Tate & Lyle Plc · LSE:TATE
Tate & Lyle — FY2007 Earnings Presentation
69 slides from Tate & Lyle's earnings presentation, May 23, 2007
Slide 1: Preliminary Results Presentation
Preliminary Results Presentation PLEASE turn off mobile phones and blackberries 1
Slide 2: Preliminary Results Presentation
Preliminary Results Presentation Iain Ferguson, Chief Executive 23 May 2007 Good morning ladies and gentlemen and welcome to Tate & Lyle’s preliminary results presentation for the year to 31 March 2007. 2
Slide 3: Agenda
Agenda Key Results Iain Ferguson Financials John Nicholas SPLENDA® Sucralose y Introduction y Where we are now Iain Ferguson y How the business works Business overview y Business reshaping Iain Ferguson y Update on expansion projects Outlook Iain Ferguson SPLENDA® and the SPLENDA® logo are trademark
Slide 4: Key Results
Key Results Year to 31 March 2007 vs 2006 Total Profit Before Tax1 £336m Up 14% Margin1 9.2% Up 40 bp Diluted EPS1 47.9p Up 15% Dividend 21.5p Up 1.5p, 7.5% 1 Before exceptional items and amortisation of acquired intangibles 4 In my presentation all profit figures are quoted before exceptional items
Slide 5: Three consecutive years of double digit profit growth
Three consecutive years of double digit profit growth Total Profit before Tax1 £336m £295m £254m +14% £227m +16% +12% CAGR FY04* to FY07 = 14% FY04* FY05 FY06 FY07 1 Before exceptional items and amortisation of acquired intangibles * Reported under UK GAAP 5 … with total profit before tax of £336m,
Slide 6: Key Results
Key Results Year to 31 March 2007 vs 2006 Total Profit Before Tax1 £336m Up 14% Margin1 9.2% Up 40 bp Diluted EPS1 47.9p Up 15% Dividend 21.5p Up 1.5p, 7.5% 1 Before exceptional items and amortisation of acquired intangibles 6 Our margins improved again, up forty basis points to 9.2%. Reflecting thi
Slide 7: Preliminary Results Presentation
Preliminary Results Presentation John Nicholas, Group Finance Director 23 May 2007 Thanks Iain and good morning. This year’s results presentation is more complex than normal due to the changing nature of our business. The results for Eastern Sugar and Redpath Canada, are classed as discontinued and
Slide 8: Income Statement
Income Statement Year to March 2007 Total Discont’d# Continuing Pro forma Pro forma £m TALFIIE Total Discont’d^ Sales 4,070 Profit before interest * 373 Net finance expense (37) Profit before taxation* 336 PBI*/Sales margin 9.2% Interest cover* 10.1x * Before exceptional items and amortisation of ac
Slide 9: Income Statement
Income Statement Year to March 2007 Total Discont’d# Continuing Pro forma Pro forma £m TALFIIE Total Discont’d^ Sales 4,070 256 3,814 Profit before interest * 373 18 355 Net finance expense (37) 1 (38) Profit before taxation* 336 19 317 PBI*/Sales margin 9.2% 7.0% 9.3% Interest cover* 10.1x 9.3x * B
Slide 10: Income Statement
Income Statement Year to March 2007 Total Discont’d# Continuing Pro forma Pro forma £m TALFIIE Total Discont’d^ Sales 4,070 256 3,814 520 3,294 Profit before interest * 373 18 355 38 317 Net finance expense (37) 1 (38) (10) (28) Profit before taxation* 336 19 317 28 289 PBI*/Sales margin 9.2% 7.0% 9
Slide 11: Income Statement
Income Statement Year to March 2007 Total Discont’d# Continuing Pro forma Pro forma £m TALFIIE Total Discont’d^ Profit before taxation* 336 19 317 Amortisation of (9) - (9) acquired intangibles Exceptional items 10 23 (13) Taxation (120) (15) (105) Minority interest (3) - (3) Profit for the period 2
Slide 12: Income Statement
Income Statement Year to March 2007 Pro forma Pro forma £m Total Discont’d# Continuing TALFIIE Total Discont’d^ Profit before taxation* 336 19 317 28 289 Amortisation of (9) - (9) - (9) acquired intangibles Exceptional items 10 23 (13) - (13) Taxation (120) (15) (105) (19) (86) Minority interest (3)
Slide 13: Exceptional items – Year to March 2007
Income Statement Exceptional items – Year to March 2007 £m Total Discont’d# Continuing Citric / Astaxanthin (33) - (33) Eastern Sugar closure 14 14 - Eastern Sugar litigation 9 9 - Sucralose 20 - 20 Exceptional Items 10 23 (13) # Discontinued operations represent Redpath and Eastern Sugar 13 We anno
Slide 14: Cash Flow
Cash Flow Years to March 2007 2006 2007 £m Total Total Continuing Operating Profit 373 328 355 Depreciation / Amortisation 104 128 97 Working Capital (83) (211) (71) Net interest (45) (27) (44) Share based payments 6 5 6 Tax (95) (98) (87) Capex (251) (273) (247) Free Cash Flow/(Outflow) 9 (148) 9 N
Slide 15: Balance Sheet
Balance Sheet Years to March £m 2007 2006 Property, Plant & Equipment 1,217 1,217 Intangible Assets 232 263 Other Net Assets 385 326 Net Assets Held for Sale 61 - 1,895 1,806 Net Debt 900 866 Shareholders’ Funds 995 940 1,895 1,806 15 Assets held for sale relate to Redpath Canada, Eastern Sugar is i
Slide 16: Key Financial Ratios
Key Financial Ratios Years to March 2007 2006 Diluted adjusted earnings per share (pence) * - Total operations 47.9 41.7 - Continuing operations 45.2 37.8 Final dividend proposed (pence) ^ 15.3 14.1 Full year dividend per share (pence) 21.5 20.0 Dividend cover (times) *# 2.3 2.1 Effective tax rate f
Slide 17: Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Americas Years to March £m 2007 2006 31% Total Sales Sales 1,255 1,127 +11% Profit before interest* 163 125 +30% Margin* 13.0% 11.1% +1.9 pts 44% Total PBI* • Exchange translation adverse impact to profit of £8m • Value added ingredients volume and margins higher • Bio
Slide 18: Food & Industrial Ingredients, Europe
Food & Industrial Ingredients, Europe Years to March £m 2007 2006 20% Total Sales Sales 825 719 +15% Profit before interest* 70 46 +52% Margin* 8.5% 6.4% +2.1 pts 19% Total PBI* • Higher profit of £25m due to impairment in FY06 • Cesalpinia profits £3m • Good sales price negotiations * Before except
Slide 19: Sucralose
Sucralose Years to March £m 2007 2006 4% Total Sales Sales 147 142 +4% Profit before interest* 70 68 +3% Margin* 47.6% 47.9% -0.3pts 19% Total PBI* • Profits up 9% on a constant exchange basis • Start-up costs £8m • Margin maintained * Before exceptional items and amortisation of acquired intangible
Slide 20: Sugars, Americas & Asia
Sugars, Americas & Asia Years to March £m 2007 2006 7% Total Sales Total sales 284 273 +4% Discontinued profit* 8 18 Continuing profit* 11 9 +22% Total profit before interest* 19 27 -30% 5% Total PBI* Margin* 6.7% 9.9% -3.2pts • Canada – Sale completed in April • Vietnam – profit slightly down • Mex
Slide 21: Sugars, Europe
Sugars, Europe Years to March £m 2007 2006 38% Total Sales Total sales 1,559 1,459 +7% Discontinued profit* 10 10 Continuing profit* 41 52 -21% Total profit before interest* 51 62 -18% 13% Total PBI* Margin* 3.3% 4.2% -0.9 pts • Oversupply causes reduction in selling prices • Sugar trading less prof
Slide 22: Group energy cost
Group energy cost 22 Energy is one of our largest costs and this time last year, we said we expected energy costs to increase by £50m to £250m. We did rather better than that limiting the increase to £30m. For 2008 we’re expecting little change in the underlying energy bill. I’d like to turn now to
Slide 23: Contribution to Margin (total business)
Contribution to Margin (total business) Years to March UNAUDITED FIGURES Category Sales % Group Profit* % Group Margin Margin Sales Profit* Profit*/Sales Profit*/Sales £m £m % 2007 % 2006 Core value 654 16 106 28 16.2 16.8 Added Sucralose 147 4 70 19 47.6 47.9 Total Value 801 20 176 47 22.0 23.1 add
Slide 24: Pro Forma Income Statement
Pro Forma Income Statement Year to March 2007 Sales Operating profit* Total Disc# Pro forma Total Disc# Pro forma TALFIIA 1,255 - 1,255 175 - 175 TALFIIE 825 (520) 305 78 (38) 40 Sucralose 147 - 147 71 - 71 TALSAA 284 (189) 20 (8) 1,587 66 TALSE 1,559 (67) 64 (10) Global costs (35) (35) 4,070 (776)
Slide 25: Pro Forma Revised Product Analysis
Pro Forma Revised Product Analysis Year to March 2007 UNAUDITED FIGURES Sales Operating Profit* Value Total Value £m Primary Primary Total added added Sugar - Products 531 72 603 30 7 37 - Trading 985 - 985 28 - 28 Ingredients - Food 681 351 1,032 88 80 168 - Industrial 407 120 527 47 1 48 Global Su
Slide 26: Preliminary Results Presentation
Preliminary Results Presentation Iain Ferguson, Chief Executive 23 May 2007 Thank you John. 26
Slide 27: Agenda
Agenda Key Results Iain Ferguson Financials John Nicholas SPLENDA® Sucralose y Introduction y Where we are now Iain Ferguson y How the business works Business overview y Business reshaping y Update on expansion projects Iain Ferguson Outlook Iain Ferguson 27 I will update you on our SPLENDA® Sucralo
Slide 28: We took over McIntosh, Alabama in April 2004
SPLENDA® Sucralose We took over McIntosh, Alabama in April 2004 Challenge Action Reliability of production Technical advances resulted in major turnaround by mid-2006 Capacity constraints Doubled Alabama and built new plant in Singapore Security of Supply Built new plant in Singapore Patent protecti
Slide 29: Singapore facility mechanically complete
SPLENDA® Sucralose Singapore facility mechanically complete SPLENDA® Sucralose Singapore Plant – £100m Commission and ramp up will take 12 months 9 29 This new plant also gives flexibility and security of supply, to both ourselves, and to our customers. It also enables us to produce a different prod
Slide 30: We took over McIntosh, Alabama in April 2004
SPLENDA® Sucralose We took over McIntosh, Alabama in April 2004 Challenge Action Reliability of production Technical advances resulted in major turnaround in mid-2006 Capacity constraints Doubled Alabama and built new plant in Singapore Security of Supply Built new plant in Singapore Patent protecti
Slide 31: Strong historic sales growth
SPLENDA® Sucralose Strong historic sales growth $143m $133m $133m $122m $113m $99m CAGR FY05 to FY07 = 14%+ 1H05 2H05 1H06 2H06 1H07 2H07 8% YOY growth in FY2007, 17% YOY growth in 2H07 31 Over the last 3 years we have achieved a great deal. We have more than doubled the turnover from the US$130m pr
Slide 32: Capacity growth and utilisation
SPLENDA® Sucralose Capacity growth and utilisation 100% Singapore 4 available Alabama = 3x Expansion 2H07 = 2x 3 Bottlenecks removed = 1.5x Capacity acquired in April 2 2004 = 1x 1 0 FY2005 FY2006 FY2007 FY2008 Capacity available at year end Average capacity utilisation over the year (production bas
Slide 33: Capacity growth and utilisation
SPLENDA® Sucralose Capacity growth and utilisation We expect to reach 4 70% utilisation Alabama within 5 years Expansion 2H07 = 2x 3 Bottlenecks removed = 1.5x Capacity acquired in April 2 2004 = 1x 70% 1 72% 84% 100% 0 FY2005 FY2006 FY2007 FY2012 Capacity available at year end Average capacity util
Slide 34: Margins trends
SPLENDA® Sucralose Margins trends We expect a modest margin glide-path going forward Two dynamics y Selling prices are likely to fall as we triple capacity and widen the customer base y We envisage further improvements in efficiency and reductions in manufacturing cost 34 Firstly, average selling pr
Slide 35: Agenda
Agenda Key Results Iain Ferguson Financials John Nicholas SPLENDA® Sucralose y Introduction y Where we are now Iain Ferguson y How the business works Business overview y Business reshaping y Update on expansion projects Iain Ferguson Outlook Iain Ferguson 35 Let’s start by looking at the global mark
Slide 36: World intense sweetener market
SPLENDA® Sucralose World intense sweetener market Manufacturers' Sales FY2007 Total Market Value ~ US $1billion By Product By Geography 1% 10% 7% 11% 28% 2% 19% 8% 53% 21% 42% 2% Sucralose Aspartame Americas Europe Acesulfame K Saccharin Asia Rest of World Cyclamate Stevia Source: Company Data. Excl
Slide 37: High intensity sweeteners
SPLENDA® Sucralose High intensity sweeteners Market shares by region North Latin Asia Rest of US $m Global America America Europe Pacific World TOTAL HIS 1,000 440 90 211 191 68 SPLENDA® Sucralose 276 197 29 26 23 1 Market share 28% 45% 32% 12% 12% 1% Source: LMC International; Company data. Exclude
Slide 38: US Tabletop Market Share
SPLENDA® Sucralose US Tabletop Market Share SPLENDA® Low Calorie Sweetener No.1 Brand in category in the USA Market Share % (US $ sales) 70 60 SPLENDA® 50 40 30 Equal® 20 10 Sweet’n’Low® 0 Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar 00 01 01 02 02 03 03 04 04 05 05 06 06 07 * Source: Inf
Slide 39: Household Penetration Data
SPLENDA® Sucralose Household Penetration Data US Household Penetration of SPLENDA® Brand higher than many iconic brands* SPLENDA® Brand 58.5% Heinz 55.5% McCormick Spices 53.1% Tropicana 51.1% * % of US households purchasing a product with the “Sweetened with SPLENDA® Brand “ logo on the packaging i
Slide 40: Little change in overall breakdown of ingredient use year on year
SPLENDA® Sucralose Little change in overall breakdown of ingredient use year on year Global Sucralose sales up $21m (8%) FY2006 FY2007 10% 9% 48% 48% 42% 43% Food Bev Pharma Food Bev Pharma % split by sales revenue Source: Company Data 40 You have seen this breakdown before – we’ve updated this with
Slide 41: Volumes to US carbonated soft drink sector did not achieve target
SPLENDA® Sucralose Volumes to US carbonated soft drink sector did not achieve target North American Beverage Sector Sales by Category US$94m US$80m (-15% YOY) 47% 52% US$2m 53% 48% US$12m % split FY2006 by sales revenue FY2007 CSD Other ACTION : Additional resources deployed to address the CSD marke
Slide 42: Agenda
Agenda Key Results Iain Ferguson Financials John Nicholas SPLENDA® Sucralose y Introduction y Where we are now Iain Ferguson y How the business works Business overview y Business reshaping y Update on expansion projects Iain Ferguson Outlook Iain Ferguson 42 Let me now give you an insight into how w
Slide 43: The innovation cycle
SPLENDA® Sucralose The innovation cycle Sucralose product launches: Global, 2003-2006 607 New Products Over 1,400 global launches in 2006 (35% share) 435 434 428 396 386 367 381 340 334 339 303 294 268 183 148 Atkins Restricted Unrestricted 110 effect supply supply Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q
Slide 44: Pipeline update April 2007
SPLENDA® Sucralose Pipeline update April 2007 Number of new projects Expected time to launch 3–6 months 6–12 months 12–18 months North America 77 62 94 Latin America 13 20 10 Europe 79 19 11 TOTAL 169 101 115 Source: Company data 44 This slide shows the projects we are working on in collaboration wi
Slide 45: Four drivers of growth
SPLENDA® Sucralose Four drivers of growth Tea drink in Pakistan Baked cookies in the New product United States lines which are difficult to Entry into new manufacture geographies with other HIS’s SPLENDA® Sucralose Substitution for Sweetener other HIS’s in optimisation – existing ranges nutritive bl
Slide 46: Success with major retailer Sainsbury’s
SPLENDA® Sucralose Success with major retailer Sainsbury’s y Sainsbury’s replacing all high intensity sweeteners with sucralose in own-brand low calorie drinks y Reformulated products available from June 2007 “We've invested a huge amount of time in redeveloping our recipes and ensuring we get the t
Slide 47: Success with major retailer ASDA
SPLENDA® Sucralose Success with major retailer ASDA y ASDA replacing aspartame with SPLENDA® Sucralose in all own label food and soft drinks by end of 2007 “Aspartame is being replaced with Sucralose… We know that our customers, particularly those that are mums and dads, are becoming more and more c
Slide 48: SPLENDA Sucralose is a highly successful product
SPLENDA® Sucralose SPLENDA® Sucralose is a highly successful product y SPLENDA® Sucralose is a strong brand with high consumer trust y More than doubled sales since realigning the business with McNeil Nutritionals y Capacity successfully added and we estimate this will achieve 70% utilisation by 201
Slide 49: Agenda
Agenda Key Results Iain Ferguson Financials John Nicholas SPLENDA® Sucralose y Introduction y Where we are now Iain Ferguson y How the business works Business overview y Business reshaping y Update on expansion projects Iain Ferguson Outlook Iain Ferguson 49 In this section of the presentation I wil
Slide 50: Business reshaping in line with Strategy: Investments
Business reshaping in line with Strategy Investments Investments in Global Food Ingredients y 80% investment in G.C. Hahn in Germany, a leader in dairy stabiliser systems (expected to complete in June 2007) y Established Health and Wellness centre in Lille and added new sales and R&D centres in Shan
Slide 51: Business reshaping in line with Strategy: Disposals
Business reshaping in line with Strategy Disposals Sale of Redpath y completed on 21 April 2007 with a net consideration of £131m Eastern Sugar y surrender of quota and successful outcome of litigation resulted in net gain of £23m European Starches y discussions at an advanced stage with Syral (subs
Slide 52: Agenda
Agenda Key Results Iain Ferguson Financials John Nicholas SPLENDA® Sucralose y Introduction y Where we are now Iain Ferguson y How the business works Business overview y Business reshaping y Update on expansion projects Iain Ferguson Outlook Iain Ferguson 52 All of our major expansion projects conti
Slide 53: Expansion projects: Bio-PDO JV
Expansion projects continue to progress satisfactorily Bio-PDO™ JV – £60m Completed on time and sales made across several categories 9 53 Our joint venture plant with DuPont to produce Bio-PDO™ from renewable resources was completed on time and has begun sales across several categories, including; f
Slide 54: Expansion projects: Sagamore
Expansion projects continue to progress satisfactorily Sagamore – £50m Expansion to increase capacity for value added food starches complete 9 54 The expansion of our Sagamore plant to increase production capacity for value added food starches, is also complete. It increases capacity for a variety o
Slide 55: Expansion projects: Loudon
Expansion projects continue to progress satisfactorily Loudon – £50m 9 Value added starches and ethanol capacity expansion, on track to complete in Oct 2007 55 The Loudon expansion is adding capacity for value added starches; to supply substrate to the Bio-PDO™ joint venture, and also for ethanol. A
Slide 56: Expansion projects: Fort Dodge
Expansion projects continue to progress satisfactorily Fort Dodge – £140m 9 1st phase of new corn wet mill (for cationic starches & ethanol) on track to complete by March 2009 56 And, last but not least, construction has begun on the first phase of our new corn wet mill in Fort Dodge, Iowa, which is
Slide 57: Agenda
Agenda Key Results Iain Ferguson Financials John Nicholas SPLENDA® Sucralose y Introduction y Where we are now Iain Ferguson y How the business works Business overview y Business reshaping y Update on expansion projects Iain Ferguson Outlook Iain Ferguson 57 ….it just remains for me to share with yo
Slide 58: Key areas of focus
Key areas of focus y Geographic and product expansion of SPLENDA® Sucralose y Reshape our European ingredients business y Continue European Sugar reshaping for the market beyond 2009 y Progress all expansion projects and continue to seek bolt-on acquisitions y Improve balance sheet efficiency 58 As
Slide 59: Outlook for year to March 2008
Outlook for year to 31 March 2008 • 2007 US ethanol profits unusually high • Continuing oversupply of sugar in the EU market • Partial disposal of Ingredients, Europe would reduce operating profits • Increased Sucralose costs will offset benefits of sales growth • Further progress in core value adde
Slide 60: Conclusion
Conclusion • Our long term strategy continues to serve us well • We are confident we will be well-placed to deliver further growth in the years ahead 60 Our long term strategy continues to serve us well. And, I am confident that we will be well-placed to deliver further growth in the years ahead. Wi
Slide 61: Question and Answers
Question and Answers Please wait for the microphone and state your name and that of your organisation 61 Please wait for the microphone before posing your question and give your name and that of your organisation for the record. Thank you. 61
Slide 62: Appendix
TATE & LYLE CONSISTENTLY FIRST IN RENEWABLE INGREDIENTS Appendix 62
Slide 63: Income Statement
Income Statement Years to March 2007 2006 £m Total Disc Cont Total Disc Cont Sales 4,070 256 3,814 3,720 255 3,465 Profit before interest* 373 18 355 328 28 300 Net finance expense (37) 1 (38) (33) - (33) Profit before taxation* 336 19 317 295 28 267 PBI*/Sales margin 9.2% 7.0% 9.3% 8.8% 11.0% 8.7%
Slide 64: Income Statement and Effective Tax Rate
Income Statement and Effective Tax Rate Years to March 2007 2006 £m Total Disc Cont Total Disc Cont Profit before taxation* 336 19 317 295 28 267 Amortisation of acquired intangibles (9) - (9) (5) - (5) Exceptional items 10 23 (13) (248) - (248) Taxation (120) (15) (105) (69) (9) (60) Minority inter
Slide 65: Contribution to Margin (total business)
Contribution to Margin (total business) Years to March UNAUDITED FIGURES Category Sales % Group Profit* % Group Margin Margin Sales Profit* Profit*/Sales Profit*/Sales % £m £m % 2006 2005 Core value 555 15 93 28 16.8 17.4 Added Sucralose 142 4 68 21 47.9 40.0 Total Value 697 19 161 49 23.1 21.7 Adde
Slide 66: Pro Forma Income Statement
Pro Forma Income Statement Year to March 2006 Sales Operating profit* £m Total Disc# Pro forma Total Disc# Pro forma TALFIIA 1,127 - 1,127 136 - 136 TALFIIE 719 (450) 269 53 (24) 29 Sucralose 142 - 142 70 - 70 TALSAA 273 (177) 28 (18) 1,477 75 TALSE 1,459 (78) 75 (10) Global costs (34) (34) 3,720 (7
Slide 67: Revised Product Analysis – Total Group
Revised Product Analysis – Total Group Year to March 2007 UNAUDITED FIGURES Sales Operating Profit* Value Value £m Primary Total Primary Total Added Added Sugar – Products 531 72 603 30 7 37 Trading 985 - 985 28 - 28 Ingredients – Food 954 462 1,416 101 104 205 Industrial 543 120 663 48 1 49 Global
Slide 68: Patent protection
SPLENDA® Sucralose Patent protection US District Federal Court for Central Illinois case filed 23 May 2006 y So far three defendants settled out of court US International Trade Commission case filed 6 April 2007 y The patents (with their related US expiration dates) are: - US 4980463 (July, 2009) -
Slide 69: Ingredient use in Food Sector remains strong
SPLENDA® Sucralose Ingredient use in Food Sector remains strong Global Food Sector sales by category US$122m US$132m (+8% YOY) 35% 39% 16% 13% 7% 18% 18% 11% 3% 5% 17% 18% % split FY2006 by sales revenue FY2007 Dairy Bakery Fruit preps Soups, Sauces and Dressings Confectionary Other (inc sales to Mc