Tate & Lyle Expects Pretax Profit Marginally Below Guidance
Food & Industrial Ingredients, Europe continued to perform well. The Single Ingredients business benefited from lower net corn costs, despite experiencing pressure on industrial starch volumes.
02/04/09 Tate & Lyle has issued a trading update for the year ended 31 March 2009 ahead of the announcement of the full year results on 28 May 2009. Profit before tax for the year to 31 March 2009 is expected to be marginally below their previous guidance of an outturn approximate to that of the prior year. However the mix of profits has reduced the tax rate so earnings per share are expected to be broadly in line with market expectations.
Solid progress has been made on debt reduction. Net debt at 31 March 2009 was less than £1.25 billion, around £300 million less than at 31 December 2008, and more than £150 million lower than net debt at 31 March 2008 once it has been adjusted for the effects of movements in exchange rates.
Results at Food & Industrial Ingredients, Americas improved over the previous quarter as orders from most food and beverage customers began to return towards more normal levels. However, demand for sweeteners and industrial starches remained weak. Ethanol margins and volumes continued to be under severe pressure. As anticipated, we completed a sale of land in Mexico and have taken £3 million to profit.
Food & Industrial Ingredients, Europe continued to perform well. The Single Ingredients business benefited from lower net corn costs, despite experiencing pressure on industrial starch volumes. The Food Systems business continued to trade in line with our expectations. Following the closure of the Greek factory, as anticipated the company has taken £4 million Restructuring Aid to profit.
In the Sugars division, the UK retail market remained extremely competitive. Tate & Lyle said they continue to be encouraged by the significant progress of the EU Sugar Regime reforms, which have now achieved the majority of the agreed target reduction in production quotas. However, the profit performance of the division until the next institutional price change on 1 October 2009 is expected to be modest.
Sucralose volumes and profits increased over the previous quarter although they were lower than a strong quarter in the comparative prior year period. The company said they continue to be encouraged by the considerable progress we are making in improving manufacturing yields as we implement process developments identified at our pilot plant. The International Trade Commission (ITC) has further postponed to 3 April 2009 the publication of its binding decision in relation to litigation against a number of Chinese manufacturers and distributors concerning alleged infringement of certain of our patents.
Exchange rates have been relatively stable in the quarter, and continued to benefit the translation of profits earned in foreign currencies when compared with the prior year.
The disposal of the international sugar trading business to Bunge, announced on 2 July 2008, was completed as scheduled on 31 March 2009. At completion, Bunge took over the remaining working capital of the disposed business, resulting in a total cash inflow of US$81 million (£56 million), subject to closing adjustments.
Iain Ferguson, Chief Executive said, “In the face of the economic downturn and its uncertain impact on customer demand, we continue to focus on matters under our control, in particular through the active management of our cost base and by maximising cash flow. Through these actions we have made solid progress in reducing our debt which at the end of the financial year was lower than our previous expectations. We remain a well-financed business and confident of our ability to deliver positive cash flows.”