Tate & Lyle Plc · LSE:TATE
Tate & Lyle — H1 FY2008 Earnings Presentation
49 slides from Tate & Lyle's earnings presentation, Oct 31, 2007
Slide 1: Interim Results Presentation
Interim Results Presentation PLEASE turn off mobile phones and blackberries 1
Slide 2: Interim Results Presentation
Interim Results Presentation Iain Ferguson, Chief Executive 31 October 2007 Good morning and thank you for joining us today for Tate & Lyle’s interim results presentation. 2
Slide 3: Agenda
Agenda Key Results and Overview Iain Ferguson Financials John Nicholas Operating review Iain Ferguson Conclusion and Outlook Iain Ferguson 3 I am going to give a brief overview of what has turned out to be a rather difficult year to date. I will also update you on a number of the structural changes
Slide 4: Key Results
Key Results Six months to 30 September 2007 vs six months to Continuing business* 30 September 2006 Profit Before Tax1 £120m Down 14% Down 1.7 Constant Margin1 8.5% currency % points Core Value-Added Food Ingredient Operating Profit £45m Up 18% Diluted EPS1 15.8p Down 23% Dividend 6.5p Up 0.3p, 5% *
Slide 5: Key Factors
Key Factors Six months to 30 September 2007 Ingredients, Americas • Strong performance in US value-added food ingredients – profit up 17% • Normalisation of US ethanol prices and margins • Weaker HFCS volume offset by price increases • GMO corn gluten feed dispute Ingredients, Europe • Increasing Eu
Slide 6: We are in a year of transition
We are in a year of transition Reducing exposure to commodities Redpath Sale completed in April 2007 £8m profit in FY2007 £131m consideration Occidente Agreement reached for sale £6m profit in FY2007 of 49% shareholding (Tate & Lyle’s share) £46m consideration Reducing exposure to regulated markets
Slide 7: We are in a year of transition
We are in a year of transition Managerial changes Delayering and New structure will help promote greater transparency and accountability for our business refocusing Value added bolt-on acquisition G.C. Hahn & Co. 80% investment in European leader in dairy stabiliser systems completed in June 2007 fo
Slide 8: Transforming our business
Transforming our business Recent key changes Divestments Investments New businesses: Redpath SPLENDA® Sucralose G.C. Hahn & Co. Occidente Custom Ingredients Cesalpinia Eastern Sugar Bio-PDOTM European Starch plants Organic growth: SPLENDA® Sucralose UK Citric Acid / Astaxanthin Loudon expansion Saga
Slide 9: Interim Results Presentation
Interim Results Presentation John Nicholas, Group Finance Director 31 October 2007 Good Morning 9
Slide 10: Agenda
Agenda Key Results and Overview Iain Ferguson Financials John Nicholas Operating review Iain Ferguson Conclusion and Outlook Iain Ferguson SPLENDA® and the SPLENDA® logo are trademarks of McNeil Nutritionals, LLC 10 Most of my presentation today will focus on our continuing business, but I thought I
Slide 11: Financial Performance
Financial Performance Six Months to September Total business £m 2007 2006 Sales 2,006 2,039 Adjusted operating profit* 185 193 Operating margin 9.2% 9.5% Profit before tax* 163 173 Diluted earnings per share* 23.1p 24.3p Operating cash flow 217 251 Net debt 840 771 * Before exceptional items and amo
Slide 12: Income Statement
Income Statement Six Months to September Continuing business # £m 2007 2006 At reported At constant (£1=$2.00) (£1=$1.85) rates currency Continuing operations: Sales 1,662 1,645 +1% +8% Adjusted operating profit* 142 168 (15)% (10)% Net finance costs (22) (19) (16)% (22)% Adjusted profit before tax*
Slide 13: Exceptional items
Exceptional items Six Months to September £m Total Discont’d# Continuing Disposal of Redpath 59 59 - Disposal of TALFIIE (29) 1 (30) Exceptional Items 30 60 (30) # Discontinued operations represent Redpath, Eastern Sugar and TALFIIE (disposed plants) 13 We’ve now incorporated the accounting for the
Slide 14: Key Financial Indicators
Key Financial Indicators Six Months to September 2007 2006 Effective tax rate § (%) – Total operations 29.4 30.1 – Continuing operations 34.4 31.5 RONOA (%) 17.8 21.0 Net Debt / EBITDA § 1.7x 1.6x § Before exceptional items and total amortisation 14 This next slide shows our key financial indicators
Slide 15: Effective Tax Rate
Effective Tax Rate Six Months to September £m 2007 2006 Continuing Discont’d Total Continuing Discont’d Total Profit before tax 84 103 187 145 24 169 Tax (41) (7) (48) (47) (5) (52) Reported tax rate 48.8% 6.8% 25.7% 32.4% 20.8% 30.8% Adjusted profit before 120 43 163 149 24 173 tax* Adjusted tax *
Slide 16: Operating profit
Operating profit* Six Months to September Continuing business £m (11) 3 (2) (18) 2 168 US$ decline and sugar trading impact profits 142 £1=$1.85 £1=$2.00 H12006 Currency TALFIIA TALFIIE Sugars Central costs H1 2007 * Adjusted operating profit before exceptional items and amortisation of acquired int
Slide 17: Sucralose
Sucralose Six Months to September At At 4% Sales £m 2007 2006 reported constant rates currency Sales 70 73 -4% +4% Profit before interest* 32 34 -6% 0% Margin* 45.7% 46.6% -90pts 21% PBI* • Successful Singapore plant start up • Higher depreciation costs of £13m in this financial year • Average sales
Slide 18: Slide 18
Slide 19: Food & Industrial Ingredients, Europe
Food & Industrial Ingredients, Europe Six Months to September Continuing business At At 13% Sales £m 2007 2006 reported constant rates currency Sales 208 157 +32% +37% Profit before interest* 26 23 +13% +13% Margin* 12.5% 14.6% -210pts 17% PBI* • EU sugar regime controls sweetener prices • Corn pric
Slide 20: Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Americas Six Months to September At At 40% Sales £m 2007 2006 reported constant rates currency Sales 671 615 +9% +18% Profit before interest* 84 93 -10% -2% Margin* 12.5% 15.1% -260pts • Ethanol profit decline 53% PBI* • HFCS volumes / pricing • Corn gluten feed • Asta
Slide 21: Discontinued operations
Discontinued operations Six Months to September £m 2007 2006 17% Total Sales Sales 344 394 -13% Profit before interest* 43 25 +72% Margin* 12.5% 6.3% +620pts 22% Total PBI* • Redpath • Eastern Sugar • TALFIIE (disposed plants) * Before exceptional items and amortisation of acquired intangible assets
Slide 22: Disposals
Disposals Six Months to September £m 2007 2007 Redpath TALFIIE Occidente Pro forma Headline Proceeds: 131 209 46 - Adjustments* 8 5 - Reported proceeds (net of costs) 139 214 46 Profit/(loss) on disposal before tax included in: - Operating profit - (30) - - Discontinued operations 59 1 10 Total pre
Slide 23: Product Analysis – Operating profit
Product Analysis – Operating profit Six Months to September UNAUDITED FIGURES Continuing operations (at actual 2007 rates) Operating Profit 2007 2006 Value Total Value £m Primary Primary Total added added Sugars - Products 11 3 14 13 3 16 - Trading 0 - 0 16 - 16 Ingredients - Food 46 45 91 44 38 82
Slide 24: Cash Flow
Cash Flow Six Months £m to September 2007 2006 (£1=$2.00) (£1=$1.85) Operating Profit* 142 168 Depreciation / Amortisation 50 41 Working Capital 71 70 Net interest (25) (12) Share based payments 2 3 Tax (32) (36) Capex (135) (134) Free Cash Flow/(Outflow) (continuing ops) # 73 100 Net disposals/(acq
Slide 25: Cash Flow
Cash Flow Six Months to September (74) 13 (42) 73 63 27 (900) (840) Net Debt April Free Cash Dividends FX and other Investments & Discont'd Ops Share Net Debt Sep 07 (inflow) disposals purchase (net 07 of issues) 25 The next slide shows those same cash flow numbers as a bridge between opening and cl
Slide 26: Balance Sheet
Balance Sheet As at 30 Sep As at 31 Mar £m 2007 2007 Property, Plant & Equipment 1,123 1,217 Intangible Assets 298 232 Other Net Assets 477 385 Net Assets Held for Sale - 61 1,898 1,895 Net Debt 840 900 Shareholders’ Funds 1,058 995 1,898 1,895 26 And finally the Balance Sheet, not much to report on
Slide 27: Interim Results Presentation
Interim Results Presentation Iain Ferguson, Chief Executive 31 October 2007 Well enough of me talking. I’ll hand you back to Iain. 27
Slide 28: Agenda
Agenda Key Results and Overview Iain Ferguson Financials John Nicholas Operating review Iain Ferguson Conclusion and Outlook Iain Ferguson SPLENDA® and the SPLENDA® logo are trademarks of McNeil Nutritionals, LLC 28 Thank you John. I will now run through the operational review and discuss the outloo
Slide 29: SPLENDA Sucralose
SPLENDA® Sucralose Successful commissioning of Singapore plant • Proved capacity of both Singapore and expanded Alabama • Better rate of ramp-up than planned • Customer inventory levels yet to stabilise in two plant environment. • Now able to flex production over both plants to optimise efficiency 2
Slide 30: SPLENDA Sucralose
SPLENDA® Sucralose Four routes to growth Reduced sugar tomato sauce in Finland Reduced sugar cake mix in the United States New product lines which are difficult Entry into new to manufacture geographies with other HIS’s SPLENDA® Sucralose Substitution for Sweetener other HIS’s in optimisation – exis
Slide 31: SPLENDA Sucralose
SPLENDA® Sucralose Patent and litigation update 7 14 Pending 6 29 Granted 5 4 3 2 1 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 • Patent estate remains robust – we continue to invest for the future • International Trade Commission l
Slide 32: Sugars
Sugars Solid future built on low cost base • Difficult EU sugar market conditions continue • Cane sugar refining remains a strong economic model • Investing in efficiency – cranes, bio-mass boiler • Role of sugar trading 32 Moving to our European refining businesses, the market remains difficult. We
Slide 33: Sugars
Sugars Latest announcements on reform of EU Sugar Regime welcomed • We welcome the announcement by the Commission on 26 September regarding agreement on measures to repair and strengthen reform of the EU sugar regime • Commission aiming for further 3.8m tonnes of quota to be surrendered. • Changes h
Slide 34: European Grain Prices
Food & Industrial Ingredients, Europe European Grain Prices Spot Prices 24 months to Mid-October 2007 Corn Delivered Euros Wheat Delivered Rouen Euros 280 260 240 220 € per tonne 200 180 160 140 120 100 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 • Expect no significant reduction
Slide 35: Food & Industrial Ingredients, Europe
Food & Industrial Ingredients, Europe Transition post disposal • High cereal costs support strategy to dispose business • Preference was sale of whole business • EU Sugar Regime impacts sweetener commodity pricing through a price cap • Business now centred on low cost production and in developing ma
Slide 36: Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Americas Value added continues to progress well • Value added continues to progress well – 11% growth in first half • Value added food ingredient growth 17% in first half • Additional capacity available in second half Sales* (rebased to 100 in 2004) Operating profit* (
Slide 37: Food Ingredients Structure
Food Ingredients Structure • Global Food Ingredients Group dissolved • Achieved global footprint – now address markets regionally • Chief Executive, International responsible for global key accounts • Customers buy SPLENDA® Sucralose and core value added from one regional sales team • R&D and consum
Slide 38: Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Americas Commodity dynamics • Supply/demand dynamics still sound – US industry front-end grind capacity remains tight at mid-90s% • US HFCS dynamics – Reducing demand from CSDs – Mexican HFCS market – further potential? – Benefit from strong 2007 price increases • Comp
Slide 39: US corn prices
Food & Industrial Ingredients, Americas US corn prices Nearby Futures Prices 24 months to Mid-October 2007 440 420 400 380 US cents per bushel 360 340 320 300 280 260 240 220 200 180 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Mid Mid Source: Chicago Board of Trade 39 Corn prices
Slide 40: Ethanol profits still generate good returns
Food & Industrial Ingredients, Americas Ethanol profits still generate good returns Spot Prices 24 months to Mid-October 2007 Ethanol Chicago Wholesale Unleaded Gas 4.5 4 3.5 3 $ 2.5 2 1.5 1 Oct 2005 Jan 2006 Apr 2006 Jul 2006 Oct 2006 Jan 2007 Apr 2007 Jul 2007 Oct 2007 • Last year’s “supra-normal”
Slide 41: Reshaping in line with strategy
Food & Industrial Ingredients, Americas Reshaping in line with strategy Organic investments Sagamore £60m Expansion to increase capacity for On stream value added food starches. Will see benefit in 2H08. Loudon £40m Expansion to increase capacity for On stream February value added ingredients and 20
Slide 42: Agenda
Agenda Key Results and Overview Iain Ferguson Financials John Nicholas Operating review Iain Ferguson Conclusion and Outlook Iain Ferguson 42 Moving to a conclusion. 42
Slide 43: Value Added Strategy Remains Robust
Value Added Strategy Remains Robust Continued progress in value-added reaffirms strategy vs six months to Value-added food ingredients 30 September 2006 (constant currency) Core £45m 18% SPLENDA® Sucralose operating profit £32m flat Total food ingredients value-added £77m Up 10% operating profit 1 B
Slide 44: Outlook for year to 31 March 2008
Outlook for year to 31 March 2008 Sugars • Continuing oversupply of sugar in the EU market Ingredients, Europe • High European corn prices squeeze second half Ingredients, Europe margins Ingredients, Americas • Further progress in core value added products • Further US food ingredient capacity comin
Slide 45: Outlook
Outlook • Second half outturn broadly similar to first half • Strategy to focus on value-added leaves us well placed to create value 45 Taking all of the above into consideration, we believe that the second half outturn will be broadly similar to the first half year. Looking further forward, we are
Slide 46: Question and Answers
Question and Answers Please wait for the microphone and state your name and that of your organisation 46 John and I are now ready to take questions. As usual, please could you wait for the microphone to arrive and state your name and that of your firm before asking a question? 46
Slide 47: Appendix
TATE LYLE CONSISTENTLY FIRST IN RENEWABLE INGREDIENTS 47
Slide 48: Product Analysis – Sales
Product Analysis – Sales Six Months to September UNAUDITED FIGURES Continuing operations (at actual 2007 rates) Sales 2007 2006 Value Total Value £m Primary Primary Total added added Sugars - Products 306 36 342 255 36 291 - Trading 371 - 371 460 - 460 Ingredients - Food 404 210 614 318 157 475 - In
Slide 49: Product Analysis – Operating profit Six Months to September 2006
Product Analysis – Operating profit Six Months to September 2006 UNAUDITED FIGURES Continuing operations (at 2006 reported rates) Sales Operating Profit* Value Total Value £m Primary Primary Total added added Sugars - Products 259 36 295 13 3 16 - Trading 505 - 505 18 - 18 Ingredients - Food 344 174