Tate & Lyle half-year sales decrease 1 percent, rising costs squeeze margins

08 Nov 2018 --- British-based multinational agribusiness Tate & Lyle says it has performed “in line with expectations” after its half-year results show flat profit growth with sales decreasing by 1 percent to £1.38 billion (US$1.81bn). The food ingredients maker fought off inflationary headwinds to deliver growth in adjusted profit before tax and strong cash flow despite cost inflation from materials. 

Key highlights for the six months to 30 September 2018 include Food & Beverage Solutions accelerating volume growth, including a 3 percent increase in North America.

With a strengthened leadership in place, the company says it successfully managed inflationary headwinds. It reports a 2 percent increase in adjusted profit before tax and a 3 percent increase in Food & Beverage Solutions profit to £77 million (US$101mn). 

Volume was up 3 percent in North America and 16 percent in Asia Pacific and Latin America, while there was a 6 percent increase in sales of new products. 

Primary Products profit was 6 percent lower at £85 million (US$111 million), while there was a 1 percent increase in Sucralose profit to £27 million (US$35.4 million). Tate & Lyle says its Sweeteners and Starches profit is in line with the comparative period. 

During a conference call earlier today, CEO Nick Hampton explained how Tate & Lyle’s three programs to accelerate business performance are making good early progress. 

“The strength and leadership team is now complete and is driving a new sense of urgency across the business, he noted. “The business performed in line with our expectations in the first half. Food & Beverage Solutions performed well. In Primary Products, the sweeteners and starches business delivered solid underlining performance with overall profit in the division due to commodities.”

“In May, I set out a clear focus and direction for the business. That was to execute our strategy through three key priorities and to build an organization with a strong sense of purpose and a dynamic culture based on partnership, agility and execution. 

“The three priorities are firstly to sharpen the focus on our customers, secondly to accelerate the development of our portfolio, and thirdly to simplify the business and deliver US$100 million of productivity benefits over a four year period. I’m pleased to say that these three priorities are clear to our employees and good early progress is being made on each one.”

Hampton also explained how despite seeing greater cost inflation in North America than expected at the start of the year, the company “took the necessary actions to manage these headwinds in the first half.”

“As a result, our guidance for the financial year remains unchanged and the Board has increased the interim dividend by 2.4 percent,” he added. 

The company’s half-year results come shortly after new scientific studies were presented at the International Sweeteners Association’s (ISA) Conference in London earlier this week, supporting current evidence that low-calorie sweeteners can aid in sugar reduction, cravings management and weight loss. 

The latest research on low-calorie sweeteners’ use, benefits, and role in the diet was discussed at the 3rd ISA conference themed: “The science behind low-calorie sweeteners: where evidence meets policy.”

In May, Tate & Lyle PLC announced it had entered into an agreement to acquire a 15 percent equity holding in Sweet Green Fields, one of the largest privately held, fully integrated global stevia ingredient firms.

Tate & Lyle also says there is early progress on its “Sharpen, Accelerate, Simplify” programs to accelerate business performance and actions are underway to deliver US$100m productivity benefits over four years. 

“We performed in line with our expectations in the first half delivering growth in adjusted profit before tax and strong cash flow despite cost inflation from materials and transport in North America, and lower profits in Commodities,” says Chief Executive, Nick Hampton.

“Food & Beverage Solutions performed well with strong volume growth in North America, Asia Pacific and Latin America. In Primary Products, Sweeteners and Starches delivered solid underlying performance.”

“The three programs we announced in May 2018 to sharpen the focus on our customers, accelerate portfolio development and simplify the business are progressing well. With our clear direction, strong financial position and a strengthened leadership team driving greater pace and agility across the organization, we remain well-placed to realize the growth potential of our business.”

Commodities profit was £5 million (US$6.5mn) lower following an exceptionally strong comparative period, while there is a 5 percent increase in earnings per share benefiting from lower finance costs and lower adjusted effective tax rate. The Interim dividend increased by 0.2p to 8.6p per share; up 2.4 percent.

The outlook for the year ending March 31, 2019, remains unchanged.

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