Tate & Lyle has issued an interim management statement for the three months ended 31 December 2013.
In Speciality Food Ingredients, volumes were said to be broadly in line with the prior year period, with strong growth in emerging markets offset by softness in developed markets. Within high intensity sweeteners, volume and sales growth in SPLENDA Sucralose were in line with the levels reported during the first half of the year and the company’s expectations. In Bulk Ingredients, Tate ^ Lyle said that it saw an improved performance from US sweeteners and US ethanol relative to the comparative period, but lower returns from co-products held back the division’s performance overall.
Underlying profits in both divisions were well ahead of the prior year period. However, due to volume softness in developed markets and lower returns from co-products, adjusted profit before tax was lower than the company’s expectations.
In Bulk Ingredients, the company said that unit margins for liquid corn sweeteners in North America will be modestly lower in the 2014 calendar year. After the soft beverage season in 2013, which was caused by the unusually cold spring and summer, a return to more normal seasonal demand patterns in 2014 should largely offset this. In Europe, sweetener margins are expected to be broadly in line, with lower corn costs offset by a reduction in sugar prices.
In Speciality Food Ingredients, within starch-based speciality ingredients, Tate & Lyle expects overall unit margins in the 2014 calendar year will be modestly higher than the comparative period.
In SPLENDA Sucralose, Tate & Lyle said that it has recently renewed a number of customer contracts, some of which are multi-year. These, said the company, have been completed in a dynamic market where the competitive environment has intensified, driven by a significant overhang of unsold Chinese sucralose. With these contracts in place, Tate & Lyle anticipates the rate of price decline in SPLENDA Sucralose will increase in the final quarter and that prices in the 2015 financial year to be around 15% lower than the current financial year. The company said that it continues to see good long-term opportunities for growth in the market for SPLENDA Sucralose leading to operational efficiencies as it continues to fill its McIntosh facility.
Concurrently, Tate & Lyle announced the establishment of a new SPLENDAAlliance with McNeil Nutritionals. The Alliance includes terms for ongoing supply which will be effective when the current supply agreement expires in April. That agreement was signed in 2004 when the Sucralose business was realigned. The terms of that realignment included the making of annual payments by McNeil to Tate & Lyle based on McNeil’s sales of table top products during the 10 years following the realignment. These payments are not a feature of the new Alliance and accordingly, the final such payment will be received in respect of the year ending 31 March 2014 and is expected to amount to approximately $11 million (£7 million).
Overall, Tate & Lyle said that it continues to be pleased with the progress it is making and particularly the underlying strength of its Speciality Food Ingredients business. SPLENDA Sucralose aside, in the 2014 financial year the company said that it expects to see profit growth in all product categories across Speciality Food Ingredients. The significant growth delivered in these product categories over the last four years means that they now represent a much larger and more meaningful part of Tate & Lyle’s Speciality Food Ingredients business, the company said. This, according to Tate & Lyle, together with a robust innovation pipeline and strong growth momentum in emerging markets, demonstrates that its long-term strategy of evolving Tate & Lyle into a more global and higher quality business remains firmly on track.
The statement concluded by saying that, overall, the group has made a solid start to the final quarter. As a result of the operating performance in the third quarter and lower SPLENDA Sucralose pricing in the final quarter, at constant rates of exchange it now expects full year profits for the year ending 31 March 2014 to be broadly in line with the comparative period.
