put pressure on margins Ethanol – Overall improvement in market conditions during the year and improved industry margins –
Slide 24: Outlook for year ending 31 March 2015
Outlook for year ending 31 March 2015 Speciality Food Ingredients We expect to deliver volume growth across all major product categories but a lower profit contribution from SPLENDA® Sucralose is expected to offset a good performance elsewhere in the division Profits expected to be more evenly w
Slide 25: Strategy Update
Strategy Update Javed Ahmed, Chief Executive © Tate & Lyle 2014 25
Slide 26: Key topics to cover today
Key topics to cover today 1 SPLENDA® Sucralose Market potential Opportunities and challenges 2 Growth in Speciality Food Ingredients Starch-based speciality ingredients Emerging markets Innovation 3 Investing in future growth © Tate & Lyle 2014 26
Slide 27: A stronger, more diversified and more resilient business today
Tate & Lyle: A stronger, more diversified and more resilient business today ICD group and global innovation centre established Innovation Strong pipeline and new product launches Much higher-quality customer engagement North 5% America 19% Larger and growing emerging market footprint Europe
Slide 28: Global trends and advantages make SPLENDA Sucralose well placed
Strong global trends and functional advantages makes SPLENDA® Sucralose well placed for future growth Functional advantages of New product launches by Sucralose value share of global high intensity sweeteners high intensity sweetener 2009-2013 high intensity sweetener market Aspartame 6373 Aspartame
Slide 29: SPLENDA Sucralose remains an important product for SFI
SPLENDA® Sucralose remains an important product for SFI and our Sweetener Platform Increasing opportunities to grow volume to mitigate pricing pressure – Reformulation e.g. lower calories, replace other sweeteners – Cost optimisation – Access to tabletop market worldwide Market likely to remain
Slide 30: SFI has delivered strong profit growth ex-sucralose
SFI has delivered strong profit growth ex-sucralose SFI operating profit1 SFI operating profit1 profile (FY10-FY14) 12% 7% £213m CAGR CAGR £163m 7% CAGR -2% CAGR FY10 FY14 SFI excl. Sucralose SFI Total Sucralose Division 1 Excluding exceptional items and amortisation of acquired intangible assets ©
Slide 31: SFI growth underpinned by starch-based specialities and emerging markets
SFI growth underpinned by strong performance in starch-based speciality ingredients and emerging markets Starch-based speciality operating profit1 SFI division sales by region2 FY2014 Fibres 37% CAGR 5% 15% CAGR 19% Starches Fibres 52% Starches 12% 24% CAGR Sweeteners North America Europe & Middle E
Slide 32: Pipeline of future product launches is strong and encouraging
Pipeline of future product launches is strong and encouraging Pipeline by stage of development % split of pipeline by platform (number of projects at 31 March 2014) (at 31 March 2014) 13 8 29% 29% 7 4 3 19% 23% Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Bulk Ingredients Texturants Bulk Ingredients Text
Slide 33: Strong innovation capabilities and traction on new products
We have built strong innovation capabilities and are starting to see encouraging traction on new products Global customer product launches TASTEVA® Stevia Sweetener Launched in 25 countries Two innovation food industry awards in 20131 Increasing pipeline of customer projects Leveraging new G
Slide 34: Strong innovation capabilities: SODA-LO
We have built strong innovation capabilities and are starting to see encouraging traction on new products Global Launches – Low Sodium Claim 24% CAGR Over 300 ongoing customer projects with our 4,297 novel salt reduction technology, SODA-LO® 3,144 Salt Microspheres 2,815 Primary applications foc
Slide 35: We are continuing to invest in SFI growth
We are continuing to invest in SFI growth £100m capital to be invested in SFI in next 2 years Capacity - Speciality food starch capacity in Europe and US expansions - Oat beta glucan capacity in Sweden - Capacity to support new product launches Biovelop, manufacturer of oat beta glucan in Sweden
Slide 36: Summary
Summary A more diversified, resilient and stronger business today Expanding presence in higher growth emerging markets Strengthened innovation capabilities with a strong future pipeline in place Revamped operational infrastructure, processes and new capabilities coming on stream Robust bal
Slide 37: Questions
Questions © Tate & Lyle 2014 37
Slide 38: Supporting information
Supporting information © Tate & Lyle 2014 38
Slide 39: Key Financial Indicators
Key Financial Indicators Year ended 31 March £m, unless stated 2014 2013 1 Adjusted profit before tax 322 327 1 Adjusted effective tax rate 18.5% 18.0% 1 Adjusted diluted EPS 55.7p 56.6p Operating cash flow - continuing operations 440 297 Net debt 353 479 Net debt/EBITDA2 0.8x 1.0x Interest cover2 1
Slide 40: Exceptional Items
Exceptional Items Year ended 31 March £m, unless stated 2014 2013 Exceptional Items Continuing operations Business transformation costs (14) (20) Gain on disposal of Sucromiles - 8 Exceptional (costs)/gains from continuing operations (14) (12) Discontinued operations Gain on disposal - Vietnam Sugar
Slide 41: Income Statement
Income Statement Year ended 31 March 2014 2013 £m Cont'd Discont'd Total Cont'd Discont'd Total Sales 3,147 - 3,147 3,256 10 3,266 1 Operating profit 349 - 349 356 (8) 348 Net finance expense2 (27) - (27) (29) - (29) 3 Profit before tax 322 - 322 327 (8) 319 Exceptional items (14) - (14) (12) 26 14
Slide 42: Profit before tax
Profit before tax Year ended 31 March £m 2013 Forex Activity 2014 - SFI 213 (2) 2 213 - BI 182 (2) (8) 172 - Central (39) - 3 (36) Adjusted operating profit1 356 (4) (3) 349 Net finance expense2 (29) - 2 (27) Adjusted profit before tax3 327 (4) (1) 322 1 Excluding exceptional items and amortisation
Slide 43: Reconciliation of Adjusted Information
Reconciliation of Adjusted Information Year ended 31 March Year to 31 March 2014 Year to 31 March 2013 Adjusting Adjusting £m Reported Adjusted Reported Adjusted items1 items1 Sales 3,147 - 3,147 3,256 - 3,256 Operating profit 325 24 349 334 22 356 Net finance expense (35) 8 (27) (33) 4 (29) Profit
Slide 44: Exchange Rates
Exchange Rates £m 2014 2013 Change Closing rates US$ 1.67 1.52 (10%) Euro 1.21 1.18 (3%) used to translate Balance Sheet Average rates US$ 1.59 1.57 (1%) Euro 1.19 1.24 4% used to translate Income Statement © Tate & Lyle 2014 44
Slide 45: Exchange Sensitivity
Exchange Sensitivity £m impact on PBITEA US$ EUR Speciality Food Ingredients 1.0 0.2 Bulk Ingredients 0.7 - Central - - 1 Impact on profit before interest & tax 1.7 0.2 Interest (0.1) - 2 Impact on profit before tax 1.6 0.2 Estimated annual movement caused by a one cent movement in the US$/€ on the
Slide 46: Balance Sheet
Balance Sheet At 31 Mar At 31 Mar £m, unless stated 2014 2013 Goodwill, intangibles and fixed assets 1,260 1,320 Working capital (excluding provisions and pensions) 437 532 Pension deficit (220) (265) Other provisions (25) (35) Other 28 27 Assets and liabilities held for sale - 1 Net operating asset
Slide 47: Debt Maturity Profile
Debt Maturity Profile £m 2014 2013 Undrawn committed bank facilities £m Drawn committed bank facilities Average net debt in period 372 433 700 Bonds and other Effective interest rate on gross debt 3.4% 3.5% 600 500 At period end 400 Average maturity of total gross borrowings 3.9 yrs 4.6 yrs 300 Undr