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GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
ContentsExecutive Summary.......................................................................................................2
2.0 Situation Analysis....................................................................................................3
2.1 Company Analysis...............................................................................................3
2.1.1 Tate & Lyle Company...................................................................................3
2.1.2 Tate & Lyle Markets and Structure...............................................................3
2.1.3 Tate & Lyle Business Strategy......................................................................3
2.1.4 Tate & Lyle Operations.................................................................................4
2.2 Business Code of Conduct...................................................................................4
2.3 Corporate social responsibility.............................................................................6
3.0 SWOT Analysis.......................................................................................................8
3.1 Strength................................................................................................................9
3.1.1The market for value added............................................................................9
3.1.2 Research and Development (R&D)..............................................................9
3.2 Weaknesses........................................................................................................10
3.3 Opportunities......................................................................................................10
3.4 Threat.................................................................................................................10
3.4.1 Top Competitors for Tate & Lyle:..............................................................10
4.0 Strategy Analysis...................................................................................................11
5.0 Strategies Capabilities of Tate & Lyle...................................................................14
6.0 Industry Analysis (Porter’s Five Forces)...............................................................15
6.1 Rivalry among existed firm................................................................................15
6.2 Threat of new entrants........................................................................................16
6.3 Threats of substitute products............................................................................17
6.4 Bargaining power of buyers...............................................................................17
6.5 Bargaining power of suppliers...........................................................................18
7.0 Tate & Lyle Environmental (PEST) Factors..........................................................18
7.1 How Tate & Lyle adding value..........................................................................18
7.1.1 Research and development..........................................................................19
7.1.2 Research partnerships..................................................................................19
7.1.3 Consumer insights.......................................................................................20
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
7.1.4 Commercial partnerships............................................................................20
7.2 How Tate & Lyle creating volume.....................................................................21
7.2.1 Developing new technologies.....................................................................21
7.2.2 Protecting their expertise.............................................................................22
7.2.3 Manufacturing efficiency............................................................................22
7.3 How Tate & Lyle going to diversify in market..................................................22
7.3.1 Industrial.....................................................................................................23
7.3.2 Food and beverage......................................................................................23
7.3.3 Animal feed.................................................................................................23
7.3.4 Pharmaceutical and personal care...............................................................24
8.0 Summary of Tate & Lyle Performance..................................................................24
8.1 Net finance expense...........................................................................................25
8.2 Taxation..............................................................................................................26
8.3 Impact of changes in exchange rates..................................................................26
8.4 Interest rate risk..................................................................................................27
8.5 Foreign exchange risk........................................................................................27
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
Executive Summary
Tate & Lyle is committed to conducting its business in a manner that is sensitive to
the environmental needs of the communities in which it operates. They comes with several
approach in order to fulfil the requirements that include and can be achieved as a minimum,
compliance with all applicable environmental laws and regulations and implementation of
responsible standards where laws or regulations do not exist. Besides that, Tate & Lyle take
seriously by making continuous efforts to prevent pollution and improve environmental
performance throughout all its activities. In order to become a successful company, they able
to seeking and to minimize the use of energy, materials and natural resources where possible,
developing renewable sources for the energy and materials used by our processes.
In Tate & Lyle it is important to assessing the environmental risks associated with
existing and new activities or when decommissioning facilities, and establishing controls to
ensure that the risks remain at an acceptable level. The achievement that can be proud of Tate
& Lyle Company is by developing renewable products for our customers for instance Bio-
ethanol and Bio-PDO to help them reduce their impact on the natural environment. Tate &
Lyle encouraging concern and respect for the environment, emphasizing every employee's
responsibility for environmental performance through providing appropriate operating
procedures and training.
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
2.0 Situation Analysis
2.1 Company Analysis
2.1.1 Tate & Lyle Company
Tate & Lyle was founded in the United Kingdom (UK) in 1921 but its roots can be
traced back to a number of companies established in the middle of the 19th century focused
on sugars in Europe, and corn milling in the USA and Europe. Tate & Lyle is headquartered
in the UK and operates more than 45 production facilities around the world. Tate & Lyle PLC
is a public limited company listed on the London Stock Exchange and registered in England.
At March 2010, Tate & Lyle employed 5,666 people across the Group.
Tate & Lyle is a global provider of distinctive, high quality ingredients and solutions
to the food, beverage and other industries. Through them large-scale of efficient
manufacturing plants, they turn raw materials into distinctive and high quality ingredients for
them customers. Tate & Lyle ingredients and solutions add taste, texture, nutrition and
increased functionality to products that millions of people around the world use or consume
every day.
2.1.2 Tate & Lyle Markets and Structure
Tate & Lyle provide customers in four market which is food and beverage, industrial,
animal feed and pharmaceutical and personal care with quality services and ingredients. Tate
& Lyle operates through two global business units which are in Specialty Food Ingredients
and Bulk Ingredients. These two business units are supported by globalised support services
and Tate & Lyle Innovation and Commercial Development group.
2.1.3 Tate & Lyle Business Strategy
Tate & Lyle strategy is to deliver sustainable long-term growth and returns for them
shareholders. This strategy will go through disciplined focus on growing them specialist food
ingredients business like deeper customer understanding, continuous innovation and agility
and stronger positions in high- growth markets. In addition, the strategy to fuel the growth
also will do through driving bulk ingredients and sugars business for sustained cash
generation.
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
2.1.4 Tate & Lyle Operations
Tate & Lyle operates a network of corn wet mills in both North America and Europe,
processing two types of corn that called dent and waxy. Dent corn is the most common crop
end is used to make high fructose corn syrup, basic food and industrial starches, alcohol and
animal feed meanwhile waxy corn is contracted direct from the farmer and has special
functionality that makes it ideal for creating stabilizers, thickeners and emulsifiers for the
food industry. It is also used in adhesives and gums for the paper industry. Tate & Lyle
sugars business processes and refines cane sugar, a tropical crop grown in areas of high
sunshine and rainfall. The results, cane sugar accounts for around 80% of world sugar
production.
Tate & Lyle have over 250 people in R&D team worldwide working to develop
innovative ingredients from renewable resources. Tate & Lyle have R&D laboratories in
Decatur, Illinois and Lille, France, but they also have application laboratories in countries
such as France, China, Germany, Italy and Australia which are combined with them sales
offices. Tate & Lyle also develop partnerships with the external research community in order
to give the fresh ideas and insights into the markets.
2.2 Business Code of Conduct
The following Business Code of Conduct set out in abbreviated form the Tate & Lyle
Ethical Commitment and Policy Guidelines. Tate & Lyle shares the widely accepted view
that a greater level of management control of a company that has more than one set of
operations, greater responsibility for ensuring compliance with Group policies. Group Ethical
commitment and policy guidance without conditions to all operating
units and subsidiaries are owned by Tate & Lyle itself.
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
Health & Safety - Tate & Lyle believed that no business activity is of such urgency
or importance that it may be carry out in an unsafe manner. The Group target of an accident
is to reduce them into zero. Group committed to providing a safe and healthy environment for
their employees and visitors to their premises, and is committed to continue
to increase Health and Safety procedures and performance. Safety committees comprise of
employees work to ensure that safety remain paramount- safety is not someone else concern,
it is everyone responsibilities. This is an ongoing process that requires continuous training.
Environment - Tate & Lyle take seriously to the environmental issues, striving to
be good neighbours and to minimize the Group environmental. All operation which is carried
out by 2the Group recognizes the responsibility towards the natural environment in which
we live and work, and the Group comply with all local laws as applicable, and agree. The
Group subscribes to the principal of the International Chamber of Commerce’s Business
Charter of Sustainable Development, and to be popular definition of Sustainable
Development as “a better quality of life for everyone, now and generation to come.’
Tate & Lyle environmental policies and operating procedures are supported by a written
report that requires the integration of environmental concerns into the operations, training and
management practices at all levels.
Human Right – After operating in the developing world more than 60 years, Tate &
Lyle recognizes that the primary responsibility of the employer and source of income in the
community lead. Tate & Lyle recognizes human rights and freedom and strive
to reflect the business operations. This Group is open to discuss issues about human
rights related to the way it does business with the government and NGOs.
Rare condition restrictions or embargoes imposed by the international community in these
countries Tate & Lyle which business, the Group is the lead of the relevant political
authorities to ensure that the restriction is not broken and that any observed trade embargo.
Tate & Lyle reserves the right, where it is able to do so, to withdraw from trade relations with
companies or countries where it is not possible for Tate & Lyle to operate under its
own policies and ethical standards.
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
Legal Compliance - Tate & Lyle will comply with all applicable local,
national, and supra-related national laws and regulations in each country in which it operates.
In These countries, or a particular situation, where there are no laws or rules governing
certain activities of operations, Tate & Lyle will strive to operate in accordance with the
principles of this Code.
2.3 Corporate social responsibility
Tate & Lyle, corporate social responsibility equates to apply four core values, which
is safety, integrity, knowledge and innovation when they conduct their business. This means
that further progress in achieving the highest standards of safety; consider
the environmental impact of every aspect of what they do and treat employees, suppliers
and the communities in which they work as a long term partners. Putting these
concerns at the centre of their business requires a proactive management at all the levels
within the group. The Board reviews Tate & Lyle’s policies and performance annually, and
the Chief Executive is the Board member accountable for all aspects of corporate social
responsibility.
Environment - Today, it is something that they must understand and reduce
environment impact. Most countries have signed up to targets for carbon
emissions, and legislation for the corporate world far more stringent environmental issues
is concerned. At Tate & Lyle, they believe that to achieve sustainable growth in
harmony with the environment, not only social responsibility, it's what customers want and it
is good business sense.
Therefore, they are committed to conducting them business in a manner that is
sensitive to the environment and the community in which they operate. They
have defined environmental standards and practices in all of their operations, and they
actively encourage their partners to demonstrate a similar level of commitment. All their
operations fully integrate sustainable management practices into their operational systems
and procedures and their board reviews environmental performance annually to ensure that
they continue to make progress in reducing their impact on the environment while bringing
economic benefits to Tate & Lyle.
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
Safety - Tate & Lyle has no higher priority than safety, which they believe is
important to run a successful business. This means that ensuring a safe and healthy
condition for everyone at their website: employees, contractors and visitors. By reporting,
recognising and rewarding safety performance, they aim to ensure that all of their
operations to focus on continuous improvement.
Overall, their employee safety performance showed good progress in 2008,
particularly in reducing the severity rate. During another year of heavy construction activity,
they were pleased that they are overall contractor safety index also improved significantly,
although it is lost-time and recordable injury rates for contractors both worsened.
Employee health and wellbeing - At Tate & Lyle, they aim to lead the way in
employee health. Programs will different across the Group in accordance with local
needs, but all are based on the principle that the Company have a role to play
in helping employees improve their health by supporting information, advice and others on
health and wellness.
In US, Tate & Lyle continues to provide programs and tools to help employees
become more informed consumers of health care services themselves, and encourage them
to adopt a healthy lifestyle. There are some examples of their programmes include
Tate & Lyle continues to provide programs and tools to help their employees to become
better informed consumers of their healthcare services, and this have encourage them to adopt
a healthy lifestyle. Besides that, they also have offer wed-based system to their entire
employee, which is called Blue Points’ system. It provides a platform for their employees to
start and keep track of healthy behaviours. Employees can earn points for meeting certain
health targets, which can be redeemed online for health related products such
as yoga mats and a sports bag.
While in UK, nurse-led in Tate & Lyle was a health program which is emphasizes in
education and prevention and is often referred to as a model for other businesses and public
sector organizations in UK. The major Initiatives include educating their employees on health
and wellness, and provide vocational rehabilitation as an alternative to certificate the absence
of disease and health promotion activities, health clinic, advice on healthy eating, and
counselling services. Besides that, they also share elements of their program partners.
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
For instance, they have helped two communities in the absence
of management training and advice, and they host regular visits from the trainee of GPs and
doctors from Occupational Health Diploma courses to assist their understanding
of occupational health in a factory environment. They also offer work experience to
the trainees from occupational health nurse from South Bank and Brunel University.
Communities - Tate & Lyle aims to play a positive role in any community in
which they operate. Over the past few years, they have developed a Group-wide community
of engagement policy that form one of the core components under their ethical behaviour.
Their program involves building a long term relationships with local partners to deliver a
common objective, which is creation a strong, safe and healthy communities by
investing time and resources into the projects that directly address local needs. For example,
in the financial year ended 31 March 2009, Tate &Lyle’s total worldwide charitable
donations is £ 674,000, up from £ 642,000 in the previous year, while their
total global pro bono contributions in goods and services were estimated to be £ 221,000,
down from £ 254,000 the previous year. They have support various initiatives and local
organizations which involved in the regeneration of communities around the world.
3.0 SWOT Analysis
Tate & Lyle (T&L) is a leading manufacturer of renewable food and industrial
ingredients. The Tate & Lyle annual report indicates that there has some real strength that can
build on. The company has cost efficient, well invested manufacturing footprint, and deep
technical process.
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
3.1 Strength
3.1.1The market for value added
Overall, value added food ingredients remained steady throughout 2010 financial
year, although the focus of consumers on health and wellness trend and facilities continue to
drive growth in these areas. Value added ingredients sales increased by 4% to £546 million.
Operating profits increased by 22% to £101 million. There was continued to experiences
good growth in sales volumes of wellness ingredients. Within primary food markets, they
expect domestic demand for corn sweeteners to continue its long-term trend of gradual
decline. Whilst we have seen a degree of improvement in demand for industrial starches from
the levels experienced during the second half of the 2009 financial year. The level of net corn
cost will be a key factor in determining performance in the coming financial year.
3.1.2 Research and Development (R&D)
The Tate & Lyle Company has a strong focus on research and development (R&D)
for introducing innovative products and technologies in the market. Scientists have developed
food ingredients and industrial from renewable resources. Marketing and regulatory teams
work together to provide consumer research, support on labeling requirements, and assistance
on meeting product claims. Tate & Lyle company use of market research to understand the
consumer, the markets operate in and customer’s needs. . By continuing to invest in R&D,
the group is able to come up with innovative a product which is add value and act as key
differentiators. In additional, the specialist knowledge supplements existing in-house R&D
capability. This business act as an R&D team for small- to medium-sized customers and build
close working relationships is a reliable trusted partners in development.
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
3.2 Weaknesses
The Tate & Lyle company indicates that the primary sales decreased by 4% from
£2,584 million to £2,476 million. This decline was due to lower co-product income, lower
industrial sales volume in both American and Europe and reduced selling prices of sugar and
isoglucose in Europe, reflecting the institutional price cuts implemented. The overall adjusted
operating profit was in line with prior year was decreased by 7% in constant currency at £298
million. The food and industrial ingredients of American were decreased of £178 million, 2%
below the prior year. Furthermore, low sales will be affected low return at the end. Weak
return on resources will be reflecting the management’s inability to deploy its asset in
profitable avenues, and this could reduce investor confidence.
3.3 Opportunities
A relatively small market for Tate & Lyle, pharmaceutical and personal care is now
they expect will grow in the future although remaining relatively modest. At the moment,
they sell two value added ingredients into this market which is ZemeaTM which is cosmetics
and creams, through joint venture DuPont Tate & Lyle BioProducts; and SPLENDA®
Sucrlose that used in oral care products and to sweeten medicines without adding calories.
3.4 Threat
The bulk starch market, where our food and industrial ingredients business to
compete, is concentrated in a relatively small number of large players who operate in many
different fields, including food, beverages, paper and pharmaceuticals. Tate & Lyle Company
main competitors in the USA for corn wet milling and starch-based products are Archer
Daniels Midland Company (ADM), Corn Products International and Cargill. National Starch
is also a competitor, particularly in relation to some higher-value modified food and industrial
starches.
3.4.1 Top Competitors for Tate & Lyle:
Archer Daniels Midland Company, Cargill Foods, Corn Products International,
Danisco, Kerry Group plc, Penford Corporation, Sudzucker Group and Tereos S.A.
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
4.0 Strategy Analysis
Tate & Lyle delivered a solid performance in the face of challenging conditions in
number of them markets. Adjusted operation profit from core value added food ingredients
grew strongly increasing by 22% (14% in constant currency) to £131 million. Profit within
primary ingredients in the Americas and Europe wore 22% below the prior year at £98
million (27% in constant currency), as lower co-product income and weaker industrial profits
adversely impacted results.
With regard to Tate & Lyle plant in Fort Dodge, Lowa, in the last few months them
have conducted detailed analysis of the end markets which the plant would supply under they
new capital management process. The continuing depressed and volatile outlook for ethanol,
and uncertain conditions in industrial starch and corn gluten feed markets, do not provide any
basic to complete and commission the plant.
Changes in feed and energy markets together with the reconfiguration of technology
required following Tate & Lyle experience of installing new equipment at them Loudon
plant, along with remobilization costs, would mean that, if them were to complete Fort
Dodge; total additional costs would now be in the region of £70 million.
At the beginning of the year, recognizing the need to act decisively and quickly in the
face of the global economic downturn, them set out they three near- term financial priorities
for the business: to optimist working capital; implement tight capital expenditure control; and
reduce they cost base.
Working capital reductions generated £79 million represented 68% of depreciation, in
line with the commitment stated at the beginning of the financial year to hold expenditure
below the annual depreciation charge. Underlying costs reduced by £30 million in the year
compared to the comparative period including the cost savings achieved from rationalizing
the sucralose manufacturing footprint, with reductions achieved through our focus on all
areas of the cost base.
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
In future, Tate & Lyle purpose will be to grow them specialty food ingredients
business. They will do it through deeper customer understanding, continuous innovation and
agility, and through building stronger positions in high-growth markets. They also will
continue to drive sustained cash generation from the bulk ingredients and sugars businesses
to fuel this growth.
From 1 June 2010 Tate & Lyle will reorganize and operate through three global
business unit: Specialty food ingredients, bulk ingredients and sugars. Each business unit will
have a distinct go-to-market organization to provide the necessary focus and bring the
required expertise to the different markets them serve, and each will have a dedicated
manufacturing asset base.
Ongoing reviews performed regularly by the Group Executive Committee, as well as
peer reviews, have been added to sharpen the investment appraisal process. Tate & Lyle will
also create a dedicated, internal resource, independent of the operations, with responsibility
for oversight of all capital expenditure.
Tate & Lyle have already made huge strides in the way they control working capital
in them business, evident from the improvement delivered in the 2010 financial year. There is
a much clearer appreciation within the organization now of the need for working capital
optimization and this is something that Tate & Lyle intend to build on. To this end, they have
implemented standard measures of working capital efficiency. In the 2011 financial year,
these targets will, for the first time, be linked to management incentive structures.
Tate & Lyle three business units will be supported by global support services, using
shared service centres’ to eliminate duplication and rationalize resources required. This will
also allow them to redeploy some needed resources to the ‘front end’ of the business. Tate &
Lyle have already started work to strengthen operation enablers, by establishing a common
set of performance metrics across the business and they will move to a single global IS/IT
platform to drive improved global decision making over the next two years. It will take time
but the steps will lay the foundation to deliver significant improvements in operational
execution over the coming months and years.
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
Exceptional costs of £8 million associated with the reorganization and restructuring of
the group activities are expected to be recognized in the 2011 financial year, with further
exceptional costs expected to be in the region of £13 million the following year. These cash
costs are expected subsequently to pay back within two years. Additionally, they are
developing a detailed implementation plan for a common, global IS/IT platform, which they
anticipate will be implemented over the next 24 months.
Tate & Lyle investment focus will be realigned to them strategy: Tate & Lyle engine
of growth and the focus of acquisitions will be specialty food ingredients, with greater
emphasis on emerging markets. Tate & Lyle bulk ingredients and sugars businesses remain
strong and valued business, and we will continue to invest appropriately in order to increase
their efficiency and generate cash.
A new unit, the Innovation and Commercial Development Group, will be established,
dedicated to driving sustained long-term growth, with a key focus on specialty food
ingredients. This unit will integrate R&D, global marketing and global product management,
and will enable a fully integrated approach to developing and commercializing innovation.
Tate & Lyle expect to achieve growth both in the existing markets, through the benefits of the
new operating modal and investment focus, and also in emerging markets and in the small-
and medium-sized enterprise (SME) and private – label customer segments, where they have
limited presence today. Tate & Lyle new operating structure will provide a clean platform
from which to grow the business, both organically and through acquisitions.
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
5.0 Strategies Capabilities of Tate & Lyle
Strategies Capabilities of Tate and Lyle have been divided into cost leadership and
differentiation. For cost leadership, company Tate and Lyle achieves economies of scale
lowers the average cost per unit through increased production. It is a global provider of
ingredients and solutions to the food, beverage and other industries, operating from over 30
production facilities around the world. For evidence, Tate and Lyle is a large-scale corn
processor. It grinds over 750k bushels of corn per day, which is equivalent to 1.75 million
acres annually. The plant size and overall scale provides this company with a low-cost
platform from which to aggressively grow our value added portfolio.
For differentiation, company Tate and Lyle does investment in research and
development (R&D) capabilities to develop innovative solution that meet customers’ product
challenges. The company emphasizes their customers. It investigates and understands what
are the customers’ need deeply and create the products that can satisfy their customers. It
enables all the products from their company have high quality. Success in long term,
company Tate and Lyle requires a mindset of constant enquiry and a relentless search for
how to do things better. It knows that creating new, profitable products requires world-class
ideas and innovation in ingredients, food applications and process technology.
Besides that, this company also focuses on attracting and developing talent, and on
making sure their employees succeed. This company requires finding the right people who
have enthusiasm, tenacity and confidence as well as being technically competent and help to
develop their employees by providing training. Moreover, company Tate and Lyle create
opportunities which develop new skills and increases levels of competences and sponsor
educational and technical development through continuing education programs.
In addition, this company is not just concern about the quality of products and
ingredients; it is also about customer services. It establishes and enhances long term customer
relationship. This company provides more flexible delivery to work out the most efficient
way possible to get customers’ order to them in the form and at the time they want it.
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
6.0 Industry Analysis (Porter’s Five Forces)
6.1 Rivalry among existed firm
Refers to annual report on 2010, we will find out that Tate & Lyle has go through
very fast in industry growth compare to other company and also their competitor. In 2010
report, Tate &Lyle has responded well to the near-term financial priorities set at the start of
the years, resulting in a stronger balance sheet and solid overall performance in what have
been challenging market conditions.
Tate &Lyle is a global provider of ingredients and solution to the food, beverage and
other industries. Tata &Lyle is famous for their raw materials, corn and cane sugar. Since
their raw material is very important in people life, this industry has growth very fast. Corn
and cane sugar is daily use products and there is less substitution products to replace them. It
is impossible for people to take sweet food without contain any sugar ingredients.
High in industry growth mean high in concentration. Industry growth will attract
many competitors into the market. Although Tate & Lyle is one of the biggest corn and cane
sugar suppliers in this world, their main competitors in Europe are Cargill, Syral (part of
Tereos), Roquette Freres, Danisco, Kerry and National Starch. Besides that, competition for
Tate & Lyle in European sugar businesses comes mainly from British Sugar which called a
subsidiary of Associated British Food plc, Sudzucker, Nordzucker and Tereos. In this market,
the concentration is still remaining high.
The differentiation in this market will be brand name, pricing, advertising strategy and
packaging. Tate & Lyle and their competitor are producing same products, which is cane
sugar and corn. So there will be no much big different in their producing product in customer
mind. Only the differentiation that available for customers to choose would be like mentioned
above. For instance, Tate & Lyle always choose the right pricing according to the product
quality. Conclude that higher quality means higher in price.
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
Besides that, switching costs for customer is extremely low. This also mean buyer can
easily switching to buy from Tate & Lyle competitor products. Low in switching cost cause
lower loyalty for Tate & Lyle products. In corn and cane sugar products, price different is
extremely low. Today, I want to buy Tate & Lyle sugar in hypermarket, but since no more in
shelf, I will only simply choose company’s sugar since the price different is only 20 or 30
cents. So low switching costs can cause customers easily switch to other product.
6.2 Threat of new entrants
First mover advantage is very important for a company get luxury profits. Even
thought Tate & Lyle is not a first mover in this corn and cane sugar market, but still they are
great company. In the sugar cane industry, Booker Brother, McConnell emerged as the
largest sugar plantation owner in British Guinea. In British, sugar was owned by a complex
mix of different types of firm, local and British owned, even before the large-scale
investments of the British sugar refiner Tate & Lyle in the 1930s.
There are also some legal barriers that stop other competitor from entering the sugar
industry. This is to prevent too much competitor in a single market. There are investment cost
and laws and regulations. Investment cost mean cost that needed when entering in sugar
industry. This investment is to get all the machinery and the resources that needed to operate
in sugar market. According to one report, a company needs at least 160 billion as 80 billion
for sugar farms, 50 million on mills and 30 billion on refineries.
Tate & Lyle has entered into five-year strategic partnership agreement with
Biovittoria Ltd. for the exclusive global marketing and distribution right for BioVittoria’s
monk fruit. Tate & Lyle will be marketing the products in the US under the
PUREFRRUIT[TM] brand name. This can help Tate & Lyle to market the fruit. This
distribution access is useful for Tate & Lyle to enter another market easily.
GA20403 DATE OF SUBMISSION: 14 MARCH 2012FINANCIAL STATEMENT ANALYSISMISS SITI NUR AQILAH AB WAHAB
6.3 Threats of substitute products
Tate & Lyle Caster Sugar 500g sell about $2.87 and Tate & Lyle icing sugar will sell
about $3.22. Caster sugar is for normal daily use and it can be use with any food that we like
while icing sugar will be more used on making cake or biscuit. Tate & Lyle have market
many type of sugar to suit the customer demand. The pricing are quite cheap compare to
other competitor price and this has become one of the comparative advantages.
Some customer prefers Tate & Lyle sugar products because their products have
quality assured. They use Tate & Lyle products from the very first day and they will not
easily change to other products. Most customers showed unwillingness to switch to other
product even though the price is lower. Tate & Lyle have built loyalty inside their customer
mind. Tate & Lyle always come out with sugar products that meet with market demand. With
this, customer can easily found sugar with different purpose with Tate & Lyle sugar product.
6.4 Bargaining power of buyers
Switching costs of customer from Tate & Lyle sugar product to other company
product is extremely low. This is because the price of sugar product is not high and the
different is low. This mean if customer do not like Tate & Lyle sugar product, he can easily
switching to other company product.
Besides that, differentiation in customer perception also important for Tate & Lyle
sugar product. Most of the customer will choose back Tate & Lyle sugar because they believe
Tate & Lyle sugar are the best among other company sugar. This is because after they already
use it and they felt the sugar is suitable for them. This will help them to differentiate Tate &
Lyle sugar with other company sugar. After that, they will continue buy Tate & Lyle sugar in
the future.
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Sugar is one of the very important daily use products. And we can say that sugar is
important product for cost and quality. Tate & Lyle sugar products are cheaper in price and
better in quality compare to other competitor sugar products. This is because Tate & Lyle is
large company which can operate efficiently and enjoy economy of scale. This will help to
reduce the Tate & Lyle production cost and then later lower price can be enjoyed by
customer.
6.5 Bargaining power of suppliers.
Since Tate & Lyle is a producer of its own sugar products, so there will no bargaining
power of suppliers. Tate & Lyle are producer and also suppliers for its sugar products. Tate &
Lyle will produce the cane sugar with their own technology and sugar cane field. Tate & Lyle
will not depend on any suppliers. This gave Tate & Lyle a lot benefits from reaching its own
customers. Tate & Lyle can use their best way to produce the product to maximum customers
need. They can put their effort n understanding their customers and serve them better.
7.0 Tate & Lyle Environmental (PEST) Factors
7.1 How Tate & Lyle adding value
Nowadays, there are rapidly changing in our lifestyles which are causing consumers
to demand more from the products they buy no matter in product department or service
departments. This company have their own expertise in processing carbohydrates
and blending, specialist R & D knowledge and insight into the market to help
them develop ingredients that add taste, nutrition and increased functionality to
their products’ customers Tate & Lyle have high-volume commodity base which is
allows them to run their plants efficiently and produce low-cost substrate they can use
to create a special, higher margin products for both food and industrial customers. These
products are adding value through the fact that they are either proprietary to
Tate & Lyle, have a greater function than alternatives, or come up with additional
services to customers. There have five ways to adding value in their product, which is
research and development, research partnerships, consumer insights and commercial
partnerships.
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7.1.1 Research and development
Tate & Lyle have 280 people in R & D teams around the worldwide to
develop innovative ingredients from renewable resources. In September 2008, they opened a
new Innovation Centre in Lille, France, and they also have application laboratories in
countries such as India, China and Australia which are combined with their sales offices.
Research and development capabilities are divided into three main groups, which is
development of products, technologies and customer solutions. Product development is
divided into sweeteners, health, text rants, bio-products, industrial and animal feed. This
group focuses on developing new products and improving existing products. While the
technologies group is include the process of engineering, chemical analysis
and carbohydrates, and bio-chemicals. Their role is to determine how to
create, analyze and produce ingredients. The customer solutions group includes the
application and technical service team. The applications team is to develop prototypes and
sensory analysis for customers who use their ingredients. While the technical
services teams work directly with their own customers to incorporate their ingredients
into their products.
7.1.2 Research partnerships
To give them have a new ideas and insight into the market, they had develop
a partnerships with external research community. In October 2008, Tate & Lyle had
contributed £4.5 million to support a new Clinical Research Facility which is opened by
King’s College London at St Thomas’ Hospital. The aim of this Clinical Research Facility is
to undertake research into areas such as gastrointestinal health, carbohydrate metabolism, and
medical conditions such as obesity, diabetes and cardiovascular disorders. With the
cooperation with King’s College London, they allow Tate & Lyle to to share knowledge
and ultimately bring new products and technologies to market.
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Besides that, they also have a Research Advisory Group which is comprise by a panel
of six international industry and academic experts. This Research Advisory Group is to
review the research and development portfolio and provides an understanding on how
the technology can be applied to future development.
7.1.3 Consumer insights
The market they operate is to satisfy customer’s needs by understanding their
consumers. In 2005, they are one of the first ingredients companies go directly to their
consumer to understand what drives purchasing habits, and what a user look in the future
products. They have used this insight to drive the development of their own
products, to differentiate themselves from their competitors and give their customers
advantage. Every year, Tate & Lyle will have run a programme of studies to canvass the
views of consumer in Europe, the Americas and Asia. Usually they will use the basic
research attitudes like focus groups as a starting point to complete the program with a
detailed quantitative study.
This research is to shows a growing understanding of the benefits of fibre in the
diet that is healthy, which is deal with a variety of their PROMITOR ™ range of dietary
fibre. Their Research and Development (R & D), marketing and regulatory teams have to
work together to provide insight from customer research, support on labelling
requirements, and assistance on meeting product demand.
7.1.4 Commercial partnerships
In order to grow their business, they have form a joint venture or partnership
to develop and distribute new products, and increase the capacity if their existing portfolio of
ingredients. By using alliances and joint ventures can be an effective way to reduce costs and
invest in new markets, and this can gain an access to new and complementary technologies
and expertise. There have few examples about their partnerships with McNeil Nutritionals (a
Johnson & Johnson company) on SPLENDA® Sucralose, and with DuPont on Bio-PDO™.
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7.2 How Tate & Lyle creating volume
To satisfy the customer want about the quality ingredient, Tate & Lyle will
start with the process a large volume of raw material from which we create the same basic
products that are sold or used as a starting point for the development of specific materials and
branded items. Produce this volume and large-scale operation, the plants effectively, enables
them to keep unit costs low throughout the business. There have several ways to keep create
the volume of raw material, there is developing new technologies, protecting their expertise,
and manufacturing efficiency.
7.2.1 Developing new technologies
Tate & Lyle have their own research and technology team are dedicated
to developing the latest engineering technology, for their existing plants and for new builds.
Tate & Lyle have their own technology, which is CORNBELT®. The purpose of this
technology is to increase the starch yields while at the same time reduce per unit energy
consumption. Besides that, Tate & Lyle also used energy conservation technology in their
cane sugar refinery in London. They had invested £20 million in refinery for biomass boiler
is it assumes it will complete in March 2009. When this is fully operation, they assume that
this biomass boiler can reduce refinery’s carbon footprint for around 20% and it also can
replace fossil fuel with the use of renewable energy source. While for the sugar business, they
have their own specialist team, which is called Tate & Lyle Process Technology. This
specialist team is provided support services, process engineering and design expertise to the
sugar cane industry worldwide.
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7.2.2 Protecting their expertise
In order to support their business and protect their competitive advantage, they need
to maintain a large number of patents. They need to carry out product innovation and
development work to result in new technology, patented or proprietary. They also need
to monitor market developments closely to identify any possible infringement of patents and
intellectual property and take legal action when they are necessary.
7.2.3 Manufacturing efficiency
In order to keep the factory operations safely and efficiently at high volumes,
they require a reliable manufacturing process and up-to-date. The engineers who are actively
involved in the manufacturing line and use some tools of computer-based process for tracking
and data model to help identify opportunities for efficiency improvements such as increasing
revenues, reducing waste and saving energy. In US, they have run the pilot plants in both
corn wet milling and sucralose businesses by dedicated teams which are used to identify a
ways to make their manufacturing processes more efficient. Process of improvement to
identify at their sucralose pilot plant within 12 months has enabled them to achieve a
breakthrough in product manufacturing.
7.3 How Tate & Lyle going to diversify in market
They have provided customers in four key markets with quality service and ingredient
made from corn or cane sugar, which provides important functionality for their customers’
product. In order to generate returns and grow their businesses,
they need to carefully manage the product mix. This involves maintaining a
high volume, low cost of basic commodities to help to produce a higher margin, value-added
ingredients and services.
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Tate & Lyle had diversified their product and services to suit different needs of
consumer in the market. Product and services that had already diversified in the market is
industrial ingredients, food and beverage, animal feed and pharmaceutical and personal care.
The net profit for the year ending March 2009 was £70 million.
7.3.1 Industrial
The global market for industrial ingredient has come under several pressures due to
continued global economic recession. However, over the longer term, potential growth
areas of the industry remain to Tate &Lyle as a trend towards a more green life and stimulate
demand for the replacement of petrochemical ingredient made from sources renewable
resources. Traditional industrial markets for Tate & Lyle have included paper and board
(starches), fuels (ethanol) and household goods (acidulants). New markets for us include oil-
well drilling (biogums), textiles and plastics (Bio-PDO™).
7.3.2 Food and beverage
The market global food and beverage ingredient are now worth about U.S. $
30 billion, and historically has been growing at a rate of around 3% per year. Tate & Lyle
was a largest market in food and beverages, which comprises over 70% of the Group’s total
sales. The development of emerging economies, like Brazil, India and China, has also fuelled
growth in demand for food ingredients in recent years.
7.3.3 Animal feed
They serve this market with the molasses produced in the Europe and worn gluten
meal and corn gluten feed produced in both Europe and the United States. This is a by
product of their production process and sold as a nutritious food to feed livestock, fish and
pets. This is important because it sells these products to help them manage the net cost of raw
materials.
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7.3.4 Pharmaceutical and personal care
An emerging market for Tate &Lyle, pharmaceutical and personal care is one they
expect will grow in the future although still relatively small. At the moment, we sell two
value added ingredients into this market: Zemea™ (cosmetics and creams) through our joint
venture DuPont Tate & Lyle BioProducts, and SPLENDA® Sucralose (to sweeten medicines
without adding calories).
8.0 Summary of Tate & Lyle Performance
Sales of £3,506 million from continuing operations were 1% lower than the previous
year. After excluding the impression of the exchange, sales were lower 6. Primary sales
decline of 4% (8% in constant currency) from £2,584 million to £2,476million. The decrease
is mainly due to declining revenue co product, lower industry sales volume in both America
and Europe and reduce the selling price of sugar isoglucose in Europe, reflecting
the institutional price cuts implemented under the EU sugar regime reform. Value-
added sales increased by 6% (flat in constant currency) to £1,030 million, this had
representing about 30% of Group sales.
Overall adjusted operating profit was in line with the previous year that is
decrease by 7% inconstant currency to £298 million. Adjusted operating profit in the Food &
Industrial Ingredients, America of £178 million is 2% lower than the previous year,
10% in constant currency as a low income with product and reduce the starch industry profit
was partially offset by increased profits from the ingredients value-added foods.
Food & Industrial Ingredients, Europe achieved an increase in operating
profits of 6%(4% in constant currency) to £54 million, this reflecting the growth in value
added food ingredients and Food System, partly offset by weaker primary food
and industrial starch margins. Sugar deliver an increase of 150% (100% in constant currency)
to £30 million, this reflecting the expected increase in margin units in the second half of
the EU sugar this year.
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Adjusted operating profit in Sucralose has been reduce by 7%(9% in constant
currency) to £ 67 million, with operating margins reflect lower unit costs associated with
making a transition to the location. Central costs are increased by £13 million to £31 million,
due mainly to a one-off cost of £5million during the year associated with this review and
restructuring of the Group’s activities, and certain one-off credit of £ 6million recognized in
the previous year.
In addition to the effects of changes in exchange rates, operating profit was
influenced by a small number of items in the financial year 2010. We recognize the delivery
of income £3 million quota isoglicose in Romania; and incurred costs of £5 million in
connection with research and business restructuring done this year.
Amortization of acquired intangible is £14 million (2009-£15 million) was
slightly lower than the previous year. Extraordinary items amounted to a charge
of £276 million (2009 - £119 million) have been addressed in the executive study. While the
net financial expenses from continuing operations are increased from £51 million to £
69million. Effect of change in accordance with the interests contributed caused an increase
of £4 million over the previous year. We had been recognize the charges in interest
expense in the current year related to post-employment
benefit plans £19 million (2009 - £3 million).
8.1 Net finance expense
A net financial expense from continuing operations is increased from
£51 million to £69million. Effect of change in accordance with the interests has
contributed an increase of £4 million over the previous year. They have recognize
the charges in the interest expense in the current year related to post-employment
benefit plans £19 million (2009 - £3 million). Interest capitalized during the year reduced
to £2 million of the £11 million in the corresponding period, reflecting the lower
capital expenditure and the decision to suspend the completion and commissioning of Fort
Dodge, Iowa plant.
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Underlying net finance expense was below the level of the prior year, reflecting
significantly lower levels of average net debt. Lower average net debt levels will benefit
the interest expense during the financial year 2011, although the mix of debt will result in an
average cost of debt will increase over the previous year. They expect net interest
charges related to post-retirement benefit plans to be around £6million in financial year 2011.
The effective interest rate for the year on the operation amount, calculated as net financial
expenses excluding net financing charges related to retirement benefits and including
capitalized interest, divided by average net debt is 5.3% (2009 - 5.0%). Interest cover for the
operation amount, calculated on the basis of the bank agreement was 5.8 times (2009 to
6.1 times).
8.2 Taxation
The Taxation charge from continuing operations before exceptional items and
amortization of acquired intangible assets was £47 million (2009 - £68 million).The effective
rate of tax on adjusted profit was 20.4% (2008 – 27.3%). This decline was due primarily to
changes in the geographical origin of profits, especially the lower level of profit in the United
States, and the impact of their internal financing plan. If the mixture of geographical origin
of profits in the year to 31 March 2011 is similar to those in the year 31 March 2010, tax
rates expected to remain in the low 20% range.
8.3 Impact of changes in exchange rates
They have reported their financial performance had a positive impact this year with
the translation of the exchange rate, mainly due to the strengthening U.S. dollar (U.S.) and
the average exchange rate of euro against the pound. In addition to the impact
on profits, strengthening to the closing exchange rate of sterling which has the effect of
reducing net debt, with the benefit of net debt reported.
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8.4 Interest rate risk
They are exposed to interest rate changes, arising principally from changes in
borrowing rates in US dollars, sterling and Euros. They have manage this risk by fixing or
capping portions of debt using interest rate derivatives to achieve a target level of
fixed/floating rate net debt. This aims to optimise net finance expense and reduce volatility in
reported earnings. Their policy is that between 30% and 75% of Group net debt (excluding
the Group’s share of joint-venture net debt) is fixed or capped (excluding out-of-the-money
caps) for more than one year, and that no interest rate fixings are undertaken for more than 12
years.
A derogation of the maximum percentage of fixed-rate debt was approved by the Tate
& Lyle PLC Board until 30 June 2010. At 31 March 2010 the longest term of any fixed-rate
debt held by the Group was until November 2019. The proportion of net debt (excluding the
Group’s share of joint-venture net debt) that was fixed or capped for more than one year was
82% (2009 – 55%). If the interest rates applicable to their floating-rate debt rise from the
levels of 31 March 2010 by an average of 100 basis points over the year to 31 March 2011,
with all other variables held constant, this would reduce Group operating profit before tax by
approximately £1 million (2009 – £4 million)
8.5 Foreign exchange risk
They have significant investment in overseas operations, particularly in the USA and
Europe. Earnings, cash flows and shareholders’ equity are therefore exposed to foreign
exchange risks. They require our subsidiaries to hedge transactional currency exposures
against their functional currency once they are committed or highly probable, mainly through
the use of forward foreign exchange contracts.
Their accounting policy is to translate profits of overseas companies using average
exchange rates. They do not hedge exposures arising from profit translation. As a result, in
any particular financial year, currency fluctuations may have a significant impact on our
financial results. In particular, a strengthening or weakening of the US dollar against sterling
will have a favourable or adverse effect respectively on the Group’s reported results.