deutsche bank conference - tate & lyle · 2017. 3. 17. · we focus on five key business...
TRANSCRIPT
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Deutsche Bank ConferenceTim Lodge, Group Finance Director
Paris, June 2009
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Company overview
Business environment
Outlook
Agenda
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Raw Materials
End products
Tate & Lyle is a world-leading manufacturer of renewable food and industrial ingredients. We use innovative technology to transform corn and sugarinto value added ingredients for customers in the food, beverage, pharmaceutical cosmetic, paper,packaging and building industries.
Who is Tate & Lyle?
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4 4
Our Strategy
Our strategy is to build a stronger value added business on a low-cost commodity base
Serving our customers
Operating efficiently and safely
Investing in acquisitions and partnerships
Investing in technology and people
Growing the contribution from value added ingredients
We focus on five key business drivers:
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Sustaining the health of our businessBuilding a strong platform for future growth
PRIORITIES FOR FY2010
Implement zero-based
capital expenditure
Implement reduced working
capital plan
Aggressively reduce costs and optional
spending
Maintain no higher
priority than safety
Maximise revenue by
total focus on customer
Tate & Lyle will emerge a leaner, stronger, and more flexible business
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What are value added ingredients?Those ingredients that utilise technology or intellectual property enabling our customers to produce distinctive products and Tate & Lyle to obtain a price premium and / or sustainable higher margins.
TASTIER LIGHTER
HEALTHIER GREENER
STRONGER
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Where we compete
Food and Beverage
Sweeteners EnrichersStabilisersAcidulants
Sugar, HFCS and other cereal sweeteners
– sweeten food and beverages. Also used
in fermentation
High Intensity Sweeteners
– go into tabletop products, food and
beverages
“Better for you”
Dietary fibres
Speciality proteins
Probiotics
Prebiotics
Omega-3 fatty acids
Vitamins
Minerals
Starches– provide texture and
mouthfeel– give freeze-thaw
stability to ready meals – dissipate heat evenly
in microwave meals – replace fat in food
Bio-gums – provide texture and
mouthfeel in food
Citric acid – adds acidic or sour
taste to food and beverages and is also a
natural preservative
Malic Acid– adds acidic or sour
taste to food and beverages
Sweetener blends
Enrich blends
Stabiliser blends
Acidulantblends
Ingredient solutions
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Bio-fuels Other applicationsBio-materialsPaper ingredients
Ethanol – used as an oxygenate in motor vehicle
fuels
Acidulants– used in cleaning fluids
Bio-gums– used in oil-well
drilling
Bio-PDO™– used in applications
from plastics and textiles to de-icing fluid
PLA – used in plastics
Starches – give strength and finish to paper and
card
Animal feed
Basic nutrients
Protein
Molasses
Pharmaceutical and personal care
Humectants Other applicationsSweetenersExcipients
Bio-PDO – provides moisture in
personal care products
Starches, gums – provide
texture and mouthfeel
Sucralose, sugar, HFCS and other
cereal sweeteners – sweeten medication
Starches – act as carrier
for active ingredients in
medication
Industrial
Where we compete
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Sales £1 797mProfit £181mMargin 10.1%
Ingredients, AmericasCitric Acid
Custom IngredientsDuPont Tate & Lyle
Food &Industrial
Ingredients, Americas(TALFIIA)
Sales £539mProfit £51mMargin 9.5%
Ingredients, EuropeCesalpiniaG C Hahn
Food &Industrial
Ingredients, Europe
(TALFIIE)
Sales £169mProfit £72m
Margin 42.6%
SPLENDA®
Sucralose
SucraloseSugars
1 Excluding International Sugar Trading and Eastern Sugar 2 Before exceptional items and amortisation of acquired intangible assetsSPLENDA® and the SPLENDA® logo are trademarks of McNeil Nutritionals, LLCThe DuPont Oval Logo and DuPont™ are trademarks or registered trademarks of E.I. du Pont de Nemours and Company.
Organisational & Reporting StructurePro Forma Continuing1 Sales £3 553m, Operating Profit2 £316m (pre central costs) in Year to March 2009
Sales £1 048mProfit £12mMargin 1.1%
London inc molassesLisbon
Vietnam
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Key ResultsYears to 31 March
(£160m)£245mNet Cash Generated 3
22.9p
38.0p
£107m
£247m
2009
+1.3%
+10%
+20%
-2%
Change
22.6p
34.6p
£89m
£253m
2008
-18% Profit Before Tax 2
Change at constant currency
Continuing operations 1
+1.3%
-8%
+3%
Dividend
Diluted EPS 2
Core Value Added Food Ingredients Operating Profit
1 Exc. International Sugar Trading and Eastern Sugar in both periods and Redpath, Occidente and disposed of EU starch plants in year ended 31 March 20082 Before exceptional items and amortisation of acquired intangible assets3 Cash from total operating activities, investing activities, and share issues, less shares repurchased and dividends
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Agenda
Company overview
Business environment
Outlook
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Exchange rate volatility
Year to March 2009Managing in Turbulent Times
1H strong performance
Corn price peak
Good EU corn harvest
Customer destocking
Paper starch decline
US Ethanol capacity higher than RFS
Difficult sugar market, UK retail sugar very competitive
Sucralose yield improvements
Apr 08 Oct 08 Apr 09Jul 08 Jan 09
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Decisive Management ActionTo maximise cash flow and defend short term profitability
Accelerated existing cost reduction projectsLaunched new cost reduction projectsActions to date:- Initiatives to reduce working capital- Pay freeze at all levels- Delayed completion and commissioning of Fort Dodge plant - Breakthrough yield improvements → mothballed US Sucralose plant- Headcount reductions across the business- Developed greater flexibility in the business
Building additional resilience into balance sheet
Sustaining the health of our business in the face of challenging and unpredictable market conditions
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112-(44)(Decrease) / increase in payables
(159)31-Change in working capital
(67)
(18)
34-
(69)
(151)
2008
(70)US margin calls
(51)Decrease in provisions & other
6-Decrease / (increase) in derivatives
77-Decrease / (increase) in receivables
113-Decrease / (increase) in inventories
2009£m
Change in Working CapitalYears to March
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Consumer Trends• Lower cost: no compromise on taste or quality
• “Value for money” alternatives to branded products• Health & Wellness
Food IngredientsWorking with our customers in challenging times
Tate & Lyle Response• Customer cost optimisation: reformulation; new ingredients; and
new processes• Increased range of Health & Wellness ingredients and processes
Food Producer and Retailer Response• Value-focused own-label product offerings
• Streamlined product ranges• Health & Wellness product ranges
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Food & Industrial Ingredients, Americas
• Strong performance in 1H, due to food ingredients and higher co-product pricing
• US domestic sweetener demand reduced in line with longer term patterns
• Economic climate deteriorated in 2H:- Mexico volumes reduced following
sudden fall in Peso
- Demand from paper and board industry fell 20-25%
- Ethanol margins came under severe pressure due to oversupply
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17Source: Renewable Fuels Association
Food & Industrial Ingredients, AmericasUS ethanol and gasoline spot prices
Spot Prices - March 2006 to May 2009
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Mar
06A
pr06
May
06Ju
n06
Jul0
6A
ug06
Sep
06O
ct06
Nov
06D
ec06
Jan0
7Fe
b07
Mar
07A
pr07
May
07Ju
n07
Jul0
7A
ug07
Sep
07O
ct07
Nov
07D
ec07
Jan0
8Fe
b08
Mar
08A
pr08
May
08Ju
n08
Jul0
8A
ug08
Sep
08O
ct08
Nov
08D
ec08
Jan0
9Fe
b09
Mar
09A
pr09
May
09
US$
per U
S g
allo
n
Ethanol Chicago Wholesale Unleaded Gasoline
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Food & Industrial Ingredients, AmericasLong term demand increases underpinned by RFS legislation
RFS legislation allows refiners to carry forward up to 20% of following year’s volume obligation
Attractive ethanol dynamics in 2008 allowed blenders to carry forward volume credits
Dry mills built capacity ahead of demand curve
Market expected to come into balance in 2010
Final completion of commissioning and start up of Fort Dodge plant postponed
0
2
4
6
8
10
12
14
16
2007 2008 2009 2010 2011
Volu
me
(bn
gallo
ns)
Demand for ethanol based on corn RFS
Effective Corn RFS Minimum
Blend wall
Current Blend Wall @10%
Source: Company forecasts / US EPA
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Food & Industrial Ingredients, Europe
Lower corn prices after good 2008 harvest
Restructuring - Isoglucose quota surrendered in Greece and Netherlands
- Levies charged until September 2009
Further progress at the Food Systems businesses- Hahn and Cesalpinia integrated well
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SugarsTate & Lyle well-placed for market post-EU reforms
EU sugar markets coming into balance
Energy costs at UK refinery doubled- UK biomass boiler: commissioning underway
Lisbon volumes and profits increased over prior year
New raw sugar supply arrangements on track
Differentiation through Fairtrade
Differentiation through lower carbon footprint
Exceptional performance from Molasses business
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EU Sugar Regime EU25 Nutritive Sweetener Volumes
Pre-reform 2005/6 –21m tonnes
Post-reform 2009/10 – 17m tonnes
85%
9%
2%2%2%
3%4%
73%
20%
Beet sugar Isoglucose InulinDirect consumption Cane sugar imports
523.7
631.9
Pre-reform
448.8 -14.3%
541.5 -14.3%
Oct08-Sep09
335.2-36.0%
Raw Sugar reference price (€/t)
404.4-36.0%
Processed Sugar reference price (€/t)
From Oct09Sugar year
EU refined sugar prices and raw sugar prices both fall by 36% over 4 years
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Tate & Lyle will remain the most efficient producer of sucralose in the world
SPLENDA® Sucralose
Breakthrough yield improvements of over 25%
Made possible by:- Investment in pilot plant- Investment in analytical research to support
patent estate- Two plant footprint which enabled full scale
trials
Decision to mothball plant in Alabama- All product moved to Singapore
No impact on customersTime
Yiel
d
>25% YIELD IMPROVEMENT
2009(Not to scale)
Volumes increased 6% over prior year: average selling prices lowerContinuing good growth in Europe
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1%
31%9%
23%
21%
4%
11%
1%
30%7%
25%
18%
4%
15%
SPLENDA® SucraloseHigh intensity sweetener market shares
Global HIS Market by Region – Year to 31 March 2009
-12%-20%+1%-6%-11%Growth in year
-9%+23%0%-6%-2%Growth in year
10%16%22%44%25%Market share
354525189294SPLENDA® Sucralose
3592781144271,178TOTAL HIS
Asia PacificEMEALatin AmericaNorth AmericaGlobalUS $m
Source: LMC International; Company data. Excludes non-food / non-pharma uses.
2009 - $1.2bn 2008 - $1.3bn
SPLENDA® SucraloseAspartameAcesulfame KSaccharinCyclamateSteviaNeotame
Global HIS Market by Product - Years to 31 March
1% 1%
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Financial PositionContinuing operations 1
• Effective interest rate 4.3%
• Effective tax rate on adjusted profit 27.3% (2008: 33.2%)
• Adjusted diluted EPS up 10% (down 8% in constant currency)
• Exceptional items of £119m - £97m Sucralose impairment
• Proposed final dividend maintained; for year increased 1.3%
• Strong cash generation; net debt / EBITDA 2.4 times
1 Excluding the results of International Sugar Trading and Eastern Sugar in both periods and of Redpath, Occidente, and the disposed European starch plants in the year ended 31 March 2008
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Free Cash Flow Year to March 2009
154
5
117224
56
17
451
298
31
Adjustedoperating profit
Dep'n / amort Working capital Share-basedpayments
Operating cashflow
Capex Interest Tax Free cash flow
£m
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Movements in Net DebtYear to March 2009
1 041
2
57378
1 231
104
154
140
57
Net debtApril 2008
Free cashflow incl.
capex
Cash fromdisc ops
Cash fromdisposals
Dividends Other Tradefinance &
other
FX Net debtMarch 2009
£mNet cash generated £245m
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Debt Maturity ProfileMarch 2009
0
200
400
600
800
1000
1200
< 1 yr 1 to 2 yr 2 to 3 yr 3 to 4 yr 4 to 5 yr > 5 yr
Undrawn committed bank facilities Drawn committed bank facilities Bonds and other
£524mUndrawn committed facilities
4.8 yearsAverage maturity of gross debt
£m
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Agenda
Company overview
Business environment
Outlook
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Outlook
Near term outlook- Relative resilience in sales to food and beverage customers- Industrial starch demand remains weak- Customer demand and net corn costs will be key factors
Key factors which will impact the second half of 2010:- Pricing in EU sugar market- 2009 corn harvests - Timing of recovery in US ethanol- Outcome of 2010 sweetener pricing round
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Question and Answers
Please wait for the microphone and state your name and that of your organisation