- $350 million sale completes transformation
- Cash proceeds to be returned via buybacks
- Resilient results delivered
Tate & Lyle (TATE) was in demand with investors on Thursday, shares sweetening up 5.2% to 712.5p after the company completed its strategic shift towards a speciality food and beverage business with the $350 million (£279 million) sale of its remaining 49.7% stake in Primient to KPS Capital Partners.
The global ingredients innovator plans to return the net cash proceeds from the sale, expected to be roughly $270 million, to shareholders through an EPS (earnings per share) enhancing buyback programme.
TRANSFORMATION COMPLETE
For the uninitiated, the FTSE 250 firm has been executing a major strategic transformation to become a growth-focused speciality food and beverage solutions business over the past six years.
A critical step in this journey was the sale of a controlling interest in Primient – a producer of food and industrial ingredients made from plant-based, renewable resources in North America and Latin America - to KPS in April 2022.
Today, Tate & Lyle said it has reached an agreement to offload its remaining 49.7% interest in Primient via a landmark transaction that simplifies the business and sharpens its focus.
As CEO Nick Hampton explained: ‘With this sale, the transformation of Tate & Lyle into a fully-focused speciality food and beverage solutions business is complete. We are now well-positioned to capture the significant growth opportunities ahead as we look to provide our customers with the solutions they need to meet growing consumer demand for healthier, tastier and more sustainable food and drink.’
INGREDIENTS FOR GROWTH
News of the milestone disposal accompanied robust results for the year ended 31 March 2024 from Tate & Lyle.
While ‘challenging’ market conditions meant constant currency sales were 2% down at a touch below £1.65 billion, as soft consumer demand and customer destocking weighed on volumes, adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) came in 7% higher year-on-year at £328 million.
Pre-tax profits jumped 18% to a slightly better than expected £287 million, Tate & Lyle reported tasty cash generation and hiked the full-year dividend by 3.2% to 19.1p per share. And with management drawing confidence from productivity gains, Tate & Lyle also increased its five-year savings target to US$150 million.
‘The actions taken over the last six years have created a higher quality and more resilient business, with the agility to navigate the challenging economic environment and softer consumer demand we saw last year,’ insisted Hampton.
In terms of the outlook, Tate & Lyle guided to ‘slightly’ lower constant currency sales for full-year 2025 with robust EBITDA growth of between 4% and 7% on the cards. Having prioritised revenue and margin over the past year, the company expects to deliver good volume growth which should accelerate through the year.
THE GOODBODY VIEW
Irish broker Goodbody said this was a solid update from Tate & Lyle, with the full-year 2024 outcome ‘slightly ahead of expectations and importantly, the disposal of the remaining 50% holding in the JV operation seeing the business become a more pure-play food and beverage solutions operator.’
Goodbody also stressed that Tate & Lyle’s shares are attractively valued at a rough 60% discount to speciality peers and continues to see ‘significant upside’ as a result.
