13th Feb 2014 13:41
LONDON (Alliance News) - Tate & Lyle PLC said Thursday that adjusted pretax profit for the third quarter came in lower than expectations, as volume and sales growth in its SPLENDA Sucraclose sweetner remained in line with first-half levels and its expectations, ahead of impending price declines, expected to hit full-year results.
Shares in the British-based multinational agribusiness plummeted in morning trading after the firm cut its full-year pretax profit expectations to flat profits for the current year due to prices for its SPLENDA Sucraclose to fall more than previously expected in the final quarter, and by another 15% in the next financial year.
It said in its interim management statement for the three months to December 31 2013 that adjusted profit before tax was lower than its expectations and that it now expects profits for the year to March 31 2014 to be broadly in line with last year.
Tate & Lyle said that despite steady sales and growth in the SPLENDA Sucraclose product, it anticipates the rate of price decline in the product to increase in the final quarter, with prices expected in the 2015 financial year to come in around 15% lower than the current year, it warned, driven by current market dynamics and its latest figures, said the company, noting however, "We continue to see good long-term opportunities for growth in the market for SPLENDA Sucralose leading to operational efficiencies as we continue to fill our McIntosh facility."
The food producer said net debt at the end of the quarter was GBP253 million, down from GBP336 million at September 30 2013. The company said, "While the recent bumper harvest in the US has eased pressure on corn stocks, we continue to maintain prudent levels of corn within our silos for security of supply. Based on current corn prices and exchange rates, we expect the payment for new crop corn held in our silos to result in a net cash outflow in the final quarter."
Tate & Lyle also announced the latest phase of its 30-year Sucralose partnership with McNeil Nutritionals through the establishment of a renewed SPLENDA Alliance. The focus for the renewed partnership will be the development and growth of the global market for Sucralose and the SPLENDA Brand. The companies will partner on the continued development and promotion of the SPLENDA Brand and Sucralose, including ingredient and brand protection initiatives, said the firm.
Overall, the firm said it continues to be pleased with the progress it is making after its "solid start" to the final quarter, and particularly with the underlying strength of its Speciality Food Ingredients business. The company notes that excluding the headline SPLENDA sweetner, it expects to see profit growth in all product categories across Speciality Food Ingredients as, "The significant growth delivered in these product categories over the last four years means that they now represent a much larger and more meaningful part of our Speciality Food Ingredients business."
The firm has now largely completed its 2014 calendar year pricing round. Within its Bulk Ingredients division, Tate & Lyle warned that unit margins for liquid corn sweeteners in North America will be modestly lower for the 2014 calendar year. After the soft beverage season in 2013, which was caused by the unusually cold spring and summer, a return to more normal seasonal demand patterns in 2014 should largely offset this, said the firm. Sweetener margins are expected to be broadly in line in Europe, with lower corn costs offset by a reduction in sugar prices.
In Speciality Food Ingredients, within its starch-based speciality ingredients, Tate & Lyle expects that overall unit margins in the 2014 calendar year will be modestly higher than the comparative period.
In November the company reported a drop in profits in the first-half of the year, despite an uptick in sales, as sweetener volumes in both of its divisions were held back by a soft US beverage sector. At the time the firm said it expected a stronger performance from the bulk ingredients business in second-half of the year, with solid demand for liquid sweeteners in North America, and lower corn prices in Europe, more than offsetting the impact of lower sugar prices on isoglucose margins.
A note from analyst firm Berenberg called the release, "a frustrating statement, due to SFI volumes and sucralose pricing, very much at odds with previous communication. A lot more colour in needed from management... especially as to what has really changed since H1 guidance."
Shares in the company were trading down 15% at 668 pence per share Thursday, now the second biggest faller on the FTSE 100 after leading the decliners on the blue-chip index through morning trading.
By Alice Attwood; [email protected]; @AliceAtAlliance
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