24th Jul 2014 09:10
LONDON (Alliance News) - Tate & Lyle PLC said trading in its first quarter was challenging and that operating profit for the period was below expectations as it felt the impact of the severe winter in the US and increased costs following an industrial accident at it Singapore facility,
In an interim management statement for the period April 1, to June 30, 2014, the sweeteners and starches company said that group adjusted operating profit came in below its expectations due to the anticipated impact of the "prolonged and severe" winter in the US and the adverse impact of the strength of sterling against the US dollar and other currencies.
The winter caused operational difficulties at Tate & Lyle's corn plants and meant that the company began the current financial year with much lower inventories than usual. While the impact on Bulk Ingredients was less than originally anticipated, it was greater on Speciality Food Ingredients, said the company, therefore it had to balance production to best meet customers needs. Inventories continue to re-build and are expected to return to more normal levels in the current quarter, it added.
The company also faced an unexpected shutdown of its SPLENDA Sucralose facility in Singapore. Production at the facility was temporarily suspended after an industrial accident, while the local authorities conducted their investigations. The company added the site remained closed for a longer period than it originally anticipated.
Tate & Lyle said the shutdown of its Singapore facility incurred GBP3 million in costs to resolve the created issues. During the quarter there was limited production, it said, and customer orders were largely met from inventories. As a result, fixed manufacturing costs of GBP8 million were expensed and reduced profits for the quarter, but these will reverse in the second-half of the year, said the company.
The company said that volumes for its SPLENDA Sucralose in the quarter were slightly lower than expected, predominantly due to a change in a large customer?s order pattern. "Overall, the sucralose market continues to be competitive and dynamic with the pressure on pricing in line with our expectations," said Tate & Lyle.
Despite the disappointing statement, within with Tate & Lyle includes no financial results, the company said customer demand remains strong and that it continues to expect group results, on a constant currency basis, for the full-year will be broadly in line with its expectations and that group profits are expected to be weighted to the second-half of the financial year.
Considering its specific divisions, the company said the performance of Speciality Food Ingredients for the full-year is expected to be slightly lower than anticipated. However, demand continues to be strong and, notwithstanding current market conditions for sucralose, for the full-year Speciality Food Ingredients is expected to deliver volume growth above the wider speciality food ingredients market, said Tate & Lyle.
The company appointed Nick Hampton as chief financial officer in June. He takes on the role September 1, replacing Tim Lodge, who has been the company's CFO since 2008.
In May the company reported flat profit and a drop in sales for its most recent financial year, hit by a soft US beverage sector and weaker sales of its bestselling brand, no-calorie sweetener Splenda sucralose.
Shares in Tate & Lyle were Thursday trading 0.38% higher at 665 pence per share.
By Alice Attwood; [email protected]; @AliceAtAlliance
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Tate & Lyle