Tate & Lyle reports 5% EBITDA growth, CP Kelco deal drives results

Investing.com -- Tate & Lyle (LON:TATE) on Thursday reported a 5% increase in adjusted EBITDA to £446 million for the year ending March 31, driven by the acquisition of CP Kelco in November. 

However, the company’s revenue declined 3% on a pro forma basis to £2.124 billion, impacted by input cost deflation and pricing adjustments.

The mainstay business saw a 5% drop in revenue to £1.51 billion, while CP Kelco generated £612 million in revenue, up 3%, with 8% volume growth offset by a 5-percentage-point decline from pricing and mix. 

CP Kelco’s adjusted EBITDA increased 9% to £108 million, and its margin improved by 100 basis points to 17.6%. Excluding CP Kelco, Tate & Lyle’s adjusted EBITDA rose 4% to £338 million, with the group’s combined EBITDA margin improving to 21%, up 170 basis points.

Profit before tax was £263 million, up 7% from the prior year. Statutory profit before tax from continuing operations stood at £88 million. 

Free cash flow increased by £20 million to £190 million, with free cash flow conversion at 82%, surpassing the company’s long-term target of 75%. 

Net debt rose to £961 million, primarily due to the CP Kelco acquisition, with a net debt to EBITDA ratio of 2.2 times.

Adjusted earnings per share rose 4% to 50.3p, while statutory diluted earnings per share fell to 11.6p, down from 40p, reflecting higher exceptional costs and the increase in shares following the acquisition. 

Return on capital employed dropped to 12.8% from 17.4%, due to the full-year impact of the CP Kelco acquisition, though on an organic basis, ROCE increased by 180 basis points.

Food and Beverage Solutions revenue fell 7% to £1.232 billion, with volume growth of 3% offset by a 10-percentage-point decline in price and mix. 

Adjusted EBITDA for this segment rose 2% in constant currency to £284 million, with the EBITDA margin increasing 200 basis points to 23.1%. 

Revenue declined by 4% in North America, 2% in Asia, the Middle East, Africa, and Latin America, and 18% in Europe.

Sucralose revenue rose 16% to £193 million, driven entirely by volume growth. Adjusted EBITDA for this segment rose 18% to £60 million. 

In contrast, Primary Products Europe revenue fell 21% to £87 million due to lower pricing, and adjusted EBITDA for this segment was a loss of £6 million.

Following its November acquisition, CP Kelco reported £224 million in revenue for the four-and-a-half months, with full-year pro forma revenue at £612 million. 

Gellan gum saw double-digit revenue growth, and pectin demand rose in North America and Europe. Adjusted EBITDA for CP Kelco increased to £108 million.

Tate & Lyle completed a £216 million share buyback in January and recommended a final dividend of 13.4p per share, bringing the full-year dividend to 19.8p, a 3.7% increase from the prior year. 

Exceptional costs totaled £96 million, including £59 million for the exit of a tapioca starch facility in Thailand, £24 million in integration costs, and £13 million in restructuring expenses. The reported effective tax rate was 48.4%, with an adjusted effective tax rate of 22.6%.

The company sold its remaining 49.7% stake in the Primient joint venture for £277 million in June, returning the £85 million gain on disposal through share buybacks. Capital expenditure totaled £121 million. 

In March, Tate & Lyle issued $300 million and €275 million in long-term debt to refinance the bridge facility used for the CP Kelco purchase.