Treasury Policies 

Please click on the links below to see a summary of our treasury policies. For more detailed information, please click here to view the “Financial Risk Factors” section of our latest annual report.

  • Funding and liquidity management

    We ensure that we have sufficient undrawn committed bank facilities to provide liquidity back-up to cover our funding requirements for the foreseeable future. We have a core committed bank facility of US$1 billion which matures in October 2012. This facility is unsecured and contains financial covenants for Tate & Lyle and our subsidiary companies that: pre-exceptional and amortisation interest cover ratio based on total Group operations should not be less than 2.5 times; and the multiple of net debt to EBITDA, as defined in our bank covenants, should not be greater than 4.0 times.

    We monitor compliance against all our financial obligations, and it is our policy to manage the consolidated balance sheet so as to operate well within covenanted restrictions at all times.

    Current policy is to ensure that, after subtracting the total of undrawn committed facilities, no more than 10% of gross debt matures within 12 months and no more than 35% has a maturity within two and a half years.

  • Internal financial targets

    As part of the Board’s monitoring of performance, it has set two ongoing key performance indicators (KPIs) to measure the Group’s financial strength. The basis for these ratios is the same as the external debt covenants, except that the ratio of net debt to EBITDA should not exceed 2.0 times for FY2011 and beyond (previously 2.5 times), and that interest cover should exceed 5 times.

  • Interest rate risk

    We are exposed to interest rate changes, arising principally from changes in borrowing rates in US dollars, sterling and euros. We 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, which aims to optimise net finance expense and reduce volatility in reported earnings. Our 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 degrogation of the maximum percentage of fixed rate debt was approved by the Tate & Lyle PLC Board until 30 June 2010.

  • Foreign exchange risk

    We 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.

    We 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.

    Our accounting policy is to translate profits of overseas companies using average exchange rates. We 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.

    We manage foreign exchange translation exposure on net investments in overseas operations, particularly in the USA and Europe, by maintaining a percentage of net debt in US dollars and euros to mitigate the effect of these risks. This is achieved by borrowing principally in US dollars and euros, which provide a partial match for the Group’s major foreign currency assets. A weakening of the US dollar and euro against sterling would result in exchange gains on net debt denominated in these currencies which would be offset against the losses on the underlying foreign currency assets.

  • Counterparty credit risk

    Counterparty credit risk arises from placing deposits and entering into derivative financial instruments with banks and other financial institutions, as well as credit exposures in outstanding trade receivables.

    We manage this risk by placing deposits and entering into financial instruments only with highly credit-rated authorised counterparties which are reviewed and approved regularly by the Board. The Board approves maximum counterparty exposure limits for specified banks and financial institutions based on long-term credit ratings (typically A-/A3 or higher) of S&P and Moody’s. We monitor counterparties’ positions regularly to ensure that they are within the approved limits and that there are no significant concentrations of credit risks.

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