Tate & Lyle Plc · LSE:TATE
Tate & Lyle — FY2004 Earnings Presentation
57 slides from Tate & Lyle's earnings presentation, Jun 3, 2004
Slide 1: Preliminary Results
Preliminary Results 3 June 2004 Good morning and thank you for coming here today. As part of our commitment to the Combined Code and progressive Governance, I’d like to welcome our Chairman Sir David Lees and a number of our Non-Executive Directors. I hope that you have had a chance to speak to them
Slide 2: Key Results
Key Results • Profit before tax, goodwill and exceptional items increased by 2.2% at constant exchange rates • Diluted EPS before goodwill and exceptional items increased 2.7% to 33.9p • Met 15% target for return on net operating assets • Net debt reduced by £83m to £388m • Proposed total dividend i
Slide 3: Calendar of Significant Events
Calendar of Significant Events 2003 July New divisional Group structure July Completion of sale of Orsan France (MSG) Appointment of two Non Executives and a Senior Nov Independent Non-Executive Director 2004 New sucralose business realignment with McNeil Feb Nutritionals / Johnson & Johnson Plant c
Slide 4: Agenda
Agenda Financials Input Pricing and the EU Sugar Regime Evolution of Strategy and New Vision Outlook 4 On the agenda, Simon will begin this morning’s presentation with a detailed review of the financials. Given recent movements in cereal and energy costs, and the topicality of the European Union Sug
Slide 5: Agenda: Financials
Agenda Financials Financials Input Pricing and the EU Sugar Regime Evolution of Strategy and New Vision Outlook 5 As usual, the slides and the text of this presentation have been posted on our website and for the first time we are webcasting our results. Preliminary results (year to 31 March 2004) P
Slide 6: Financial Highlights
Financial Highlights • Profit before tax & exceptional items marginally below 2003 • 2003 benefited from unusual credits • Impact of exchange translation • Improvement in interest cover • Increase in dividend • Achieved 15% RONOA 6 The bald figures would indicate that profit before tax and exception
Slide 7: Profit and Loss Account
Profit and Loss Account Years to March AUDITED FIGURES £m 2004 2003 Sales 3,167 3,167 = Profit before interest* 251 254 -1% Interest (24) (26) +8% Profit before taxation* 227 228 - 7 * before exceptional items and goodwill amortisation Turning to the profit and loss account: Exchange translation and
Slide 8: Profit and Loss Account
Profit and Loss Account Years to March AUDITED FIGURES £m 2004 2003 Sales 3,167 3,167 = Profit before interest* 251 254 -1% Interest (24) (26) +8% Profit before taxation* 227 228 - PBI*/Sales margin 7.9% 8.0% Interest cover* 9.3 x 7.6 x 8 * before exceptional items and goodwill amortisation The prof
Slide 9: Profit and Loss Account
Profit and Loss Account Years to March AUDITED FIGURES £m 2004 2003 Profit before taxation* 227 228 - Goodwill amortisation (8) (8) = Exceptional items 5 (33) N/a Taxation (69) (57) -21% Minority interests (1) 2 N/a Profit for the period 154 132 +17% 9 * before exceptional items and goodwill amortis
Slide 10: Exceptional Items
Exceptional Items Gain for the Year £5m AUDITED FIGURES Non- £m Operating Total Operating Duty refund 6 5 11 Closure of Mexican Citric Acid business - (3) (3) Net loss on sale of assets / businesses - (3) (3) Total exceptional items 6 (1) 5 10 * before exceptional items and goodwill amortisation Of
Slide 11: Profit and Loss Account
Profit and Loss Account Years to March AUDITED FIGURES £m 2004 2003 Profit before taxation* 227 228 - Goodwill amortisation (8) (8) = Exceptional items 5 (33) N/a Taxation (69) (57) -21% Minority interests (1) 2 N/a Profit for the period 154 132 +17% 11 * before exceptional items and goodwill amorti
Slide 12: Earnings & Dividends per Share
Earnings & Dividends per Share In Pence AUDITED FIGURES 2004 2003 Diluted earnings per share* 33.9 33.0 Dividend per share 18.8 18.3 Dividend cover* 1.8 x 1.8 x 12 * before exceptional items and goodwill amortisation Diluted earnings per share before exceptional items and goodwill amortisation has i
Slide 13: Segmental Analysis
Segmental Analysis Profits in this part of the presentation, as last year, are for continuing activities and are before exceptional items and goodwill amortisation. There is no profit or loss arising in the year classified as discontinued activities. The loss in the prior year was £1m. Preliminary r
Slide 14: Sweeteners and Starches - Americas
Sweeteners and Starches Continuing Activities - Americas AUDITED FIGURES £m 2004 2003 52% Group PBI* Sales 1,219 1,137 +7% Profit before interest* 131 139 -6% Margin* 10.7% 12.2% -1.5 pts • Exchange translation reduced profits by £9m 14 * before exceptional items and goodwill amortisation The £8m re
Slide 15: Sweeteners and Starches - Americas
Sweeteners and Starches Continuing Activities - Americas • HFCS industry demand down • Staley sweetener gross margins flat • Industrial starch gross margins & volumes higher • Strong performance from food ingredients • Higher energy, maintenance, research and pension costs • Success in increasing se
Slide 16: Sweeteners and Starches - Europe
Sweeteners and Starches Continuing Activities - Europe AUDITED FIGURES £m 2004 2003 46% Group PBI* Sales 1,336 1,331 - Profit before interest* 115 111 +4% Margin* 8.6% 8.3% +0.3 pts • Profits increased by £4m due to exchange translation 16 * before exceptional items and goodwill amortisation Exchang
Slide 17: Sweeteners and Starches - Europe
Sweeteners and Starches Continuing Activities - Europe • Increased raw material prices • EU sweetener volumes up; starch volumes flat • Eaststarch performed well • Integration benefits exceeded target • Continued strong cash flow • Profits marginally ahead of prior year • Losses lower than prior yea
Slide 18: Sweeteners and Starches - Rest of the World
Sweeteners and Starches Continuing Activities – Rest of the World AUDITED FIGURES £m 2004 2003 3% Group PBI* Sales 412 354 +16% Profit before interest* 8 11 -27% Margin* 1.9% 3.1% -1.2 pts • Vietnamese profits slightly higher • Sugar trading profits back to normal levels 18 * before exceptional item
Slide 19: Other Segments
Other Segments Continuing Activities – Animal Feed & Bulk Storage and Other AUDITED FIGURES £m 2004 2003 Animal Feed & Bulk Storage Sales 195 227 -14% Profit before interest* 6 4 +50% Margin* 3.1% 1.8% +1.3 pts Other Sales 5 27 -81% Loss before interest* (9) (10) +10% 19 * before exceptional items a
Slide 20: Other Segment: Sucralose
Other Segment Sucralose • Completion announced 5 April 2004 • Accelerated recognition of licence fees in 2004 year • Transaction price of US$137m (£74m) including capitalised costs • Proforma profit before tax of US$33m in calendar 2003 • Significant one-off costs expected in 2005 year • Expect to e
Slide 21: Capital Expenditure
Capital Expenditure AUDITED FIGURES Capital Expenditure Depreciation Astaxanthin Investment £m 140 120 100 80 60 40 20 0 2001 2002 2003 2004 Years to March 21 Capital expenditure at £118m, as expected, was above depreciation of £106m. Investment expenditure included £15m related to the new astaxanth
Slide 22: Free Cash Flow
Free Cash Flow Year to March 2004, in £m AUDITED FIGURES 31 35 74 320 118 62 EBITDA § Increase in Interest Tax Capex Free working capital cash flow 22 § subsidiaries only, before exceptional items Net debt reduced again during the year. Operating profit before depreciation and amortisation of goodwi
Slide 23: Net Debt Reduced to £388m
Net Debt Reduced to £388m Year to March 2004, in £m AUDITED FIGURES 62 (26) 49 15 471 388 63 (80) Net debt Free Disposals Dividends Investments Foreign Other Net debt cash flow exchange Mar 03 Mar 04 23 Disposal income was £63m. The main constituent was the sale of our Orsan monosodium glutamate pla
Slide 24: Summary Balance Sheet
Summary Balance Sheet As at 31 March AUDITED FIGURES Total net assets Net debt Net debt / EBITDA § £m Times 1200 1.6 1.4 1000 1.2 800 1 600 0.8 0.6 400 0.4 200 0.2 0 0 2003 2004 24 § subsidiaries only, before exceptional items Net debt at March 2004 was £388m compared to £471m at the end of the prio
Slide 25: Net Debt History
Net Debt History Years Ended March AUDITED FIGURES £m Net debt Interest cover † Times 1100 10 1000 9 900 8 800 7 700 6 600 5 500 4 400 300 3 200 2 100 1 0 0 2001 2002 2003 2004 25 † before exceptional items and goodwill amortisation. 2003 before unusual interest credits This is the third consecutive
Slide 26: Retirement Benefits
Retirement Benefits P&L Charge & Cash Contributions £m 2004 2003 SSAP24 P&L charge 30 24 Pension Cash Contributions Current service 25 19 To fund deficit 9 42 Total cash contributions 34 61 26 I reported at the interims that the two yearly actuarial review of our main UK pension fund was carried out
Slide 27: Retirement Benefits: FRS17 Gross Deficit
Retirement Benefits FRS17 – Gross Deficit AUDITED FIGURES Pensions Healthcare £m Mar 02 Mar 03 Mar 04 0 50 50 150 100 117 196 150 81 200 250 104 300 350 27 Moving away from actuarial valuations and SSAP 24 to FRS17, this slide shows the deficit for pensions and healthcare liabilities. The pension de
Slide 28: Retirement Benefits: Impact of FRS17
Retirement Benefits Impact of FRS17 – Year to March 2004 AUDITED FIGURES Current £m SSAP24 FRS17 Profit before interest* 251 261 Interest (24) (34) Profit before tax* 227 227 Total net assets 1,016 918 28 * before exceptional items and goodwill amortisation Incorporating FRS17 into the accounts at M
Slide 29: IFRS
IFRS IFRS • We will adopt in the March 2006 year • Detailed project for orderly transition • Project progressing well • Reviewed by our external auditors • Update at November 2004 interims 29 We will adopt international financial reporting standards in the year ending 31 March 2006. A detailed imple
Slide 30: Key Financial Ratios
Key Financial Ratios Years in to March AUDITED FIGURES 2004 2003 Interest cover* 9.3 x 7.6 x Dividend cover* 1.8 x 1.8 x Net debt / EBITDA § 1.2 x 1.4 x Gearing 38% 45% RONOA ‡ 15.1% 14.2% Value added & consumer branded 54% 52% * before exceptional items and goodwill amortisation 30 § subsidiaries o
Slide 31: Agenda: Input Pricing and the EU Sugar Regime
Agenda Input Pricing and the EU Sugar Regime Financials Input Pricing and the EU Sugar Regime Evolution of Strategy and New Vision Outlook 31 Thank you Simon. As I explained earlier I will now look at major external factors affecting the Group before sharing with you the strategic vision for Tate &
Slide 32: European Grain Prices to Mid-May 2004
European Grain Prices to Mid-May 2004 Spot prices March 1999 to Mid-May 2004 Euros per tonne Corn Delivered Bayonne Euros Wheat Delivered Rouen Euros 180 160 140 120 100 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 32 Data: HGCA The drought last year in Europe caused rising cereal costs, which had a si
Slide 33: Amylum: The View Ahead
Amylum The View Ahead • Operations fundamentally viable and integral part of Tate & Lyle Group • Some opportunities for product mix optimisation • Remain committed to investment in Amylum and improving technical performance, customer service and margins • Future growth from more emphasis on value ad
Slide 34: US Corn Prices to Mid-May 2004
US Corn Prices to Mid-May 2004 Nearby Futures Prices March 1999 to Mid-May 2004 US Cents per Bushel 320 300 280 260 240 220 200 180 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 34 Data:Chicago Board of Trade Corn prices increased from US$2.38 per bushel in November to a peak of US$3.16 per bushel in Ap
Slide 35: US Corn and Co-Product Prices to Mid May 2004
US Corn and Co-Product Prices to Mid May 2004 Based to 100, March 1999 Index Corn Corn Gluten Feed Corn Gluten Meal Corn Oil 220 200 180 160 140 120 100 80 60 40 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 35 Data: Corn -Chicago Board of Trade, Corn Feed and Oil -Wall Street Journal, Corn Meal -The Ja
Slide 36: US Corn Wet Millers who Produce Sweeteners
US Corn Wet Millers who Produce Sweeteners Estimated Share of Total Front End Grind % 15 32 9 3 41 Staley CPI Roquette America ADM (incl MCP) Cargill - Cerestar 36 Data: McKeany-Flavell Co., Inc., September 2003 Here you can see the relative position of the major Corn Wet Milling companies (who prod
Slide 37: Energy
Energy • Group energy bill 2004 around £150m • Four prime sources – gas, electricity, coal, oil • More than 60% of 2005 energy bill hedged or covered 37 Our energy bill is around £150m per annum, making it the largest variable cost after raw materials and labour. Our energy comes from four prime sou
Slide 38: EU Sugar Regime
EU Sugar Regime Update on Current Time Frame • No news since interim results in November 2003 • Next communication from the Commission expected in the summer – but implementation timetable may slip • New Commission to be appointed in November 2004 38 There has been no new news since the European Uni
Slide 39: Agenda: Evolution of Strategy and New Vision
Agenda Evolution of Strategy and New Vision Financials Input Pricing and the EU Sugar Regime Evolution of Strategy and New Vision Outlook 39 I have been with the Group for just over a year, and have been getting to know the company and evaluating how we can develop and grow in the future. I have bee
Slide 40: Purpose and Vision
Purpose and Vision Unveiling the New Strategic Vision • PURPOSE To create the world’s leading renewable ingredients business • VISION We will grow by uniting our businesses and developing partnerships to create the world’s leading renewable ingredients business. We will build a consistent global por
Slide 41: Consistently First
Consistently First What We Have to Do Be Consistent • Integrated • Common Standards • Consistent Customer Service • One Brand • One Culture Be First • Lead not follow • Innovate in all areas 41 ‘Consistently first’ - means first and foremost an integrated Tate & Lyle. The initial steps were taken wi
Slide 42: The Strategic Challenge
The Strategic Challenge Change in Emphasis and Key Thrusts Low Cost Focus Value Added Re-energise Growth in Leadership initiatives adjacent and position in core selected markets/ areas technologies 42 When I joined the Group I inherited a sound strategy – which has evolved as we move from consolidat
Slide 43: Choosing How We Will Grow
Choosing How We Will Grow Why Choose the Value Added Path? Consumer Quota Commodity Branded Value Added Constrained Products Excellent Good margins, growth Higher margins low volumes - opportunities but growth Limited growth Growth would opportunities not deliver unlikely - required Political return
Slide 44: Choosing How We Will Grow: Economics of the Four Segments
Choosing How We Will Grow Economics of the Four Segments Cash for Growth Value Added – Consumer Excellent Growth Cash Generation per Unit Branded Opportunities Quota Constrained Cash and Low Cost/ High Volume Substrate for Growth Commodity 44 Growth Opportunities Data: Illustrative not to scale Thes
Slide 45: How We Will Grow Value Added
How We Will Grow Value Added Unlocking our Full Potential • Improving the cost and efficiency of the commodity base • Change how we go to market • Change what we take to market • Select where we compete 45 So improving the cost and efficiency of our commodity base supports value added growth. But wh
Slide 46: Kellogg's Case Study
Kellogg’s Case Study Working in Partnership with our Customers • Long-term relationship • 2004 over 2002 sales – number of products more than doubled • Growth in demand for value added ingredients • Close R&D relationship – supplying material for plant trials 46 I’d like to look at a profile of Stal
Slide 47: Developing Partnerships - McNeil Nutritionals
Developing Partnerships - McNeil Nutritionals Review of Sucralose Realignment • Sucralose plant, Alabama - global ingredient business • In 3,500 products globally • Potential to cross-sell with other value- added products • Integration process underway 47 The strategic re-alignment of our relationsh
Slide 48: Ingredient Advert US Television 2003
Ingredient Advert US Television 2003 McNeil Nutritionals’ Sucralose Ingredient Advert To view the advert online please click on the picture. The advert will not play if the file is saved to disc/hard drive. 48 Before we look at some statistics, I’d like to show you an advert developed by McNeil Nutr
Slide 49: Major Sweeteners Global Demand, 2003
Major Sweeteners Global Demand, 2003 150 Million Tonnes Sugar Equivalent Million Tonnes Sugar Equivalent 11 14 125 HFCS Intense Sugar 49 Data: LMC International and Company Estimates Starting with an overview of the global demand for sweeteners, which stands at 150 million tonnes sugar equivalent –
Slide 50: Intense Sweetener Market Relative Value
Intense Sweetener Market Relative Value Split by Geography and by Product, Total Value US$1bn US$m, Manufacturers’ Sales 10 110 220 80 130 550 550 220 10 120 Aspartame Acesulfame K Americas Europe Stevia Sucralose Asia Rest of World Saccharin Cyclamate 50 Data: Company Estimates We estimate that the
Slide 51: End Use Categories for Intense Sweeteners
End Use Categories for Intense Sweeteners Split by End Use, Total Value US$1bn US$m, Manufacturers’ Sales Tabletop 160 110 Beverages 30 Baked Goods 40 30 Confectionery 10 Dairy 620 Processed Foods Other Foods 51 Data: Company Estimates As we can see from the pie-chart, the beverage market (here in b
Slide 52: US Tabletop Market Share
US Tabletop Market Share Intense Sweeteners’ Market Share – US Dollar Sales Market Share % 60 SPLENDA® No Calorie Sweetener Equal® Sweet 'n' Low® 50 40 30 20 10 0 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Source: Information Resources, Inc. - Total US FDTKS, 4-5 week periods from Septe
Slide 53: Developing Partnerships - DuPont
Developing Partnerships - DuPont Bio-3G Loudon Plant (North View) – Computer Generated Image • Combined investment approx. $100m • Initial commercial manufacturing facility in Loudon, Tennessee • Construction complete 31 March 2006 • Sales forecast $75m by 2008 53 Last week we announced our joint ve
Slide 54: Developing Partnerships - DuPont
Developing Partnerships - DuPont 54 Sorona® is also UV and chlorine-resistant - making it ideal for swimwear! Preliminary results (year to 31 March 2004) Page 54 Presentation: 3 June 2004
Slide 55: Developing Partnerships - DuPont
Developing Partnerships - DuPont Bio-3G Loudon Plant (North View) – Computer Generated Image • Combined investment approx. $100m • Initial commercial manufacturing facility in Loudon, Tennessee • Construction complete 31 March 2006 • Sales forecast $75m by 2008 55 However the main market segment for
Slide 56: Agenda: Outlook
Agenda Outlook Financials Input Pricing and the EU Sugar Regime Evolution of Strategy and New Vision Outlook 56 That concludes my strategic review. I hope that we have given you examples of how we are increasing our value added portfolio and reducing our exposure to the volatility of commodity price
Slide 57: Outlook Statement
Outlook Statement Consistently First in Renewable Ingredients • Strong performance in a challenging environment • Continued growth in value added products • Success in growing the business through partnerships with McNeil Nutritionals, DuPont and IGENE • Challenges at Amylum • Evolution of strategy