6th Feb 2015 07:33
LONDON (Alliance News) - Tate & Lyle PLC on Friday said it expects its profit for the year to be below its guidance as it said its Specialty Food Ingredients business performed in line with expectations in the third quarter, but this was offset by a weaker performance in its Bulk Ingredients business.
The FTSE 250-listed sugar company said it expects its profit for the year to the end of March to come in below its guidance in September of GBP230 million to GBP245 million, owing to the weak performance in the Bulk Ingredients business.
Tate said its Specialty Food Ingredients business performed in line with expectations in the third quarter to the end of December, with volumes ahead year-on-year on the back of solid growth in its Europe and Asia Pacific markets.
The Splenda Sucralose business also performed in line with expectations, albeit with volumes slightly lower year-on-year. Tate said the sucralose market remained very competitive in the quarter, and it expects this trend to continue, adding it will only compete for volumes in parts of the market where it sees value.
But Tate's Bulk Ingredients business was weaker year-on-year in the quarter, hit by the impact of lower US sweetener volumes. It blamed constraints in the wider US transportation network, weakening European Union sugar prices, which hit bulk sweetener prices in Europe, and a deterioration in ethanol margins near the end of 2014.
The group has been repositioning its Bulk Ingredients business, meaning tolling contracts now represent around 75% of its US corn sweetener volumes. Contracts for the 2015 calendar year for the remaining 25% of its corn sweetener volumes were renewed at higher unit margins, though it expects the benefit of this to be offset in the fourth quarter and in 2016 by lower volumes.
Tate & Lyle also said its review of global demand, supply and planning processes announced in September last year has been completed and found there will be no need to increase its capital investment beyond the already announced incremental rise expected to come on stream in the second half of its 2016 financial year.
The review also found improvements are needed in its operating and supply chain processes and said a programme to carry out these improvements is now underway. It reiterated it expects to incur costs of GBP40 million in the year to the end of March as a result of operational and supply chain disruption.
By Sam Unsted; [email protected]; @SamUAtAlliance
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