Tate & Lyle PLC · LSE:TATE
Tate & Lyle — FY2006 Earnings Presentation
43 slides from Tate & Lyle's earnings presentation, May 25, 2006
Slide 1: Preliminary Results Presentation
Preliminary Results Presentation 25 May 2006 Preliminary Results (Year to 31 March 2006) 1 Presentation: 25 May 2006
Slide 2: Preliminary Results Presentation – Iain Ferguson, Chief Executive
Preliminary Results Presentation Iain Ferguson, Chief Executive 25 May 2006 Good morning and thank you for joining us today for the first time at the London Stock Exchange. I'd also like to welcome our Chairman, Sir David Lees and other non-executive directors, • Richard Delbridge (our senior non-ex
Slide 3: Agenda
Agenda Key Results EU sugar regime Suit alleging patent infringement Investment in Fort Dodge Financials 3 As you have probably noticed, this has been an unusually busy week for Tate & Lyle and it is reflected in the agenda. I will start with an outline of the key results, and then give a brief over
Slide 4: Key Results
Key Results AUDITED FIGURES • PBTEA up 16% at £295 million • Total value added PBIEA up 22% to £161m – SPLENDA® Sucralose PBIEA up 48% to £68m – Core value added up 8% to £93m • New one year target for PBIEA from total value added to increase by 30% in FY2007 • Group margins up 50bp to 8.8% • Propos
Slide 5: EU Sugar Regime
EU Sugar Regime Renewal from 1 July 2006 • Final proposals announced by Commission 24 November 2005, detailed legislation not yet available • Profitability in EU sugar refining reduced further due to oversupply of sugar and higher costs of export licences • Isoglucose profitability also impacted by
Slide 6: Suit Alleging Patent Infringement
Suit Alleging Patent Infringement • Suit filed in the US District Federal Court for Central Illinois on 23 May 2006 • Against a Chinese manufacturing group based in Hebei province as well as six importers of sucralose into the US • First case based on ongoing review of possible infringements against
Slide 7: £140 million investment in Fort Dodge, Iowa
£140 million investment in Fort Dodge, Iowa Continuing investment for growth • First phase capacity of 150,000 bushels of corn per day expected to be complete by March 2009 • Proprietary technology, lower cost, better yields, reduced energy consumption Houlton, ME Stanfield, OR • Expected to cover c
Slide 8: Preliminary Results Presentation – Simon Gifford, Group Finance Director
Preliminary Results Presentation Simon Gifford, Group Finance Director 25 May 2006 This is the first set of annual results prepared under IFRS and the comparative figures and some of the key ratios have been restated to reflect this change. As in the interim presentation, some figures are quoted bef
Slide 9: Income Statement
Income Statement Years to March AUDITED FIGURES £m 2006 2005 Sales 3,720 3,339 +11% Profit before interest* 328 278 +18% Net finance expense (33) (24) -38% Profit before taxation* 295 254 +16% PBI*/Sales margin 8.8% 8.3% Interest cover* 9.9 x 11.6 x 9 * Before exceptional items and amortisation of a
Slide 10: Income Statement
Income Statement Years to March AUDITED FIGURES £m 2006 2005 Profit before taxation* 295 254 Amortisation of acquired intangible assets (5) (4) Exceptional items (248) (45) Taxation (69) (55) Minority interest (3) (4) (Loss)/Profit for the period – equity holders (30) 146 10 * Before exceptional ite
Slide 11: Income Statement – Exceptional Items
Income Statement Exceptional Items – Year to March AUDITED FIGURES £m 2006 Impairment of fixed assets (272) US healthcare 24 Exceptional Items (248) 11 We have, as we said we would, reviewed the carrying value of our European assets affected by the reform of the EU Sugar Regime. The impairment charg
Slide 12: Income Statement and Effective Tax Rate
Income Statement and Effective Tax Rate Years to March AUDITED FIGURES £m 2006 2005 Profit before taxation* 295 254 Amortisation of acquired intangibles (5) (4) Exceptional items (248) (45) Taxation (69) (55) Minority interest (3) (4) (Loss)/Profit for the period – equity holders (30) 146 Effective
Slide 13: Earnings and Dividends per Share
Earnings and Dividends per Share AUDITED FIGURES 2006 2005 Diluted earnings per share (pence) * 41.7 37.4 Interim dividend paid (pence) 5.9 5.7 Final dividend proposed (pence) ^ 14.1 13.7 Dividend per share (pence) 20.0 19.4 Dividend cover (times) * 2.1 1.9 * Before exceptional items and amortisatio
Slide 14: Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Americas Years to March AUDITED FIGURES £m 2006 2005 31% Group Sales Sales 1,127 1,037 +9% Profit before interest* 125 96 +30% Margin* 11.1% 9.3% +1.8 pts 38% Group PBI* • Exchange translation benefit to profit of £4m • Value added ingredients volume and margins higher
Slide 15: Food & Industrial Ingredients, Europe
Food & Industrial Ingredients, Europe Years to March AUDITED FIGURES £m 2006 2005 19% Group Sales Sales 719 761 -6% Profit before interest* 46 44 +5% Margin* 6.4% 5.8% +0.6 pts 14% Group PBI* • Higher volumes, especially food ingredients and alcohol • Selling prices lower • Lower raw material costs
Slide 16: Sucralose
Sucralose Years to March AUDITED FIGURES £m 2006 2005 4% Group Sales Sales 142 115 +23% Profit before interest* 68 46 +48% Margin* 47.9% 40.0% +7.9pts 21% Group PBI* • Profit £22m higher • Sales increased by 23% • Start-up costs £5m, 2007 expected to be £9m • Higher manufacturing costs, robust margi
Slide 17: Sugars, Americas & Asia
Sugars, Americas & Asia Years to March AUDITED FIGURES 7% Group Sales £m 2006 2005 Sales 273 237 +15% Profit before interest* 27 20 +35% Margin* 9.9% 8.4% +1.5 pts 8% Group PBI* • Canada – lower volumes, mark to market gain of £7m • Vietnam – profit slightly higher • Mexico – profit slightly lower 1
Slide 18: Sugars, Europe
Sugars, Europe Years to March AUDITED FIGURES £m 2006 2005 39% Group Sales Sales 1,459 1,189 +23% Profit before interest* 62 72 -14% Margin* 4.2% 6.1% -1.9 pts 19% Group PBI* • Oversupply causes reduction in selling prices • Higher export licenses and energy costs • Sugar trading excellent year • Lo
Slide 19: Energy Cost
Energy Cost Years to March in £m UNAUDITED FIGURES 9+ 45 9 30 196 250+ 157 e e er er 07 05 06 ic ic th th Pr Pr 20 20 20 O O al al st u u ca ct ct re A A Fo 19 For the year under review, energy costs increased in total by £39m to £196m of which £30m is due to higher energy prices as predicted at the
Slide 20: T&L Group Energy Index 2005
T&L Group Energy Index 2005 Calendar Years UNAUDITED FIGURES 3.6% decrease in 2005 compared to 2004 1.00 1.00 0.96 0.95 0.93 0.93 0.92 0.90 0.89 0.85 0.85 0.84 0.83 0.81 0.80 0.75 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Energy used per unit of production 20 Sucralose included from 2005 Thi
Slide 21: Capital Expenditure and Investments
Capital Expenditure and Investments AUDITED FIGURES Capital Expenditure Investments Depreciation £m 360 280 200 120 40 2003* 2004* 2005 2006 Years to March 21 *Excludes Joint Ventures As expected, capital expenditure at £273m was more than double depreciation of £125m as we invest for growth. Both t
Slide 22: Free Cash Flow
Free Cash Flow Year to March 2006 in £m AUDITED FIGURES (211) 461 (27) (98) (273) (148) Operating Cash Increase in Interest Tax Capital Free Cash Flow W orking Capital expenditure Outflow 22 Operating cash flow was £461m. As previously indicated, the working capital outflow was unusually high at £21
Slide 23: Net Debt Increased to £858m
Net Debt Increased to £858m Year to March 2006 in £m AUDITED FIGURES 37 67 16 93 148 58 858 471 529 ds ue 05 ts 06 w er s 's en al en f lo is s th / JV 3/ /4 os v id ut O m 1/ t1 e sp th st O t3 ar & Di eb wi ju di sh Sh ge eb Ad tD 05 ss Ca an tD le Ne 3/ 9 ch S3 ee Ne 1/ ts Ex t3 Fr en IA eb n m i
Slide 24: Summary Balance Sheet
Summary Balance Sheet AUDITED FIGURES Total net assets Net debt Net debt / EBITDA § £m Times 1200 2.5 1000 2 800 1.5 600 1 400 200 0.5 0 0 Mar-05 Mar-06 24 § Before exceptional items and total amortisation With net debt at March 2006 being £858m, the net debt/pre-exceptional EBITDA multiple as shown
Slide 25: Retirement Benefits
Retirement Benefits Income Statement Charge & Pension Cash Contributions AUDITED FIGURES • Income statement charge – Full year charge of £20m to operating profit (2005: £21m) and £3m net finance charge (2005: £3m) • Pension cash contributions – Full year contributions of £40m (2005: £34m) 25 The cha
Slide 26: Retirement Benefits – Gross Deficit
Retirement Benefits Gross Deficit AUDITED FIGURES £m Mar 04 Mar 05 Mar 06 0 50 77 156 139 100 95 150 200 85 105 172 250 241 244 300 Pensions Healthcare 26 This slide shows the deficit for pensions and healthcare liabilities under IFRS. Since 31 March 2005 the pension deficit has reduced by £62m main
Slide 27: Key Financial Ratios
Key Financial Ratios Years to March AUDITED FIGURES 2006 2005 Interest cover* 9.9 x 11.6 x Dividend cover* 2.1 x 1.9 x Net debt / EBITDA § 1.9 x 1.2 x PBI* / Sales margin 8.8% 8.3% RONOA ‡ 17.6% 18.8% RONOA ^ 18.9% N/A * Before exceptional items and amortisation of acquired intangible assets § Befor
Slide 28: Preliminary Results Presentation – Iain Ferguson, Chief Executive
Preliminary Results Presentation Iain Ferguson, Chief Executive 25 May 2006 Preliminary Results (Year to 31 March 2006) 28 Presentation: 25 May 2006
Slide 29: Agenda
Agenda Total value added contribution SPLENDA® Sucralose update Core value added projects Research & development update Outlook 29 Thank you, Simon. I now want to focus on how we are growing our business through the successful delivery of our strategy to increase the contribution from value added pr
Slide 30: Contribution to Group Profitability
Contribution to Group Profitability* Years to March UNAUDITED FIGURES Group Profit* FY2006 Category Profit £m YOY Margin £328m change PBIEA/Sales % % 32% 2006 2005 2006 2005 28% Core Value 93 86 8 16.8 17.4 Added Sucralose 68 46 48 47.9 40.0 106 93 Total Value 161 132 22 23.1 21.7 Added CB, QC and 1
Slide 31: Intense Sweetener Market Relative Value
Intense Sweetener Market Relative Value Year to March 2006 Split by Product (FY2005 %) Total US$1.114bn Manufacturers’ Sales FY2006 (FY2005: US$1.10bn) Cyclamate 8% (10%) Saccharin 10% (7%) Aspartame 49% $96m (52%) $110m $543m SPLENDA® Sucralose $253m 23% (19%) $9m $103m Stevia 1% 31 (1%) Acesulfame
Slide 32: SPLENDA Sucralose New Product Launches
SPLENDA® Sucralose New Product Launches Beverages Pharma Cookies Cereals Ice creams Baked goods 32 Despite capacity constraints during the past year, we have seen a number of exciting new product launches across all categories; food, beverage, and pharmaceutical. In foods, SPLENDA® Sucralose continu
Slide 33: Investment in Value Added Growth
Investment in Value Added Growth Sagamore Loudon Bio-PDO™ a Iow New capacity New capacity n t in On track for completion operational January me operational in October 2007st in mid calendar 2006 ve 2007 in 0m Hycail Custom Ingredients Cesalpinia 4 d £1 an Acquisition of Hycail Integrated well. Profi
Slide 34: Research and Development
Research and Development Investing in people and technology 40 250 35 R&D Expense (US$m) 200 30 R&D Headcount 25 150 20 15 100 10 50 5 0 0 FY02 FY03 FY04 FY05 FY06 R&D Expense R&D Headcount 34 This year we spent US$37 million (or 3% of total value added sales) on research and development, principall
Slide 35: New Products Launched in FY2006
73 New Products Launched in FY2006 Breakdown of new products launched in FY2006 5 EU Sugars Product Category 25 EU Solution Sets 11 US Solution Sets 19 EU Food Ingredients 13 US Food Ingredients 0 10 20 30 No. of new products launched 35 Our investment in research and development has delivered innov
Slide 36: Turning Innovation into Sales
Turning Innovation into Sales 36 Launch in: US, Australia, South America and Europe In February, PreGel, a leading manufacturer of pre-mixes for Italian ice-cream, announced that it will be launching a new range of low-calorie and low-fat ice cream mixes, made with one of Tate & Lyle’s Ice Cream Reb
Slide 37: Turning Innovation into Sales
Turning Innovation into Sales 37 Launched in c90% of all leading Norwegian outlets Lerum is Norway’s number one manufacturer of fruit drinks and is also a key own-label supplier to Norwegian supermarkets. Their new range of no-added-sugar dilutable fruit drinks is sweetened with SPLENDA® Sucralose.
Slide 38: Outlook Statement
Outlook Statement • Good performance in 2006, demonstrating successful implementation of strategy • New one year target for PBIEA from total value added to increase by 30% in FY2007 • Three principal areas of management focus: – Completion of expansion projects - to facilitate longer term value adde
Slide 39: Question and Answers
Question and Answers Please wait for the microphone and state your name and that of your organisation. 39 Thank you for your time today. Simon and I are now happy to take any questions you may have. Please wait for the microphone and clearly state your name and that of your organisation. Preliminary
Slide 40: Appendix
Appendix Preliminary Results (Year to 31 March 2006) 40 Presentation: 25 May 2006
Slide 41: SPLENDA Sucralose Ingredient Use
SPLENDA® Sucralose Ingredient Use FY2006 (FY2005) - % Split by sales revenues) Sales £142 million (£115 million) Pharma 8% (8%) Beverages 40% (39%) 41 Food 52% (53%) Data: Company Estimates Preliminary Results (Year to 31 March 2006) 41 Presentation: 25 May 2006
Slide 42: Contribution to Group Sales
Contribution to Group Sales Years to March UNAUDITED FIGURES Group Sales FY2006 Category Sales £m YOY % Group £3,720m change Sales 15% % 2006 2005 2006 2005 64% Core Value 555 494 12 15 15 555 Added 4% Sucralose 142 115 23 4 3 142 4% Consumer 136 141 -4 4 4 136 Branded Quota 507 535 -5 13 16 507 2,3
Slide 43: Contribution to Margin
Contribution to Margin Year to March 2006 UNAUDITED FIGURES Category Sales % Group PBIEA* % Group Margin Margin £m Sales £m PBIEA* PBIEA*/Sales PBIEA*/Sales % 2006 % 2005 Core value 555 15 93 28 16.8 17.4 Added Sucralose 142 4 68 21 47.9 40.0 Consumer 136 4 15 5 11.0 14.2 Branded Quota 507 13 46 14