Tate & Lyle plc

Good morning and welcome to the conference call for Tate and Lyle's Q3 trading statement. Your speakers today are Nick Hampton, Chief Executive, and Sarah Cowlers, Chief Financial Officer. I will now hand you over to Nick Hampton for some opening remarks.

Thank you, Operator. Good morning, everyone, and thank you for joining this third quarter conference call. I will start by making a few remarks on our performance and strategic progress, and then we'll open it up to Q&A. Trading in the third quarter was in line with our expectations and consistent with the first half. Our guidance for the full year remains unchanged. On a pro forma basis and in constant currency, revenue was 2% lower in the quarter, reflecting continuous muted market demand, with performance in all regions broadly in line with the first half. On a reported basis, which includes CP Telco from the date of acquisition on the 15th of November 2024, group revenue was 15% higher. For the nine months of the 31st of December 2025, on a pro forma basis, revenue in the Americas was 2% lower, with modestly higher pricing more than offset by lower volume. In Europe, Middle East, and Africa, lower pricing resulted in 5% lower revenue. While at Asia Pacific, revenue was up 1% driven by higher volume. Turning to the renewal of customer framework agreements for the 2026 calendar year, which is well advanced. With our number one priority returning the business to top line growth, we have selectively chosen to invest to drive volume and revenue growth. This is the right thing to do for the business, giving us a stronger platform for future growth. And we are pleased with the engagement from customers to our expanded offering. We are making good progress on the series of actions we set out at our interim results to drive top line growth and improve performance. Let me give you one or two examples of progress. We continue to accelerate the rollout of our solutions chatted program with a focus on mouthfeel. We launched two new mouthfeel chatties in the quarter, one to improve the stability of pourable salad dressings and another to support egg reduction. The level of customer engagement on our enlarged portfolio remains high, with the value of cross-selling opportunities in our new business pipeline increasing by more than a third in the quarter. Revenue synergies from the CP Telco combination are growing in line with our expectations, and we remain confident that run-rate cost synergies will exceed our target of $50 million by the end of the 2027 financial year. And finally, our five-year $200 million productivity program continues to operate well, with further savings delivered in the quarter. Overall, then, I am pleased with the progress we are making. There is a real determination and focus across the business to deliver on the actions we are taking, and I am confident that in the near term they will improve the top-line performance of the business. We will give you more detail of our progress when we announce our full-year results in May. At that time, as usual, we will also provide guidance for the 2027 financial year. To conclude, with our leading positions in sweetening mouthfeel and fortification, we remain well-placed to benefit from the global trends towards healthier and more nutritious food and drink. With the breadth of our portfolio, our formulation expertise, and the targeted investments we are making to accelerate customer wins in key growth areas, We are well positioned to drive profitable revenue growth at that time. With that, Sarah and I would be happy to take any questions.

Thank you, sir. If you wish to ask a question at this time, please signal by pressing star 1 on your telephone keypad. And please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. If you wish to cancel your request, please press star 2. It is star one to ask a question. We will now take our first question from Carol Zertig from Kepler Shuffle. Please go ahead.

Yes, good morning all. Thanks for taking the question. I have two questions. The first one is in regards to the price investment you mentioned to sustain volume growth or to improve volume growth. Could you be a bit more specific about which markets you decided to invest and what that might mean for pricing going forward. And the other question is around fibers. I think more and more evidence or discussions in the public domain about fiber, fiber being the new protein, et cetera. What kind of engagement do you see with your customers on the fiber ingredients you sell? Thank you.

Okay, Carol, let me pick up on the Fiber question first, because I think it's an important one, and I'll let Sarah handle the select review on pricing. I mean, Fiber clearly is a big global trend. In fact, there was an article yesterday in Bloomberg about Fiber maxing, and we're seeing very encouraging progress with customers on our Fiber portfolio, both products going into market, notably in the U.S. market, where In both beverages and dairy, we're seeing fiber fortification as a trend, and increasing the pipeline for fiber is growing. But it's a global trend as well, and we're seeing that trend across Europe and Asia too. And I expect that to continue as we think about the continued desire to create more nutritious processed foods, especially in a world where people have a significant shortfall of fiber in their diets. And all of the nutritional trends we're seeing point towards Fiber addition is a strong growth opportunity for us going forward.

Thanks, Nick. And Carol, good morning. So when you think about, you know, our framework agreements, I think it's worth taking a step back. And we're all very aware that market demand remains muted. And as we stated, you know, our number one priority is to deliver the top-line growth. So that's volume and mix-driven top-line growth. So we've taken the decision to set our business up stronger for the future, is that we're selectively investing to drive that volume amendment and the revenue growth. So we always want to think about this as, you know, it would be very selective, so it's buy product, buy customer, buy region, to ensure that we're setting ourselves up for that growth, given we now have the broader portfolio following the acquisition of CPCS.

Thank you.

Thank you. And the next question is from Reynolds or from Siri. Please go ahead.

Hi. Thanks for taking the question. Just one for me. I mean, you talked a bit in the past about the sort of 4Q improvements. Could you just provide a bit of an update on that? You know, what's going well and where you have visibility on some of those sort of factors coming through? Thank you.

You mean in the fourth quarter?

Yes.

Yeah. I think we're seeing encouraging signs of increased customer engagement on reformulation. It's very clear the sentiment in the market is my customers are increasingly thinking about the need to put price back in to drive momentum. But we're not assuming any improvement in market outlook in the fourth quarter in our underlying guidance for this financial year. What we saw in the third quarter was consistent performance from the first half and very clearly in line with our expectations. And so far as we've entered the fourth quarter, we'd say the same. Always as you go from Q3 to Q4 and cross a calendar year, you get some kind of pluses and minuses between December and January from a phasing perspective. But we're seeing the kind of customer demand that we would be expecting given the underlying guidance given for this year.

Okay, that's very clear. And just one more, if I may. On the price investments for the year ahead, can you give any kind of quantification or indication of the scale of those, maybe in relation to the current year?

Look, I think we haven't finished yet because we're still closing out the renewal of agreements for this calendar year. We'll give you a precise view on that when we get to our May results as things have settled down. But I think it's fair to say that we're doing a little bit more this year than we did in this calendar year than we did in the last calendar year to ensure that we're really driving momentum with key customers. And obviously offsetting that with real focus on productivity and the benefits of the combination coming through in both cost synergies and the revenue synergies, of course, because let's not forget this is now the second year of the new business. And this is the first year we're entering as one combined business.

Thank you. We'll move to our next question from John Lim from BNP Paribas. Please go ahead.

Hello, morning all. Quite a few of my questions have been asked, but maybe just could you provide more colour on trends by region and category? Like, for example, which category has been doing well or you're seeing more uptake with customers? You mentioned a bit about fibre. Is that more driven by... innovation in beverages, for example, and supported by GLP-1 users taking more fiber. My second question is, do you have any indication of how effects will be like for the next year? And lastly, maybe an update on CP-Calco's volume and margins recovery, please. Thank you.

Okay, so let me give you some headlines on the overall shape of what we're seeing in the market, and then maybe Sarah can pick up on the Forex and the CDK question. I mean, overall, what we saw in the third quarter was quite consistent with the first half. You know, in the Americas, we're seeing modestly higher pricing, more than offset by lower volume. And that's very consistent with the Nielsen volume data that we saw in the first half, where you saw volume down and value driven by pricing, which was, you know, part of the pass-through tariffs at the time, if you remember. And that seemed pretty consistent. In Europe, volume pretty slattish, volume mix with, you know, the pricing investment driving loss. low revenue, and then in Asia, encouragingly, some revenue growth driven by high volume, so some signs of momentum. I think underlying that, though, is it wouldn't the same. What we're seeing with customers in terms of trends is some clear benefits of the combination flowing through. So in the quarter, the cross-selling pipeline was up over a third, having been strong at the first half. And we're seeing double-digit growth in our innovation pipeline . And that's driven by some key themes. So as we've already talked on the call, we're clearly seeing a focus on fiber fortification across many categories. And may well be driven by this need for nutritional density, driven by nutritional needs for processed food and the GLP-1 point you made. We're seeing that especially in beverages and dairy in the U.S. You know, in EMEA, we're seeing dairy beverages being more resilient. And in Asia, actually, overall robust category performance. We talked about recovery in China of the half driven by CPK. Beyond fiber fortification, the other trends we're seeing is renovation for value. So, you know, cost efficiency and product renovation. We're also seeing continued focus on sugar reduction. And that link to mouthfeel will be talked about at the half where, you know, as you take sugar out, being able to control the texture and mouthfeel of a product is really important. And that's where the combination is really helping us build a stronger pipeline, which we expect to build as we go into next year.

Thanks, Nick. And, Joan, Nick's question is about Forex. So, indeed, we saw a headwind of, given the U.S. in the first nine months, which is approximately 2% to 3% of revenue, and that we expect to continue. That is partly offset by the strength in Europe. I remember with the acquisition of CPK, we now have a broader footprint, so there's also some impact of general reality, Danish Krona, et cetera. But overall, a headwind in the sort of the 2% to 2% on the top line. That's a slightly higher impact on EBITDA given the important contributions from the North American . Turning to CPK, so clearly the integration continues to go well. Cost synergy is well in hand. And as Nick has spoken about, now, obviously, the attention on the pipeline growth of those cross-sells. And it's been really powerful going into the conversations this year as a combined portfolio, fronting up our, you know, the combined commercial staff, really demonstrating the ability and the strengthening capability of the portfolio and the stronger together. It's been very powerful. Good to see.

Very helpful. Thank you.

My next question is from Situ Sharma from Barclays.

Please go ahead. Hi. My question is on the selective investments. How should we think about the margin impact of these investments as we move into FY27? Are you viewing this as a one-year reset to drive volume recovery or a more structural change in pricing intensity? And my second question would be regarding like to what extent can be the ongoing productivity program and cost and revenue synergy can offset the margin impact of these investments? Should we expect net margin pressure or stability as we bridge from FY26 into FY27?

Okay, so I think let me start by saying we'll give very clear guidance on We need to complete that planning process for next year and see how trading evolves in quarter one of the calendar year. But the way I think about it is, if you think about the building costs going to next year, we're clearly, because of the market demand remaining these years, putting some selective investment into price to drive the top line, both volume and revenue. Alongside that, we've got clear offsets from productivity delivery and accelerating the benefits of the CP-Calco combination. And different to last year, we've also got the benefits of the combination flowing through in terms of the pipeline and the cross-selling opportunities to support the framework agreement renewal. So we're confident that that builds a strong platform for growth. Where that leads us to on on overall earnings delivery and margins will be much clearer about when we get to our full year results. But the key here is the quality of the portfolio to build a growing pipeline of business for customers. As we see markets start to improve and the trends that are, you know, our friend from a positioning of the business perspective, we fully expect to drive those going forward and into the medium term. And we'll give very clear guidance on the near and certain results.

Thanks for that. Just a follow-up on the Fiverr thing. Thanks for giving some color on that. So are you seeing a meaningful increase in customer briefs or RFP activity linked to high Fiverr formulations? And how does the current pipeline compare with the time last year?

So if you think about our pipeline in the last quarter, it grew double digits overall, and that is driven by a focus on things like fiber fortification. I think the question always is, at what pace are those pipeline projects converting to innovation in the market? And as you know, we've probably seen, you know, we haven't really seen an increase in innovation pace yet, but we're anticipating that coming as these projects start to flow through.

And Nick, maybe I've just added, it's not simply just adding fiber to a product. With fiber, you really need the mouthfeel. And that's really where it's made to our sweet spot because you really need the appealing mouthfeel for the fortified product to be successful in the market.

Thank you. That's quite helpful.

Thank you. We'll now move to our next question from Samantha Darbyshire from Goldman Sachs. Please go ahead.

Good morning. Thanks for taking my question. I just kind of wanted to talk about some of the themes you're seeing in the market longer term. So we had a lot of feedback at Cagney last week about clean label reformulation, including away from artificial sweeteners like sucralose and several emulsifiers, some of which I think are in your portfolio. What proportion of products are being reformulated this way? And Is the increased customer opportunity that you're seeing with CP Calcos from fortification and protein and fiber, is that enough to offset this headwind? Are you still seeing structural growth in the way that customers are reformulating with your ingredients? Thank you.

So thanks for the question. I mean, all of those trends that we talked about at Cagney this month actually plays to the reshaping of the portfolio. I think it's important to say that, you know, superglue clearly is an important part of our portfolio as an artificial sweetener of choice, but it's growing in demand. And, you know, we're selling every kilo of superglue that we can make because it's the best tasting artificial sweetener out there. It would be also important to say that if there was a shift away from artificial sweeteners, we've got lots of non-nutritive natural sweeteners in the portfolio. everything from Stevia, we're the only company with an all-America supply chain to Stevia, for example, through some monk fruits and aloe loaves. So we're well-placed for the reformulation to more natural and clean label. Emulsifiers actually are part of our portfolio. We do a lot of replacements of emulsifiers, and that's where the CP Calgary portfolio comes in as well. So one of the trends that we're seeing people talk about are the trends we really believe the combination of our three core platforms can help customers win. Because that sugar replacement or our fish or sweetener replacement that we talked about also comes with the need for mouthfeel modulation, as Sarah just talked about. So the things that we heard from Cagney are precisely the reason that we've repositioned the business the way we have done in the last five years.

Thank you. And then we'll tell our next question from Matthew Abraham from Berenberg. Please go ahead.

Morning all. Thanks for taking my questions. I just want to relate to the fibre fortification services you've touched on. I'm just wondering if you can provide a sense of the margins from those services relative to the rest of the group. If fibre demand does accelerate manually, could there be a broader impact on overall group margins? And then the second question just relates to the price investment commentary that you've provided. Is that a reflection of a perception of improved demand elasticity or is it more a reflection that demand is such that it requires stimulation through price investment? Thank you.

So on your first question on Fiverr, our Fiverr portfolio generates very nice margins for us. And, you know, obviously it depends on the customer basis, how much fiber we're using, what other components we're putting in to help with that solution. But I think the key is the fiber fortification trend is driving a solutions model where typically that business is stickier business and good margin business. So it's certainly helpful in that regard. In terms of your question on price and price elasticity, we're clearly in a world where consumers are more challenged. Food is 20 to 30 cents more expensive than it was pre-pandemic because of all of the geopolitical challenges we've seen over the last three or four years. And there clearly is a requirement for some price stimulation to drive demand. But more importantly for us, we're trying to balance the way we think about growing our business to make sure we're well positioned for growth through the cycle. And in a cycle where demand is more muted, we want to make sure we're stimulating growth so that we're well positioned as markets start to improve.

Thank you. I'll pass it on. Thank you. As a reminder, to ask a question, please single by pressing star 1. The next question is from Lisa Dineve from Morgan Stanley. Please go ahead.

Hi, thank you for taking my questions. I have two. First, can we talk a little bit about what you're seeing in APAC? Various players in this reporting season have noted an improvement in China specifically, and I believe your sequential local currency growth is modestly better in APAC, so any color on that would be great. That's one. And secondly, can you provide us a little bit of color on how your raw materials are trending into this year on average? How should we think about the direction for cost input inflation or deflation? Thank you.

So maybe let me pick up the APAC, Michelle. Sarah can pick up the input cost one. Look, I mean, we're encouraged by the progress we're seeing in Asia. As you mentioned, we did see some improvements in China in the first half, and that continued through the third quarter. I mean, it's difficult to talk about Asia as one region because it's actually a vast, vast, vast area, but we're seeing good progress in China, solid demand in North Asia, across Japan and Korea, and that gives us some encouragement for the future. And if I look at APAC in the broader suite, We've grown our business significantly over the last five years. We're now a $500 million business revenue when we were around about 105 years ago. And it's a huge growth opportunity for us still because it's 60% of the world's population and a lot of the trends we've talked about on the call are true in Asia as well. So the opportunity there is very clear. And the fact that we're starting to see some stability and improvement is very encouraging as we go into into the next 12 months.

Thanks, Nick. And then Lisa on the raw material, I think it's worth reminding you that we've now got a much broader array of raw materials, mostly actually from CDKs. It's not just corn. There's also, you know, pectins and seaweed, et cetera. And broadly, it's a more benign environment. There's not a strong insulation in bush coming through there. So it's more benign and we're well diversified. Thank you.

I think it's fair to say we're seeing pushing flat year-on-year costs overall. I mean, with some ups and downs, but nothing significant.

Thank you. It appears there are currently no further questions in the queue. Pardon. We have a follow-up question from John Lynn from BNP Paribas. Please go ahead.

Hello. Sorry. I'm just squeezing in one more question because everyone seems to be asking about margins. Nick, you've historically talked about how important it is to protect unit margins. Has this changed? Are you confident of maintaining unit margins this year?

No, I think the focus on unit margins hasn't changed at all. I think in the near term, we're trying to balance all the levers we have to get the business back into top-line growth. And doing that in an environment where marketing is more sluggish means we're having to make some choices about where we invest. what choices you make, but fundamentally, over time, we expect to focus on maintaining unit margins and using MIX to improve margins to the quality of the portfolio. We're in a cycle at the moment where we're having to make some choices.

Okay. It's reassuring to hear that you're confident of maintaining the unit margins. Thank you very much.

Thank you. With this, I'd like to hand the call back over to Nick Hampton for any closing remarks.

Thank you, operator, and thank you, everybody, for your questions. So just to summarize, trading in the first quarter was in line with our expectations and consistent with the first half, and importantly, our guidance for the full year remains unchanged. As we talked a lot about on the call, our number one priority is returning the business to top-line growth, and we're clear on the actions we're going to take to improve top-line performance of the business in the near term. We remain focused on top-line growth, execution, and delivering for our customers. So thank you for your time and questions, and I wish you all a very good day.

Thank you. This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.