Profits up Five-Fold at Tate & Lyle But Hurt by Weak Ethanol Prices in US

26 May 2016 --- Tate & Lyle has posted a five-fold increase in full-year pre-tax profits to £126m ($185m), helped by a strong performance from sugar alternative Splenda and its other speciality ingredients but suffered from weaker prices in the commodity markets.

While profits were up from £25m ($37m) to £126m ($185m), sales only nudged up from £2.34bn ($3.4bn) to £2.35bn ($3.5bn) over the year across the British food ingredients company.

Tate & Lyle took a financial hit from lower corn costs and weak ethanol prices in the US, which impacted its sales.

Speaking to analysts, chief executive Javed Ahmed said: "In commodities, however, the environment has been very challenging, in particular high ethanol inventories and low gasoline prices in the US continue to put significant pressure on industry margins throughout the year."

"The fundamentals of the US ethanol industry do not show any near term signs of improving and therefore we expect returns from US ethanol to remain weak in the 2017 financial year. The US corn wet milling industry remains relatively stable and well balanced.”

“US carbonated soft drink sales volume, the main demand driver for our bulk sweeteners, declined by around 0.5 percent in the 2016 financial year, somewhat less negative than the market trend."

Sales across its Speciality Food Ingredients division - its more profitable division - were up from £865m ($1.27bn) to £897m ($1.32bn) but down across bulk ingredients division from £1.48bn ($2.2bn) to £1.46bn ($2.14bn).

Sales of sugar substitute Splenda were up by four percent to £156m ($230m) and it turned in a profit of £22m ($32m) for the year.

The company said it has been able to arrest a drop in the selling price of Splenda, which fell significantly last year, by focusing on key customers.

However, it said that going forward it said the industry capacity for Splenda is "well in excess" of demand which will lead to pricing pressure.

Ahmed added: "This has been a year of solid financial performance and strong project delivery. Both business divisions delivered margin expansion and we completed the major structural change initiatives needed to further strengthen the business and drive higher quality earnings.”

“We also made progress against the 2020 ambition we outlined in November 2015.Turning to the outlook for the 2017 financial year, subject to currency movements, we are confident the group will continue to make progress in line with our plan and towards our 2020 Ambition."

Tate & Lyle issued a string of profit warnings in 2015 and has subsequently restructured its business to try and revive its financial health.