Tate & Lyle plc

Thank you, operator, and good morning, everyone. Welcome to the conference call.

I will make some introductory comments, and then Sarah and I will be happy to take your questions. First, I want to look at the bigger picture.

We continue to make very good progress delivering the benefits of the CP Kelco combination. Customers are increasingly recognizing the strength of our combined portfolio, especially our expertise in mouthfeel.

And this has led to a very encouraging early cross-selling successes with the value of the pipeline more than doubling in the last 2 months alone. The strong interest our combined offering and reformulation expertise is generating with customers clearly demonstrates the strategic logic of bringing Tate & Lyle and CP Kelco together, and reinforces our confidence in the growth potential of the combined business.

While the level of customer engagement is high, we are operating in a tough market and have seen a slowdown in demand as the first half progressed, particularly over the last 2 months, which in turn has slowed our recent performance. We are seeing different dynamics across each region.

In the Americas, we expect revenue in the first half to be slightly lower, reflecting softer consumer demand, notably in North America, still have largest market. In Europe, Middle East and Africa, revenue is expected to be mid-single-digit lower despite slightly higher demand.

In Asia Pacific, revenue is expected to be broadly in line after absorbing the impact of tariffs, which we continue to navigate well. Against this more challenging backdrop, we are accelerating a series of steps to drive delivery of top-line growth.

These include investing in enhanced customer segmentation, further strengthening our customer-facing capabilities such as solution selling, applications and marketing, working even more closely with customers to accelerate innovation through technology and optimizing capacity in our manufacturing network to accelerate productivity. The margin of the CP Kelco portfolio is expected to improve further in the first half.

Planned revenue and cost synergies, and delivery of savings from our productivity programme remain on track and demand for sucralose continues to be strong. Overall then, for the first half in constant currency and compared to the pro forma comparatives, we now expect Group revenue to be 3% to 4% lower.

Reflecting this top-line softness, the investments we continue to make for growth, and the planned weighting of cost synergies into the second half, EBITDA in the first half is now expected to be high single-digit percent lower. We will provide a more detailed update on the business and the actions we are taking when we announced our half year results on the 6th of November 2025.

Turning to the full year outlook. While we anticipate the near-term market demand environment will remain challenging, we expect performance to improve as we move into the fourth quarter.

This will be driven by the acceleration of actions we are taking to drive delivery of top-line growth and increasing benefits from the CP Kelco combination, including an acceleration in cross-selling, the migration of distribution relationships to a direct service customer model, and delivery of cost synergies. Therefore, for the year ending 31st of March 2026, in constant currency and compared to pro forma comparatives, we now expect revenue and EBITDA to decline by low single-digit percent compared to the prior year.

In summary then, in April, we started to operate as one combined business. Since then, we have made real progress setting up the business for future growth, while also operating in a period of considerable economic volatility.

The benefits of the combination appear to see. Looking ahead, the fundamental growth drivers of our business remain strong.

Consumer demand for healthier and more nutritious food and drink continues to grow. And our expertise in food and drink reformulation and our leading positions across sweetening, mouthfeel and fortification, mean we are well-positioned to capture this growth.

To conclude, we are determined to accelerate top-line growth and are fully focused on successfully delivering the benefits of the CP Kelco combination. With that, I will open up the call for questions.

I wonder if I could start off by just asking about the split of the revenue decline, both in H1 and expected for the full year between volume and pricing. And I suppose I'm particularly interested in the extent to which the weakness in volume demand has had the knock-on effect on pricing and what sort of the competitor behavior has been as well as a result of that weakness?

That's my first question.

Obviously, overall we're seeing a lack of consumer confidence in sluggish markets and the dynamics across regions are somewhat different. So in North America, we're seeing pretty broad-based category softness fueled by inflation and tariffs, I think.

But we're seeing relatively balanced pricing environment, but broadly in line, slightly positive. In Europe, as we said when we did our full year results, we consciously invested some price in driving volume momentum.

So in Europe, we're actually seeing a slight volume momentum, but some pricing decline. And in Asia, we're seeing relatively muted demand with some pricing pressure, especially driven by softness in China.

And then I wonder if you could perhaps try and separate out the impact that tariffs have had here on the reduced guidance. Is that a big factor?

And I suppose there, I mean even more about the direct impact of tariffs on you rather than the sort of broader impact of tariffs on consumer demand?

You're asking the right question, of course, because the second order impact on consumer confidence is difficult to measure but clearly, we're seeing that, especially in North America. And overall, the team is navigating the tariff situation well, given that it's still bumping around a bit, it's relatively uncertain, and we're focused on customer supply security, recovery of tariffs where possible and alternative supply routes.

So if you look at it around the world, we said at the full year that it routed about 2% of our revenue shipped into China was being impacted. There's a little bit going the other way.

The other thing that's happened is the significant imposition of tariffs on Brazil and [indiscernible] out of Brazil into North America. So we think -- and again, it's very difficult to be precise when you look at supply routes, probably 3% to 5% of our revenue pre -- any mitigation is being impacted by tariffs because of the flow of goods.

As I said, we're mitigating that in various ways. So I would think about it in that kind of...

And then sorry, final question. I mean clearly, the deterioration in the market environment, as you said, has been a relatively recent thing at least has become worse of late.

And I wonder, therefore, how much sort of confidence and visibility you've got in the ability to improve your performance in Q4. It just sort of feels like you're slightly swimming against the tide there.

How confident can you be that we will see that improvement?

So we're not assuming any near-term improvement in the market environment until we see that, and we shouldn't be building that into our assumptions. However, what we are clearly going to see in Q4 is the benefits of the combination starting to flow through.

So if you remember, we always said the cross-selling benefits, the distribution to direct benefits would only start to flow towards the end of the year and we have very clear line of sight to those. And we're also seeing the pipeline building on our solution selling portfolio because of the benefits of bringing the 2 portfolios together.

So we're really assuming any improvement in quarter 4 is coming from the benefits of combination flowing through more fully and the actions we're taking to accelerate growth regardless of the environment we're operating within.

A couple of questions, if I may. Firstly, just in terms of, I guess, that innovation pipeline, and you touched on it there, Mark, but Nick, sorry, but maybe you could just elaborate one of the things we've heard from a lot of customers of yours or peers is the pipeline and the demand from an innovation perspective, particularly in the U.S.

as reformulation really starts to kick in, has never been stronger, so I'd be interested to hear your comments on that. And secondly, look, apologies, I didn't hear all of your prepared remarks, but on sucralose, could you maybe just give us a comment in terms of how that business is trending and how much of the softness you've called out today is related to that business?

So let me take your second question first on sucralose. We're still seeing very strong demand for sucralose, this is what we do.

We talked about this a number of times and let me put simply, we're pretty much selling everything we can make. And while there's been some noise on sucralose in the market recently, we're seeing very strong robust demand and continue to see that, so that's pretty clear.

On your first point, yes, we are seeing strengthening of the pipeline. And a lot of that is to do with the benefits of bringing the combination together as well.

I think the question we're still asking ourselves internally is how fast that pipeline converts in an uncertain consumer environment because what we're seeing at the moment is a lot of relative pricing in the market versus innovation, so the question we can't answer yet is the pace of conversion of that pipeline. The win -- success rate is very good actually in the pipeline when we look at that.

When those products come to market, it is still less certain, I would say.

A couple of questions from me, please. So you mentioned you are taking a series of actions with customers.

I was wondering if you could help providing more color as to how the conversations look like, what else you're doing with the customers? So that's my first question.

And second question was the categories. In terms of categories, I know you said broad-based softness in North America, but I wondered if there were any like beverages or specific categories you could call out in terms of latest color on market trading?

So let me take the second question first. We're actually seeing pretty consistent softness across our key categories currently.

I wouldn't call any out specifically at a sort of macro category level. Clearly, when you go double click one level below into subcategories, we're seeing more slightly healthier demand for the better-for-you type part of the portfolio.

But overall, net-net, there isn't a significant difference across the core categories that we always talk about serving and we're obviously continuing to track that closely as we go forward. In terms of what we're doing, the benefits of the portfolio clearly allow us to think differently about how we serve our customers.

And a big part of that is, frankly, working through which customers we want to double down our efforts on and where do we see the most growth and how do we deploy our resources with the right ammunition to accelerate growth with the customers where we see most opportunity. So we're doing a lot of work on segmenting our customers both globally and locally to deploy our resources as effectively as possible.

And at the same time, making sure that based upon what we're seeing in terms of consumer demand and consumer trends, we're building the ammunition and the solutions focused on those areas of consumer opportunity. And we'll talk more about that when we do our half year results in November.

Sorry, can I just follow up on that? So you mentioned customers locally and globally.

Are you seeing a difference between the local and regional customers and the bigger customers?

Always when you come across the world, you see different behaviors. I wouldn't call out a specific trend that's global versus regional.

It's just more importantly for us, it's about making sure in each region, we're working with the right customers because of how they're building their businesses locally. And that can vary global customers versus regional.

Because I think the global customers have been losing share to the local and regional, who might be growing faster. So I wonder if there were any...

Why it's important that we build a balanced focus across all customer types to make sure we're focusing on where we see most growth potential.

And then on your broad-based category softness, was it just in North America? Or was it across regions?

Specifically referencing to North America in the more recent months, I mean we are seeing varying cash flow dynamics across the world. In Latin America, we're seeing stability in Brazil, some softness in Mexico.

Across Asia, we're seeing relatively muted demand, but there are opportunities in places like health and wellness. In Europe, we're seeing relatively stable demand with opportunities in categories like dairy and clean-label, so the point I made earlier in some way about customer segmentation, you have to look at it region by region and get on the surface where the key trends are.

Two for me. One is a follow-up in terms of the assumptions in the second half.

So it sounds like you're not assuming much in the way of improvement inflection in underlying market conditions from a sort of a volume perspective. What are you assuming in terms of the pricing round?

So obviously, I guess, kind of weaker demand probably doesn't bode that well there. So have you been conservative in your assumptions there?

And I guess sort of the overarching question there is how confident can we be that this is kind of one and done? Or is there more risk to the revised full year guidance?

And then second question, I think in your prepared remarks, you talked about CP Kelco margins moving higher in the first half despite obviously the fact that kind of the group profits are going to be down high single digits. So is it fair to assume that sort of more of this pressure is being felt in the legacy-tight FBS business than CP Kelco?

So on your first question, Alex, obviously, we're very early in the framework agreements we're building for next year with customers and that process will continue through the next few months. We've been relatively conservative in our assumptions for the contracting round at this point in the year.

And as always, we'll give you more color on that as the round evolves. On the CP Kelco margin point, we are seeing improvements at the gross margin level.

You have to remember, of course, that we're not measuring profit margins separately across the 2 businesses at the moment because they're integrated. So to some extent, some of the investments we're making in the business sit below the gross margin level.

But it would be fair to say that we have seen some pressure on the legacy-tight Lyle business, especially because of the pricing which has put back into the market in the last round.

And maybe just if I could squeeze in one more. Just in terms of the Brazil tariff situation, obviously kind of relatively lower I think those kicked in, in August.

Could you give a bit more color in terms of how you're mitigating that and what impact that had -- I guess what impact you're assuming that has for the full year?

So roughly about 1% of our revenue is shipped out of Brazil into North America. We are shifting supply routes to source more out of Europe because we've got [indiscernible] manufacturing in Brazil and in Europe.

And obviously, where possible, we're passing tariffs through. So we've assumed a rebalancing between Brazil and Europe and an appropriate level of cost associated with the tariff shipping into the U.S.

that's built into the overall assumptions we've given you today. Sarah, do you want to add anything to that?

No, I think that's absolutely. I think [indiscernible] maybe linked to that, as we navigate through tariffs, obviously, we are really focusing on having the right products for the customer in the right place which impacts our supply chain.

And I think that leads to an inventory level which is not yet optimal. And that will come later.

But obviously, it's that -- the prime focus is the right products in the right place for our customers.

And sorry, just one more. Obviously, you've done well over the last few years in terms of driving productivity savings.

If the outlook actually does deteriorate further, is there more you can look at on this front?

Absolutely, we will continue to drive productivity hard. As you say, we've got a very successful track record and overall, the program that we announced a couple of years ago is running ahead of target, so we'll continue to double down our efforts on that.

And of course, as we learn more about the potential of the combined business, we'll -- I'm sure [indiscernible] more opportunities that will help with fueling the business.

A few for me, please. Firstly, just on the sort of the demand outlook, I think in North America, you're ascribing the slowdown to broadly economic factors.

I was just wondering to what extent do you think GLP and consumers just eating less is impacting this? And how we should think about that when we think about our medium-term expectations in that business is the first question?

Second question is on sucralose. Now I hear what you said around the sort of current trading of sucralose.

But what do you think the risks are around changing regulatory sentiment towards high-intensity sweeteners and how sucralose positioned to deal with that? And then I guess the final question is perhaps for you, Sarah.

Given the sort of downgrades we're sort of looking at today and the sort of increased talk about destocking across the sector, how should we think about cash generation for the full year?

So on the demand outlook, I would say I mean the facts that we're seeing are significant consumer inflation in price in North America. So if you look at the retail sales data, while volume is down, value is up quite significantly.

And that's always a big driver of relative demand. On GLP-1, no doubt it's changing the way people eat.

And as we talked about in our capital markets event a couple of months ago, we see that as an opportunity for reformulation over time because of the need to provide more nutritionally balanced and dense food for those on GLP-1 and then to provide healthy alternatives when they come off the drug. So we're looking at through the lens of opportunity.

And obviously, we'll see how that plays out. When I look at the data, it looks like the price inflation is driving a significant piece of the volume softness in the near term.

And on your question on sucralose, there's been a continual [indiscernible] pressure on high-intensity sweeteners for a number of years. And we continue to see the demand for sucralose especially to be very robust and growing across the world.

And that's a trend we've seen for the last 10 years. So we're very confident about the outlook for our sucralose business, especially as we are very focused on customers who really value what we do and we are capacity constrained at this point.

However, whether a decrease in demand for high-intensity sweeteners, that's the power of the portfolio because we have other sweetening solutions in the business that can replace high-intensity sweeteners and provide the same kind of impact, albeit that there's often a cost trade-off there. So if you take a high-intensity sweetener out, you've got to put something else in and natural sweetener solutions like stevia can really play against that trend should that happen.

So I think the portfolio balance here is really important and the way we position that sucralose business is really important when you think about the future.

And then Damian, on cash, of course, we continue to focus on cash and continue to focusing on target cash conversion of 75% and the reduction of our leverage. However, as per one of the earlier answers, we've got to acknowledge that the working capital is going to take a bit of time to be optimized because given the volatility in the tariff environment, that doesn't help optimizing our inventory position at the moment; absolutely, we're focusing on getting inventory in the right places to support the customers.

And obviously, we'll talk more about where cash lands on November 6 for our H1 results.

I have 2 questions, and one is a bit of a follow-up on the demand comments you've made. So can I just ask you to which extent -- I mean, CPGs are being here much more cautious in their purchases and are either mimicking the underlying market?

Or are they actually being a lot more cautious than perhaps the softness we're seeing in the market? I'm just trying to understand and disentangle what's driving this demand weakness?

Because my understanding is that the North American market and global food and beverage market is trending broadly flattish with CPGs, the big ones being down. And I'm just trying to understand, is it just CPGs being even more cautious on their purchases and managing their inventories?

Is it specific ingredients that -- where you see softer demand? I mean it would be great to get a little bit more granularity on this.

And then secondly is a bit of a follow-up on the free cash flow question. In the light of the sort of softer year for you, and it's very much across the sector, but just talking about you, I mean, how committed are you to the dividend?

So on your point on CPG and overall demand, we've clearly seen a decline in volumes in North American retail in the last quarter. So that's a clear trend we're seeing.

Whether that's then impacting customers' inventory levels and how they think about that is a bit early to tell. But we're certainly seeing a reduction in demand in the near term.

As you rightly correct, more broadly across the [indiscernible], things are relatively more stable, not growth but stable. Now that's a gross generalization because you have to look market by market.

But the thing we've really seen in the recent couple of months or so is a notable slowdown in North America. On your question on the dividend, the Board has a very clear capital allocation structure framework and has been committed to a progressive dividend for the last 10 to 15 years.

So we're absolutely committed to the dividend, and the Board will continue to appraise the capital allocation framework as normal as we go forward.

Thank you, operator, and thank you for your questions. So in summary, we continue to make good progress delivering the benefits of the CP Kelco combination.

Customers are increasingly recognizing the strength of our combined portfolio and the cross-selling pipeline has more than doubled in value over the last 2 months. A slowdown in market demand has impacted our recent performance, and we are accelerating actions to drive a top-line growth.

Looking ahead, the fundamental growth drivers of our business remain strong. Consumer demand for healthier and more nutritious food and drink continues to grow, and our expertise in food and drink reformulation mean we are well positioned to capture this growth.

We are determined to accelerate top-line growth and are fully focused on successfully delivering the benefits of the combination. Thanks for your time and questions, and I wish you all a very good day.