Tate & Lyle Volumes Rise in Third Quarter, But Margins Down
11 Feb 2016 --- Tate & Lyle has reported in a trading statement that its’ Speciality Food Ingredients performed steadily with volume ahead of the comparative period. Strong volume growth in Europe and Asia Pacific more than offset softer demand in North America and Latin America.
In Food Systems, volume continued to grow and also benefited from the acquisition of Gemacom in December 2014, however margins declined as a result of the sharp increase in certain ingredient costs. SPLENDA Sucralose volume was ahead of the comparative period although, as expected, pricing was lower year-on-year.
In Bulk Ingredients, North American sweetener volume in the quarter was slightly ahead of the comparative period. As previously communicated, the bulk sweetener pricing round will deliver modest margin gains in the fourth quarter. Commodities continue to have a material adverse impact on performance especially due to further weakness in the US ethanol market. As a result, we now expect a small loss from Commodities for the full year.
The company’s outlook for the full year remains unchanged. As previously communicated the Group’s adjusted profit before tax from continuing operations in constant currency and on an equity accounting basis is expected to be broadly in line with that of the 2015 financial year at £193 million (US$278 million).
At reported rates, adjusted profit before tax is expected to be modestly below this figure.
The longer term outlook for the business remains positive. In Speciality Food Ingredients we expect the market to grow at mid-single digits, and over time our objective is to grow modestly ahead of the market and to drive margin expansion, supported by increased utilization of new capacity, growing revenues from new products, and a gradual return to growth in North America. While in the near term we expect weakness in commodity markets to persist, we will continue to target stable earnings from core Bulk Ingredients and to manage Commodities to dampen volatility.
Speaking on a conference call Javed Ahmed, Chief Executive spoke about the Sucralose Singapore plant and managing the transition back to Macintosh: “We have already started the shutdown process for that plant, it’s a very detailed project that is going extremely well. The transition is well thought through, we are carrying a bit of inventory as we go through the transition but that will be a phased approach.”
“We fully expect to see volume going into next fiscal, I would say double digits,” Ahmed adds.
Ahmed concluded: “We are very much on track to deliver full year guidance and the longer term outlook for the business remains positive.”
By Elizabeth Kenward
