Tate and Lyle's European Sugar Profitability Reduced

29/09/05 UK based sweetener company, Tate and Lyle has reported that its profitability in the EU sugar refining business has been substantially reduced with oversupply in the market coupled with the expected higher cost of export licenses. Energy costs were also higher.
The company reported that over the five months to 31 August 2005, profit before tax and amortisation has met budgetary expectations and is modestly above the corresponding period of the prior year, despite higher interest charges as we invest for growth.

Overall, expectations for the full financial year to March 2006 remain unchanged. Looking further forward, if prevailing energy prices persist through our financial year 2007 it would increase our costs by around £40 million. The company said that it aims to recover this through product pricing.
 
There has not been any new information or clarification on the proposals for reform of the EU sugar regime which were tabled by the European Commission on 22 June 2005.  Tate and Lyle’s efforts to achieve an equitable solution for our businesses continue. The company expects the Commission to announce final proposals for the EU Sugar Regime towards the end of November 2005.

SPLENDA Sucralose has continued to enjoy strong demand across all major food, beverage and pharmaceutical categories.  Similar to 2005, demand from existing customers is expected to outpace production through the year to March 2006, the company said.  The expansion projects to increase sucralose production capacity in Alabama, USA and Singapore are on schedule and the related capital expenditure is in line with budget.
 
The company commented on the Altern affair by noting, “we are aware that a no-calorie sweetener tabletop product containing sucralose and called “Altern” has been available in one or two stores in the USA.  We have determined that the sucralose contained in the product was manufactured in our facility in McIntosh, Alabama. This product has now been withdrawn from sale”.
 
Food & Industrial Ingredients Americas has again demonstrated good growth in value added food ingredients, Tate and Lyle reported. Industrial ingredients have performed as planned in difficult market conditions. Ethanol has benefited from increased margins in recent months.  Commodity sweetener volumes have exceeded our expectations whilst margins have been stable.  The citric acid product line has contributed increased profitability. Increased costs, in particular energy and transport, have partially eroded margin gains in this division. As expected, small start up losses have been incurred on both Aquasta astaxanthin and the Bio-PDO (Bio-3G) joint ventures.
 
Food & Industrial Ingredients Europe has achieved higher sales volumes with good growth in food ingredients. This benefit has been partially offset by lower sweetener selling prices and margins following the 2005 calendar year  pricing round, and higher costs, particularly energy and transport. These cost increases will affect second half performance and will need to be recovered in the 2006 calendar year pricing round.