Interim Results

Tate & Lyle PLC 9 November 2000 ANNOUNCEMENT OF INTERIM RESULTS For the 27 weeks ended 30 September 2000 2000 1999 INTERIM RESULTS TO SEPTEMBER 27 26 weeks weeks ----------------------------------------------------------------- Sales £2,122m £2,132m Total operating profit: group and share of joint ventures and associates £106m £166m Profit before tax, exceptional items and £68m £127m goodwill amortisation (Loss)/profit before taxation (£2m) £127m Earnings per share (diluted) before 9.3p 17.4p exceptional items (Loss)/earnings per share (diluted) after (6.5p) 17.4p exceptional items ----------------------------------------------------------------- - Good progress on strategic initiatives - Profits significantly impacted by difficult trading conditions - Operating cash inflow of £195 million - Unchanged interim dividend of 5.5p * 'Overall, we are making good progress in the delivery of the strategy as set out in the last Annual Report, and we are pursuing strategic solutions for both our US sugar businesses. This remains a high priority. Trading conditions have not improved since the Annual General Meeting and in US sugar there has been a further deterioration in recent weeks. If current conditions persist, it will be difficult in the second half of this financial year to improve on the results for the first half. Our response to these circumstances is to intensify our focus on cost reduction and cash management.' Sir David Lees Larry Pillard Chairman Chief Executive An interim statement incorporating the Group profit and loss account for the 27 weeks ended 30 September 2000 will be posted to shareholders. Copies of this Announcement are available from: John R Hunter, Company Secretary, Tate & Lyle PLC, Sugar Quay, Lower Thames Street, London EC3R 6DQ * This is unchanged from the interim dividend for the first half year to 27 March 1999, the appropriate comparative period following the change of year end. PAGE ONE OF TWELVE INTERIM REPORT Overview Profit before tax, goodwill amortisation and exceptional items for the 27 weeks to 30 September 2000 was £68 million, compared to £127 million in the 26-week period to 25 September 1999, and was, as expected, below the £82 million achieved in the 26 weeks to March 2000. Unprecedentedly poor market conditions have resulted in continuing losses in US sugar, and competitive markets at Staley and Amylum have also depressed profitability. Furthermore, the Group as a whole has seen a £12 million increase in energy costs compared with the 26 weeks to 25 September 1999. We expect Group energy costs for the 2001 financial year to be over £30 million higher than in the year to March 2000. We continue to refocus the Group towards higher-margin and higher-growth businesses, disposing of underperforming assets and eliminating costs wherever possible. The acquisition of the minorities in Amylum and Staley, and the sale of the commodity Australian sugar business, Bundaberg, were completed in this period, and eight smaller businesses have also been sold. Since the period end, we have signed a non-binding memorandum of understanding for the sale of Western Sugar, and further details relating to this agreement are described below. We announced on 1 August 2000 that we had entered into a joint development agreement with DuPont's Bio-Based Materials business to develop the process that turns a carbohydrate base into 1,3-propanediol ('PDO'), which is then used to manufacture DuPont Sorona(TM), the most advanced polymer platform in DuPont's science portfolio. This is an excellent fit with our global carbohydrates business and an important opportunity to advance our strategy of growing through developing new value-added products. It is expected that a pilot plant for the process will be completed by the year-end. We continue to benefit from cost cutting initiatives, including the UK and North American Business Improvement Projects and other programmes, although the benefit is currently masked by market conditions. The Board has declared an interim dividend of 5.5p per share, to be paid on 16 January 2001 to shareholders registered on 8 December 2000. This is unchanged from the interim dividend for the first half year to 27 March 1999, the appropriate comparative period following the change of year end. Results for the 27 weeks to 30 September 2000 ** Sales were almost unchanged at £2,122 million (£2,132 million). Operating profit was £106 million (£166 million) and included losses of £5 million (£3 million) from discontinued businesses and a £1 million (nil) charge for amortisation of goodwill relating to the purchase of minorities in Amylum and Staley. Exceptional items totalled £69 million (nil), comprising the profits on the sale of other businesses of £6 million, less a £75 million write down in recognition of the proposed sale of Western Sugar, which includes goodwill of £25 million previously written off to reserves. The effect of the write down on shareholders' funds is a reduction of £50 million. Profit before tax, goodwill amortisation and exceptional items was £68 million (£127 million). Loss before tax and after goodwill amortisation and exceptional items was £2 million (profit of £127 million). Currency movements benefited profit before tax by £1 million, with a £7 million gain in the Americas segment offsetting adverse movements of £3 million in the European segment and £3 million elsewhere in the Group. The underlying tax charge remained at 27%. Diluted earnings per share before goodwill amortisation and exceptional items were 9.3p (17.4p), and after exceptional items losses per share were 6.5p (earnings of 17.4p). Net cash inflow from operating activities was satisfactory despite adverse trading conditions, contributing £195 million against £306 million last year. Capital expenditure at £57 million (£50 million), remained below depreciation. The sale of Bundaberg for £159 million, completed in July, together with other disposals totalling £19 million, contributed to the funding of the £212 million cash consideration for the purchase of the Amylum and Staley minorities, completed in August. 24.08 million new ordinary shares worth £69 million were also issued in August as the balance of the consideration for this acquisition. ** Results for the 26-week period to 25 September 1999 are shown in brackets. PAGE TWO OF TWELVE US Sugar Strategic Review As part of our overall strategy, we have been active in evaluating and pursuing options for the Group's US sugar businesses, Domino and Western Sugar, both of which are trading unprofitably. We have signed a conditional non-binding memorandum of understanding with the Rocky Mountain Sugar Growers Co- operative ('RMSGC') for the sale of Western to RMSGC. Whilst this is an important initial step towards a solution, discussions may take some months to conclude. Any disposal of Western is likely to be at a substantial discount to net asset value. In recognition of this, a £75 million write down has been charged as an exceptional item, and this includes goodwill of £25 million previously written off to reserves. Fixed assets at Western Sugar at the end of September were £103 million before the write down. We continue to explore options for Domino, although the prospects for a speedy resolution have been further impaired by worsening conditions in the US sugar market. Amylum Integration Following the completion of the purchase of the minorities in Amylum and Staley on 14 August, good initial progress has been made towards the full integration of the Amylum businesses with the rest of the Tate & Lyle Group and towards the creation of a global starch business. Teams are pursuing benefits in operations, sales, procurement, logistics, and also in support services such as tax, treasury and accounting. For a number of product lines, particularly in value-added starches, this will lead, in time, to world markets being served flexibly through co-ordinated production plants in America and Europe, as already happens in the citric acid business. Our target is for annual benefits to exceed £50 million within three years. PAGE THREE OF TWELVE Segmental Analysis before Exceptional Items Americas Profits in the segment declined by £35 million to £57 million. Profits at Staley were lower, principally because of reduced sweetener margins. Higher net corn costs, arising from lower by-product pricing, and higher energy costs, affected margins in both sweeteners and starches. Starch margins also suffered from lower pricing for industrial starches. High fructose corn syrup ('HFCS') volumes were flat, as a result of disappointing carbonated soft drink consumption in the US. Citric acid improved as the benefits of increased capacity at the Dayton, Ohio, factory, and in Brazil, began to come through, although results were below our expectations in terms of both volumes and prices. In our North American sugar business, Canadian refining performed well, with higher volumes and good margins. In the US, however, where the sugar market is substantially oversupplied, both beet-processing and cane-refining operations continued to make losses. Margins were squeezed by unprecedentedly low selling prices, coupled with increased energy costs. Our new purpose-built barge began operations in September, transporting partly-processed liquid sugar from Baltimore, which will enable Brooklyn to move to full production as well as reducing transport costs. A rise of over 10% in US raw sugar prices at the end of September and the beginning of October has resulted in a further squeeze on margins and will make a return to profitability at Domino in the second half of this financial year unlikely. Europe Profits in the segment declined by £19 million to £48 million. At Amylum, our European cereal sweetener and starch business, profits fell. HFCS volumes in Western Europe were down in the period, due to the poor summer weather in northern Europe and to the rephasing of quota sales more evenly over the year. Glutamate prices were also significantly lower. Starch selling prices increased but there was little or no progress in overall sweetener product pricing. Amylum's Central European joint ventures saw increased volumes and profits over the comparable period. Energy costs increased substantially. We expect higher energy and transport costs to affect Amylum's profitability adversely in the second half. An in-depth cost reduction programme has been initiated at Amylum, running parallel to the integration exercise referred to above. In European Sugar, our refineries in London and Lisbon performed well. The weakness of the euro impacted profits in the UK. A range of organic sugars was launched in the UK. The review of the European Union beet sugar regime is expected to be fully completed by March 2001. Our beet operations in Central Europe continued to make satisfactory profits, with good volume increases, particularly in Hungary. Domestic prices in Central Europe benefited from lower stocks. Rest of the World Underlying profits from continuing businesses in this segment were little changed. The sale of Bundaberg, which was the largest unit in this segment, was completed on 14 July. PAGE FOUR OF TWELVE Animal Feed and Bulk Storage Trading losses on businesses sold during the period totalled £5 million. The profit from continuing businesses, chiefly molasses and storage, was £7 million. The weaker euro affected pricing and profitability in Europe. The Board Richard Delbridge, formerly Chief Financial Officer of National Westminster Bank Plc, was appointed to the Board on 1 September 2000. His international experience will further strengthen the Board. Outlook Overall, we are making good progress in the delivery of the strategy as set out in the last Annual Report, and we are pursuing strategic solutions for both our US sugar businesses. This remains a high priority. Trading conditions have not improved since the Annual General Meeting and in US sugar there has been a further deterioration in recent weeks. If current conditions persist, it will be difficult in the second half of this financial year to improve on the results for the first half. Our response to these circumstances is to intensify our focus on cost reduction and cash management. Sir David Lees Larry Pillard Chairman Chief Executive 8 November 2000 8 November 2000 PAGE FIVE OF TWELVE TATE & LYLE GROUP PROFIT AND LOSS ACCOUNT Results for the 27 weeks ended 30 September 2000 27 26 52 weeks weeks weeks ended ended ended 30 Sept 25 Sept 25 March 2000 1999 2000 £million £million £million --------------------------------------------------------------------- Total sales - ongoing activities 2,015 1,899 3,636 - discontinued activities 107 233 454 ------ ------ ------ Total sales, including discontinued 2,122 2,132 4,090 activities Less share of sales of joint (175) (196) (352) ventures and associates ------ ------ ------ Group sales 1,947 1,936 3,738 ====== ====== ====== Group operating profit before 91 140 237 goodwill amortisation Goodwill amortisation (1) - - ------ ------ ------ Group operating profit 90 140 237 Share of profits of joint ventures 16 26 47 and associates ------ ------ ------ Total operating profit: group and share of joint ventures and 106 166 284 associates ---------------------------------------------------------------------- Ongoing activities 111 169 285 Discontinued activities (5) (3) (1) ---------------------------------------------------------------------- Exceptional write down on planned (75) - (50) sale of business Exceptional profit on sale of businesses 6 - 25 Exceptional profit on sale of fixed assets - - 7 ------ ------ ------ Profit before interest 37 166 266 Net interest payable (35) (34) (65) Share of joint ventures' and (4) (5) (10) associates' interest ------ ------ ------ (Loss)/profit before taxation (2) 127 191 UK taxation - (6) (8) Overseas taxation (22) (28) (55) ------ ------ ------ (Loss)/profit after taxation (24) 93 128 Minority interests (6) (13) (17) ------ ------ ------ (Loss)/profit for the period (30) 80 111 Dividends paid and proposed (28) (56) (99) ------ ------ ------ Retained (loss)/earnings (58) 24 12 ====== ====== ====== (Loss)/earnings per share - basic (6.5)p 17.5p 24.3p - diluted (6.5)p 17.4p 24.2p Dividends per ordinary share 5.5p 12.3p 21.4p ---------------------------------------------------------------------- Before goodwill amortisation and exceptional items: Profit before taxation (£ million) 68 127 209 Diluted earnings per share (pence) 9.3p 17.4p 29.9p ---------------------------------------------------------------------- PAGE SIX OF TWELVE TATE & LYLE GROUP BALANCE SHEET Summarised balance sheet as at 30 September 2000 Unaudited Unaudited Audited 30 Sept 25 Sept 25 March 2000 1999 2000 £million £million £million ----------------------------------------------------------------- Fixed assets: Intangible assets 152 - 1 Tangible assets 1,530 1,692 1,678 Investments 176 190 175 ------ ------ ------ 1,858 1,882 1,854 ------ ------ ------ Current assets: Stock 375 374 479 Debtors 524 591 535 Investments and cash at bank and 176 201 261 in hand ------ ------ ------ 1,075 1,166 1,275 Creditors - due within one year: Borrowings (158) (302) (434) Other (418) (537) (530) ------ ------ ------ Net current assets 499 327 311 ------ ------ ------ Total assets less current 2,357 2,209 2,165 liabilities Creditors - due after one year: Borrowings (856) (766) (632) Other (7) (11) (12) Provisions for liabilities and (249) (237) (257) charges ------ ------ ------ Total net assets 1,245 1,195 1,264 ====== ====== ====== Capital and reserves: Called up share capital 123 117 117 Share premium account and other 496 443 445 reserves Profit and loss account 580 478 539 ------ ------ ------ Shareholders' funds 1,199 1,038 1,101 Minority interests 46 157 163 ------ ------ ------ 1,245 1,195 1,264 ====== ====== ====== PAGE SEVEN OF TWELVE TATE & LYLE STATEMENT OF CASH FLOWS For the 27 weeks ended 30 September 2000 27 26 52 weeks weeks weeks ended ended ended 30 Sept 25 Sept 25 March 2000 1999 2000 £million £million £million ------------------------------------------------------------------------- Net cash inflow from operating activities 195 306 450 Dividends from joint ventures and associates 7 1 12 Returns on investment and servicing of finance: Net interest paid (44) (32) (62) Dividends paid to minority interests (1) (3) (6) in subsidiary undertakings ------ ------ ------ (45) (35) (68) ------ ------ ------ Taxation paid (34) (26) (44) Capital expenditure and financial investment: Purchase of tangible fixed assets (57) (50) (126) Sale of tangible fixed assets - 1 23 Purchase of fixed asset investments - (7) (11)* Sale of fixed asset investments - 2 2 ------ ------ ------ (57) (54) (112) ------ ------ ------ Acquisitions and disposals: Purchase of businesses and subsidiaries (net of cash acquired) (217) (2) (2) Sale of businesses 153** 2 9 Refinancing of existing joint ventures - (8) (8)* Sale of interests in joint ventures 15 - 68 and associates Capital repayments by joint ventures - 1 1 ------ ------ ------ (49) (7) 68 ------ ------ ------ Equity dividends paid (42) (79) (135) Net cash (outflow)/inflow before financing and management of liquid resources (25) 106 171 ====== ====== ====== * In addition to £8 million direct equity refinancing of joint ventures, £4 million increase in loans to joint ventures represented refinancing in the 52 weeks to March 2000. ** In addition, £10 million of borrowings were transferred out of the Group as part of the disposal of subsidiaries. PAGE EIGHT OF TWELVE TATE & LYLE NOTES TO STATEMENT OF CASH FLOWS For the 27 weeks ended 30 September 2000 NET CASH INFLOW FROM OPERATING 27 26 52 ACTIVITIES weeks weeks weeks ended ended ended 30 25 25 Sept Sept March 2000 1999 2000 £million £million £million ------------------------------------------------------------------- Operating profit 90 140 237 Depreciation of tangible fixed assets 66 68 136 Amortisation of goodwill 1 - - Change in working capital 38 98 79 Provisions against fixed asset - - (2) investments ------ ------ ------ 195 306 450 ====== ====== ====== CASH FLOW/NET DEBT RECONCILIATION ------------------------------------------------------------------- Net cash (outflow)/inflow before financing and management of liquid (25) 106 171 resources Raised on issue of share capital - 1 2 Changes in debt not involving cash flow: - Reduction/(increase) on disposal 10 - (1) of subsidiaries - Exchange movements (18) 12 10 - Amortisation of bond discount - - (1) ------ ------ ------ (Increase)/reduction in net borrowings (33) 119 181 Net borrowings at the start of the (805) (986) (986) period ------ ------ ------ Net borrowings at the end of the (838) (867) (805) period ====== ====== ====== NET DEBT/BALANCE SHEET RECONCILIATION ------------------------------------------------------------------- Investments and cash at bank and 176 201 261 in hand Borrowings due within one year (158) (302) (434) Borrowings due after one year (856) (766) (632) ------ ------ ------ Net borrowings at the end of the (838) (867) (805) period ====== ====== ====== PAGE NINE OF TWELVE TATE & LYLE STATEMENT OF RECOGNISED GAINS AND LOSSES For the 27 weeks ended 30 September 2000 STATEMENT OF RECOGNISED GAINS 27 weeks 26 weeks 52 weeks AND LOSSES ended ended ended 30 Sept 25 Sept 25 March 2000 1999 2000 £million £million £million ------------------------------------------------------------------- (Loss)/profit for the period (30) 80 111 Unrealised deficit on revaluation of tangible fixed assets (7) - - Currency difference on foreign currency net investments 51 (10) (1) ------ ------ ------ Total recognised gains for period 14 70 110 ====== ====== ====== Average exchange rates US dollar £1=$ 1.50 1.60 1.60 Euro £1=EUR 1.64 1.52 1.56 Period end exchange rates US dollar £1=$ 1.48 1.64 1.59 Euro £1=EUR 1.68 1.57 1.64 BASIS OF PREPARATION The foregoing accounts are prepared on the basis of the accounting policies set out in the 2000 Annual Report for the period ended 25 March 2000. The balance sheet as at 25 March 2000 has been abridged from the full Group accounts, which received an auditors' report which was unqualified and did not contain any statement concerning accounting records or failure to obtain necessary information and explanations. The full Group accounts have been delivered to the Registrar of Companies. The results for the 27 weeks ended 30 September 2000, the 26 weeks ended 25 September 1999 and the 52 weeks ended 25 March 2000 are neither audited nor reviewed. The balance sheet at 30 September 2000 is neither audited nor reviewed. The balance sheet at 25 September 1999 was reviewed by the auditors, whose report did not identify any material modification. PAGE TEN OF TWELVE TATE & LYLE ANALYSIS OF SALES AANALYSIS OF SALES 27 weeks 26 weeks 52 weeks ended ended ended 30 Sept 25 Sept 25 March 2000 1999 2000 £million £million £million ---------------------------------------------------------------------- Sweeteners and starches - Americas 990 882 1,702 - Europe 609 622 1,167 - Rest of the world 257 271 520 ------ ------ ------ 1,856 1,775 3,389 Animal feed and bulk storage 215 309 595 Other businesses and activities 51 48 106 ------ ------ ------ 2,122 2,132 4,090 ====== ====== ====== Included in the analysis of sales are the following amounts relating to associates and joint ventures: Sweeteners and starches - Americas 88 91 159 - Europe 64 58 104 - Rest of the world 19 16 31 ------ ------ ------ 171 165 294 Animal feed and bulk storage 3 18 33 Other businesses and activities 1 13 25 ------ ------ ------ 175 196 352 ====== ====== ====== Included in the analysis of sales are the following amounts relating to discontinued activities: Sweeteners and starches - Americas - - - - Europe - - - - Rest of the world 26 71 127 ------ ------ ------ 26 71 127 Animal feed and bulk storage 76 151 305 Other businesses and activities 5 11 22 ------ ------ ------ 107 233 454 ====== ====== ====== PAGE ELEVEN OF TWELVE TATE & LYLE ANALYSIS OF PROFIT BEFORE INTEREST 27 weeks 26 weeks 52 weeks ended ended ended 30 Sept 25 Sept 25 March 2000 1999 2000 BEFORE EXCEPTIONAL ITEMS £million £million £million ---------------------------------------------------------------------- Sweeteners and starches - Americas 57 92 156 - Europe 48 67 112 - Rest of the world 6 5 12 ------ ------ ------ 111 164 280 Animal feed and bulk storage 2 7 11 Other businesses and activities (7) (5) (7) ------ ------ ------ 106 166 284 ====== ====== ====== AFTER EXCEPTIONAL ITEMS --------------------------------------------------------------------- Sweeteners and starches - Americas (18) 92 170 - Europe 48 65 121 - Rest of the world 12 7 (1) ------ ------ ------ 42 164 290 Animal feed and bulk storage (1) 7 (17) Other businesses and activities (4) (5) (7) ------ ------ ------ 37 166 266 ====== ====== ====== Included in the above tables are the following amounts relating to discontinued activities: Sweeteners and starches - Americas - - - - Europe - - - - Rest of the world (2) (3)* -* ------ ------ ------ (2) (3)* -* Animal feed and bulk storage (5) (3) (7) Other businesses and activities 2 3 6 ------ ------ ------ (5) (3)* (1)* ====== ====== ====== * Includes an exceptional profit of £2 million. 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