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Tate & Lyle sees sweetener pressure

With the annual sweetener pricing round largely complete, Tate & Lyle has issued a trading statement for the three months ended 31 December 2014. Speciality Food Ingredients, excluding SPLENDA Sucralose, performed in line with expectations, with volumes slightly ahead of the prior year period driven by solid growth in Europe and Asia Pacific. Customer demand for […]

With the annual sweetener pricing round largely complete, Tate & Lyle has issued a trading statement for the three months ended 31 December 2014.

Speciality Food Ingredients, excluding SPLENDA Sucralose, performed in line with expectations, with volumes slightly ahead of the prior year period driven by solid growth in Europe and Asia Pacific. Customer demand for new products launched from the company’s innovation pipeline remains high, with these new products delivering another quarter of strong volume growth.

SPLENDA Sucralose performed in line with expectations with volumes slightly lower than the prior year period. The sucralose market remained, and looks set to continue to be, extremely competitive and Tate & Lyle said that its approach remains only to compete for volumes where it sees value. The company expects to conclude the project to evaluate how best to maximise returns from this product by the end of the current quarter.

Tate & Lyle said that it continues to invest in the higher growth emerging markets. On 8 December 2014, it acquired a majority equity interest in Gemacom Tech Indústria e Comércio S.A. (Gemacom), the leading domestically-owned Food Systems business in Brazil. In December, Tate & Lyle also re-purchased certain distribution rights to sell crystalline fructose directly to customers primarily in Asia Pacific for a consideration of US$18million. This will be treated as an exceptional cost in the full year income statement.

Bulk Ingredients performed below the prior year period driven by the impact of lower US sweetener volumes in part due to capacity constraints in the wider US transportation network, weakening EU sugar prices which affected bulk sweetener prices in Europe, and a sharp deterioration in ethanol margins near the end of the period. The combined impact of these industry-related factors meant that Bulk Ingredients performed below expectations.

Consistent with its strategy to dampen commodities volatility, Tate & Lyle said that it has progressively re-positioned its Bulk Ingredients business such that tolling contracts now represent around 75% of US corn sweetener volumes. Contracts in the 2015 calendar year pricing round for the remaining 25% of corn sweetener volumes were renewed at higher unit margins, although this benefit for the overall division will be offset in the final quarter and into the 2016 financial year by a combination of lower volumes as grind is diverted to Speciality Food Ingredients and the impact of continued pricing pressure in US ethanol and EU bulk sweetener markets.

Looking forward, Tate & Lyle said that, while Speciality Food Ingredients is anticipated to continue to perform in line with expectations, following the weak performance of Bulk Ingredients in the third quarter driven by lower US sweetener volumes and pressure in ethanol and EU bulk sweetener markets, which it anticipates will continue through the fourth quarter, Tate & Lyle now expects Group profits for the full financial year to be modestly below the range stated in September 2014 of £230 to £245 million^[