London / UK. (tl) Tate + Lyle PLC issues the following trading update for the six months ending 30 September 2011. CEO Javed Ahmed: «The encouraging start to the financial year has continued during the second quarter with solid demand within a number of our markets in both Speciality Food Ingredients and Bulk Ingredients, assisted by strong co-product returns».
Operating Performance – Continuing Operations
The comments on operating performance exclude the unfavourable impact of currency movements on the translation of first half profits.
In Speciality Food Ingredients, corn-based speciality sweetener and starch volumes grew in line with the market. Sucralose volume growth was particularly strong with increased demand to support new customer product launches albeit, as expected, at lower average selling prices. Sucralose volumes are expected to revert to more normal levels during the second half. In the Food Systems business, volumes were lower than Tate + Lyle´s expectations due to tough trading conditions in Russia.
Within Bulk Ingredients, US corn sweeteners benefited from good domestic demand and a continuing firm market for corn sugar in Mexico. In Europe the anticipated squeeze in sweetener margins from higher corn prices has been partially offset by higher volumes. Industrial starch volumes in both the Americas and Europe are broadly in line with the prior year although we have improved margins in Europe against a market backdrop of higher demand for corn starches. The company expects citric acid sales to be somewhat lower in the first half than the prior year as a result of a more competitive environment, particularly in Latin America.
Con Prices and Corn Products
For the previous full financial year (ended 31 March 2011), Tate + Lyle reported 16 million GBP of additional income from co-products following a significant increase in the US corn price, with around two-thirds of this benefit accruing during the second half.
During the first half of this financial year, Tate + Lyle has seen a continuation of favourable market conditions for co-products and in the US the company has locked in sales further forward to take advantage of unusually strong demand. In the first half, the company anticipates that the additional income from co-products will contribute around double the benefit in the comparative period last year.
Since over 80 percent of the corn grind is utilised to produce Bulk Ingredients, the majority of this effect is recorded within this segment.
Debt Management
In August Tate + Lyle paid 79 million GBP in respect of the final dividend for the year ended 31 March 2011 and received 24 million GBP in relation to the recovery of tax losses that crystallised as a result of the sale of the company´s ethanol facility in Fort Dodge. As reported in July, the company has agreed to make a payment of 45 million GBP into the main UK pension scheme this financial year, half of which has been paid.
Outlook
In Speciality Food Ingredients, Tate + Lyle expects to achieve steady volume growth within both Sucralose and starch-based speciality ingredients for the remainder of the financial year. Overall within Speciality Food Ingredients, the company expects to deliver a year of good sales and profit growth although as previously reported, the level of profit growth is expected to be more modest than the strong result achieved in the prior financial year.
In Bulk Ingredients, Tate + Lyle expects the firm demand for corn sugars in the US and Mexico to continue, subject to normal seasonal patterns, and stable demand in its other food markets. As usual, the outcome of the 2012 calendar year sweetener pricing rounds will influence performance in the final quarter of the financial year. Industrial starch, particularly in Europe, is expected to perform better than the prior year as a result of higher demand for corn-based starches.
Overall, and before the gains made during the first half from co-products and any impact from currency movements, Tate + Lyle´s expectations for the full year remain unchanged and the company continues to anticipate another year of profitable growth.
