British sweeteners and starches maker Tate & Lyle expects flat half year profits due to difficult trading in Europe although it sees a better second half with profits for its full year expected to be ahead.
The company’s performance in its Specialty Food Ingredients sector improved during the second quarter; however due to difficult trading conditions in Europe, operating profit in this division will be lower than the prior year period.
Volume growth for the first half is expected to be in line with the market and sales ahead of the prior year period with solid growth in the US and emerging markets offsetting a weaker performance in Europe.
The company said in a statement that they have seen good growth in Sucralose volumes in the second quarter; although overall volumes in the first half are expected to be lower than the comparative period (which included an unusually large volume from customers’ new product launches) this is attributed, again, to the more difficult market conditions in Europe.
Overall, they expect to report adjusted operating profit for the Group for the first half in line with expectations and the prior year period, which benefited from an exceptionally strong performance from co-products.
Within Bulk Ingredients, operating profit is expected to be ahead of the comparative period with a strong performance from liquid sweeteners in both the US and Europe more than offsetting ongoing challenging market conditions in US ethanol. Income from co-products returned to more normal levels during the period.
While US corn prices have eased slightly since publication of the USDA’s latest supply and demand estimates on 12 September 2012, prices remain high as a result of tight market conditions and continued uncertainty about the size and quality of this year’s harvest following the severe drought in the mid-west. European corn prices have followed a similar pattern to the US.
In Speciality Food Ingredients, they expect continued challenging market conditions in Europe, overall they expect to achieve steady volume growth across all major product categories and solid sales growth for the full year.
In Bulk Ingredients, they expect the firm demand for liquid sweeteners in the US to continue and demand in their other food markets to remain stable. In Europe, higher corn prices are expected to reduce isoglucose margins in the second half. Market conditions in US ethanol are expected to remain challenging.
The company said that the outcome of the 2013 calendar year sweetener pricing rounds will influence performance in the final quarter of the financial year.
