Demand for Sodas in US Sweetens Profits at Tate & Lyle
03 Nov 2016 --- Profits for the half-year at Tate & Lyle were up 37 percent to £140m ($173m), as US demand for sodas in the summer spiralled and earnings were helped by the weakness of sterling. Revenues at the British ingredients supplier were up 13 percent to £1.3bn ($1.6bn) in the period, while full-year profit expectations have been increased.
Across its biggest division, Bulk Ingredients, which supplies high fructose corn syrup (HFCS) sweeteners, sales were up 12 percent to £834m ($1.03bn) while profits were up 51 percent to £64m ($79m).
The performance in the division was helped by lower energy costs and growth in its core sweetener business in the US.
Tate & Lyle has switched sales models in the US, moving from a regional to a product line model, in an effort to lower costs across the supply chain.
Across Speciality Ingredients, which includes Splenda, sales were up nine percent to $487m ($601m) while Splenda sales were up nine percent to £84m ($104m).
Strong performing markets in Speciality Ingredients included Latin America and Asia Pacific.
Tate & Lyle is looking to build its fibers and texturants business in China in categories like dairy. Volumes were up 17 percent across Europe, Middle East and Africa.
The fall in value of sterling compared to the US dollar helped earnings at Tate & Lyle.
It said: "If current exchange rates were to prevail for the remainder of the financial year, we estimate that our reported full year earnings would increase by around £40 million ($49m)."
Like other businesses, Tate & Lyle, which generates less than two percent of its revenues in the UK, has assessed the impact of Brexit.
It added: “The outcome of this referendum is not expected to have a material near-term impact on our business and we are well-placed to continue to grow our global business without significant disruption."
Javed Ahmed, Chief Executive, said: “We have made a strong start to the year delivering good profit growth in both divisions supported by good US bulk sweetener demand in the key summer beverage season, and the benefit of the one-off sell-down of excess inventory in Sucralose.”
“We continued to strengthen execution across the business, leading to further improvement in customer service and supply chain performance.”
“Speciality Food Ingredients performed well and consistent with our 2020 Ambitions, delivering double digit profit growth in the core business. All regions delivered solid volume performance other than North America where volume was held back by lower demand. Sales from New Products continued to gain good traction.”
“Bulk Ingredients performed particularly well, driven by solid demand, robust margins and strong manufacturing performance. We are continuing to actively position core Bulk Ingredients to deliver steadier earnings over the longer term, with an increasing focus on customer service, cost control and continuous manufacturing improvement.”
“Turning to the outlook, we expect adjusted profit before tax in constant currency for the full year to be higher than we anticipated coming into the year driven by the strong first half performance, with performance in the second half remaining in line with our expectations.”
