Tate & Lyle PLC (TATE) is a London, the United Kingdom-based manufacturer of food ingredients. The company primarily offers Sweeteners, Texturants, Health and Wellness products and other bulk ingredients. It operates mainly in two industries: sweeteners and corn wet milling. The company has differentiated its operations in two operating segments: Bulk Ingredients and Speciality Food Ingredients. It operates across the Americas, Europe, the Middle East, Africa and South East Asia.

Financial Highlights (H1 FY 2019, £million)

(Source: Interim Report, Company Website)

The company’s reported sales from continuing operations declined by 1 per cent to £1,383 millionas compared to £1,398 million in H1 FY 2018. On a constant currency basis, sales were up by 2 per cent. Adjusted operating profit from continuing operations decreased by 2 per cent to £166 millionagainst the £170 million in H1 FY18. Adjusted profit before tax (PBT) from continuing operations stood at £166 million (2 per cent higher at constant currency). The group’s adjusted diluted earnings per share from continuing operations surged from 27.3 pence to 27.9 pence (5 per cent in constant currency terms) due to the decrease in an adjusted effective tax rate to 21.5 per cent (2017: 23.1 per cent). Adjusted free cash flow rose from £151 million in H1 FY18 to £152 million in H1 FY19. On 30^th September 2018, Tate & Lyle’s net debt decreased to £337 million. The Net Debt-to-EBITDA ratio stood at 0.7 times in H1 FY2019.

Share Price Performance
 
Daily Chart as at April-30-19, before the market close (Source: Thomson Reuters)

On 30^th April 2019, at the time of writing (before market close, GMT 10:00 AM), Tate & Lyle PLC shares were trading at GBX 744.40, up by 1.39 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 750.40/GBX 575.60. The company’s stock beta was 0.97, reflecting slightly lower volatility as compared to the benchmark index.

Recent News
On 26^th March 2019, Lantmannen EK agreed to acquire production facility of Tate & Lyle PLC, a London-based wet corn mill operator.

Key Risks
Tate & Lyle operates in many parts of the world and is exposed to fluctuations in foreign exchange rates.The company reports its financials in the Pound Sterling for accounting purposes. Therefore, its revenue is exposed to the volatility of the Pound Sterling against other functional currencies such as Euro, US Dollar and other currency. The company must abide by stringent regulations and specifications pertaining to its products in domestic and export markets. There are some principal risks like failure to comply with legal or regulatory requirements and Code of Ethics, fluctuations in prices and availability of raw materials, energy, freight and other operating inputs and consumer or government attitudes to the products.

Valuation Methodology

*All forecasted figures have been taken from Thomson Reuters.

Conclusion
Food ingredients maker Tate & Lyle is on the hunt for acquisitions as it seeks to expand the part of its business that helps big food companies to reformulate their products to reduce sugar, salt, and fat. Tate & Lyle’s largest business remains its primary products division, focused in North America, where it produces high fructose corn syrup and various starches.The decent financial performance focuses on research and development and emphases on safety are the company’s major strengths, whereas geographic concentration remains an area of concern. In the future, risks associated with counterfeit products, foreign exchange risk and stringent regulations could affect its business growth. However, new product launches, growing demand for dairy products and strategic agreements could provide ample growth opportunities to the company. On the base of above valuation, we recommend investors to keep a cautious Watch approach on the stock at the closing price of GBX 734.20 (as on 29th April 2019), while any correction with support from few catalysts needs to be evaluated at a later stage.

EVRAZ PLC

Evraz Plc (EVR) is a vertically integrated steel company that carries out the production of steel, coal and vanadium products. The company has differentiated its operations in three operating segments: Steel; Steel, North America; Coal, and Other Operations. It also operates production assets in Russia, the US, Canada, Czech Republic, Italy, South Africa, Ukraine and Kazakhstan.

Financial Highlights (FY 2018, US$ million)

(Source: Annual Report, Company Website)

The company’s consolidated revenue surged by 18.6 per cent to $12,836 millionas compared with the financial year 2017 of $10,827 million, due to an increase in prices for steel and vanadium products. Profit from operations rose from $1,986 million in 2017 to $3,528 million in 2018. Consolidated EBITDA climbed by 43.9 per cent to $3,777 million against the $2,624 million in FY17, reflecting the strong growth in the market and various improvement initiatives. The EBITDA margin stood at 29.4 per cent in 2018. The group’s net profit increased from $759 million in F17 to $2,470 million in FY18. Earnings per share climbed to $1.67 vs $0.49 in FY2017. Net cash flow from operating activities increased by 34.5 per cent to $2,633 million as compared to $1,957 million in 2017. EVRAZ’s capex declined by 12.6 per cent to $527 million as compared with $603 million a year ago. The Board has declared an interim dividend per share of $0.40.

Share Price Performance
 
Daily Chart as at April-30-19, before the market close (Source: Thomson Reuters)

On 30^th April 2019, at the time of writing (before market close, GMT 10:00 AM), EVRAZ PLC shares were trading at GBX 636.40, down by 0.34 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 674/GBX 435.50. The company’s stock beta was 1.91, reflecting higher volatility as compared to the benchmark index.

Key Risks
Evraz's operations are subject to a wide range of health, safety, and environmental laws, regulations, and standards. This is an external risk that was coming from the global economic factors, industry conditions and cyclicality. The global steel industry is cyclical, highly competitive, and has historically been characterized by overcapacity. Evraz competes with several steel manufacturers ranging from large diversified enterprises to smaller companies specializing in particular products. Market risk is caused by changes in foreign exchange and interest rates. Evraz may face an increase in its operating costs due to the volatility of input costs, especially raw materials.

Valuation Methodology

*All forecasted figures and peers have been taken from Thomson Reuters. Currency exchange rate taken for 1 USD = 0.77 GBP.

Conclusion
The company had shown an increase in revenue in the current financial year 2018 as compared to the previous year.The company’s profits are impacted by the fluctuations in the commodities market and exchange rate fluctuations. The reduction of demand in the geographical areas is also affecting the company’s results. The company was negatively impacted by regulatory and political changes. Going forward, stringent regulations, market risks, intense competition and fluctuation in prices may impact the company’s performance. However, an increase in demand for steel and coal, strategic agreements and growth initiatives are likely to present new growth opportunities to the company. On the basis of above valuation, we recommend investors to keep a cautious Watch approach on the stock at the closing price of GBX 638.60 (as on 29th April 2019), while any correction with support from few catalysts needs to be evaluated at a later stage.

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