Trading Statement
Tate & Lyle PLC
Tate & Lyle PLC
TRADING STATEMENT
With the annual sweetener pricing round largely complete, Tate & Lyle
issues the following trading statement for the three months ended 31
December 2014.
THIRD QUARTER OPERATING PERFORMANCE
-
Speciality Food Ingredients in line with our expectations
-
Bulk Ingredients weaker driven by lower US sweetener volumes and
ethanol margins
-
Diagnostic review of global supply chain confirms no material
incremental capital investment is required; improvements to operating
and internal planning processes being implemented
SPECIALITY FOOD INGREDIENTS
Speciality Food Ingredients, excluding SPLENDA® Sucralose,
performed in line with our expectations, with volumes slightly ahead of
the prior year period driven by solid growth in Europe and Asia Pacific.
Customer demand for new products launched from our innovation pipeline
remains high, with these new products delivering another quarter of
strong volume growth.
SPLENDA® Sucralose performed in line with our expectations
with volumes slightly lower than the prior year period. The sucralose
market remained, and looks set to continue to be, extremely competitive
and our approach remains only to compete for volumes where we see value.
We expect to conclude the project to evaluate how best to maximise
returns from this product by the end of the current quarter.
We continue to invest in the higher growth emerging markets. On 8
December 2014, we acquired a majority equity interest in Gemacom Tech
Indústria e Comércio S.A. (Gemacom), the leading domestically-owned Food
Systems business in Brazil. In December, we also re-purchased certain
distribution rights to sell crystalline fructose directly to customers
primarily in Asia Pacific for a consideration of US$18million. This will
be treated as an exceptional cost in the full year income statement.
BULK INGREDIENTS
Bulk Ingredients performed below the prior year period driven by the
impact of lower US sweetener volumes in part due to capacity constraints
in the wider US transportation network, weakening EU sugar prices which
affected bulk sweetener prices in Europe, and a sharp deterioration in
ethanol margins near the end of the period. The combined impact of these
industry-related factors meant that Bulk Ingredients performed below our
expectations.
Consistent with our strategy to dampen commodities volatility, we have
progressively re-positioned our Bulk Ingredients business such that
tolling contracts now represent around 75% of US corn sweetener volumes.
Contracts in the 2015 calendar year pricing round for the remaining 25%
of corn sweetener volumes were renewed at higher unit margins, although
this benefit for the overall division will be offset in the final
quarter and into the 2016 financial year by a combination of lower
volumes as grind is diverted to Speciality Food Ingredients and the
impact of continued pricing pressure in US ethanol and EU bulk sweetener
markets.
REVIEW OF DEMAND, SUPPLY AND PLANNING PROCESSES
The diagnostic review of global demand, supply and planning processes
announced in September 2014 has been completed. This confirms that the
programme of incremental capital expenditure announced as part of our
May 2014 full year results, together with ongoing actions to increase
inventory held closer to our customers, will allow us to better manage
customer needs going forward. Accordingly, no material incremental
capital investment is required beyond the already announced incremental
capital expenditure which we expect to come on stream in the second half
of the 2016 financial year. The review also confirms that improvements
are needed to operating and supply chain planning capabilities and to
the robustness of internal planning processes. A programme to implement
these improvements is underway, with a number of short-term actions
already in place, and it is anticipated this will take 12 to 18 months
to embed fully. Together, these actions are expected to improve the
capabilities required to support future growth in our Speciality Food
Ingredients business.
As previously reported, we expect to incur costs of around £40 million
in the current financial year as a result of operational and supply
chain disruption. Of this, around £15 million relates to operational
costs which are not expected to reoccur in the next financial year. The
remaining costs relate mainly to lost sales due to product
unavailability and while we expect a return to normal levels of growth
off a lower base, we do not expect to see the incremental benefit of the
recovery of these lost sales in the 2016 financial year.
BALANCE SHEET
Net debt at 31 December 2014 was £466 million (30 September 2014 – £383
million), reflecting investments in future growth including the
continued deployment of capital expenditure previously announced, the
acquisition of a majority stake in Gemacom, and the repurchase of
crystalline fructose distribution rights. The effect of exchange
translation was to increase net debt by £15 million.
OUTLOOK FOR THE YEAR ENDING 31 MARCH 2015
While Speciality Food Ingredients is anticipated to continue to perform
in line with our expectations, following the weak performance of Bulk
Ingredients in the third quarter driven by lower US sweetener volumes
and pressure in ethanol and EU bulk sweetener markets, which we
anticipate will continue through the fourth quarter, we now expect Group
profits for the full financial year to be modestly below the range
stated in September 2014 of £230 to £245million1.
1 Range based on forecast foreign exchange rates of GBP:USD
£1.00:$1.69 in September 2014
END
Conference call:
A conference call will be held today at 8:00am GMT, hosted by Javed
Ahmed, Chief Executive and Nick Hampton, Chief Financial Officer.
Participants are requested to dial in at least 10 minutes before the
commencement of the call.
Dial in details are as follows:
Standard International Access: +44
(0) 20 3003 2666
Password: Tate & Lyle
UK replay number: +44 (0) 20 3350 6902
Replay access PIN: 1243240
A replay of this call will be available after the end of the live call
for 14 days until 19 February 2015.
For more information contact Tate & Lyle PLC:
Christopher Marsh, Group VP, Investor and Media Relations
Tel: +44
(0) 20 7257 2110 or Mobile: +44 (0) 7796 192 688
Andrew Lorenz, FTI Consulting (Media)
Tel: +44 (0) 20 3727
1323 or Mobile: +44 (0) 7775 641 807
About Tate & Lyle:
Tate & Lyle is a global provider of ingredients and solutions to the
food, beverage and other industries, with operations in over 30
locations worldwide.
Tate & Lyle operates through two global divisions, Speciality Food
Ingredients and Bulk Ingredients, supported by our Innovation and
Commercial Development and Global Operations groups. The Group's
strategy is to become a leading global provider of Speciality Food
Ingredients through a disciplined focus on growth, and by driving Bulk
Ingredients for sustained cash generation to fuel this growth.
Speciality Food Ingredients consists of three platforms: Texturants,
which includes speciality starches and stabilisers; Sweeteners, which
comprises nutritive sweeteners and our range of no-calorie sweeteners
including SPLENDA® Sucralose; and our Health and Wellness
portfolio which includes speciality fibres and our salt-reduction
offering. Additionally, our Food Systems business provides a wide
variety of blended ingredient solutions.
Tate & Lyle Bulk Ingredients includes bulk sweeteners, industrial
starches and fermentation products (primarily acidulants). Corn
co-products from both divisions are primarily sold as animal feed.
Tate & Lyle is listed on the London Stock Exchange under the symbol
TATE.L. American Depositary Receipts trade under TATYY. In the year to
31 March 2014, Tate & Lyle sales totalled £3.1 billion. For more
information, please visit http://www.tateandlyle.com.
SPLENDA® is a trademark of McNeil Nutritionals, LLC.
