15th Feb 2008 07:00
INTERIM MANAGEMENT STATEMENT Tate & Lyle PLC issues the following management statement covering the periodfrom 1 October 2007 to 31 January 2008. Profit before tax for the continuing operations for the period was marginallyahead of our expectations. This has reinforced the Board's overall expectationsas set out at the presentation of our interim results, that the outturn for ourcontinuing operations in the second half of the year to 31 March 2008 will bebroadly similar to that of the first six months (1). Key points for the four months ended January 2008 are: -- Good performance in our Americas ingredients operations, somewhat ahead of our expectations, in particular benefiting from improved by-product pricing. -- At constant exchange rates sucralose sales grew compared with the prior year period but profits were lower due to higher patent defence and Singapore plant fixed costs. -- The EU sugar market remains difficult, but news of beet production quota surrender demonstrates the determination of the EU Commission and the industry to ensure a positive outcome to the Sugar Regime reform. (1) The profit before tax for the first six months of the year ending 31 March2008 from continuing operations, after adjusting for exceptional items and theamortisation of acquired intangible assets and the reclassification of theprofit before tax for Occidente from continuing operations to discontinuedoperations, was £117 million. TRADING PERFORMANCE The Food & Industrial Ingredients, Americas division continues to perform welland was somewhat ahead of our expectations with further strong performances fromboth value added food ingredients and commodity products, which benefited fromfirmer by-product revenues. Strong demand from feed compounders in the USA, whoare using higher incorporation rates of the by-product corn gluten feed as areplacement for higher priced corn, has decreased the reliance on exports. Aftera weak summer, the HFCS market improved in the period. As expected, ethanolreturns were lower in the four months to the end of January 2008 than in thecomparative period of the prior year, but prices have improved following theDecember 2007 passage of the Energy Bill, requiring the use in the USA of 9billion gallons of ethanol in 2008 and 15 billion gallons by 2015. New foodingredient capacity at the Sagamore plant in Lafayette, Indiana is on stream andwill further benefit our value added performance. The sale of an investment inthe Chicago Mercantile Exchange, which was anticipated at the time of theannouncement of our interim results, contributed a one-off £4 million (US$7million) to profit. Initial proceeds of £197 million from the sale of five starch plants from theFood & Industrial Ingredients, Europe division were received in October 2007 anda further £17 million was received in December 2007. The separation of thecontinuing operations and the closure of the Aalst, Belgium head office werecompleted successfully in the period. In the recent pricing round, thecontinuing operations recovered, where possible, higher net corn costs throughselling price increases. However margins on sweetener products, the price ofwhich is capped by the regulated price of sugar, remained under pressure. Cornhas been purchased for the remainder of the financial year. Good progresscontinued in food ingredients, including the recently acquired GC Hahn business,whose performance over the four months to January 2008 continues to be in linewith expectations, and where integration with the Group is progressing well. Asstated in the interim results announcement, profits in the second six months ofthe year for the continuing operations, including GC Hahn and Cesalpinia, willbe modest, although in line with our expectations. Sucralose sales at constant exchange rates for the period improved compared withthe prior year. Sales growth continues across all territories. With thesuccessful start-up of the Singapore plant, ahead of schedule, we have seencustomer de-stocking and anticipate this will largely be complete by the end ofthe financial year. However profits for the period, after taking into accountthe legal costs incurred in patent defence and the higher fixed costs due to theSingapore plant, were lower than in the prior year at constant exchange rates,and this trend is expected to continue for the rest of the financial year. Thetrial in our US International Trade Commission (ITC) litigation against a numberof Chinese manufacturers and distributors concerning alleged infringement ofcertain of our patents is in court later this month. The judge's initialdetermination is expected in June 2008, leading to a final ruling by the ITC inOctober 2008. Within the Sugars division, our EU sugar refineries continued to operate withina challenging market and, in the four months to January 2008, performed in linewith the first half year. Profits excluding transitional aid were slightlyhigher in the period than the prior year. We welcome the recent announcements ofquota surrender by some of the major EU beet sugar producers. We are encouragedby the initial reaction to the measures announced in September 2007 by the EUCommission to repair and strengthen the EU Sugar Regime reforms with the aim ofremoving a further 3.8 million tonnes of production to bring supply of sugar inline with EU demand. Quota surrendered for the sugar year starting 1 October2008 will be published by the Commission in April. If supply and demand arebrought into balance the impact will be felt in the market only towards the endof the next financial year, so market conditions can be expected to remaindifficult in the short term. International sugar trading has made a small lossin the period due to lower volumes. A similar pattern is expected for theremainder of the year and international sugar trading is therefore now likely toshow a loss for the full year. As discussed at the presentation of our interimresults, we regard international sugar trading as a valuable activity and we areexamining ways to ensure more stable results in future. We will provide anupdate at the presentation of our full year results in May. Molasses tradingcontinued its good performance, and the combined molasses and internationalsugar trading operations were profitable in the period. The sale of our 49% stake in Occidente, the Mexican joint venture, completed inDecember 2007 and proceeds of £47 million have been received. The results ofOccidente were recorded within continuing operations in the interim results.Following the disposal the results (sales of £29 million and operating profit of£3 million for the six months to September 2007) will be reclassified asdiscontinued. The review of our Central Costs following recent changes to the composition ofthe Group is largely complete and we will report further in May. TAXATION We expect the effective tax rate for the continuing operations to be in linewith the 34.4% applied to the interim results. The precise final rate willdepend on the geographic mix of profits. RETURN OF CAPITAL Following approval from shareholders at the AGM in July 2007, we had acquired bythe close of business on 14 February 33.6 million shares (6.9% of the issuedshare capital at the time of the AGM) for a total cash consideration of £159million. The Company holds 2,908,135 ordinary shares in Treasury and has456,856,886 ordinary shares in issue (excluding Treasury shares). EXCHANGE RATES If the sterling : US dollar exchange rate continues at the assumed level of 1.96for the remainder of the financial year the average rate for the second sixmonths would be 2.00, compared with the average rate of 2.04 assumed at the timeof the interim results announcement. On this basis, we would now anticipate areduction in profit before tax of £14 million for the year as a whole (£16million reduction anticipated at the time of the interim results announcement)from exchange translation by comparison with the prior year. NET DEBT Net debt at the end of January 2008 was £982 million compared with £840 millionat 30 September 2007. Movements in exchange rates contributed approximately £30million to the increase in debt. During the period, £94 million was spent on therepurchase of our own shares and £31 million on the payment of the interimdividend. SENIOR MANAGEMENT CHANGE D. Lynn Grider, President, Food & Industrial Ingredients, Americas and a memberof the Tate & Lyle Group Management Committee is retiring from the Group in July2008. Lynn has made a huge contribution to Tate & Lyle over his 35 years withthe Group. Matthew Wineinger has been appointed to succeed Lynn. Matt will bejoining Tate & Lyle on 3 March 2008 to ensure a smooth handover. Matt has had adistinguished career with a number of major companies in the food sector,including Swift, Cargill, Monsanto and Novartis. OUTLOOK Profit before tax for the continuing operations for the four months from 1October 2007 to 31 January 2008 was marginally ahead of our expectations. Takinginto account the above exchange rate assumptions, this has reinforced theBoard's overall expectations as set out at the presentation of our interimresults, that the expected outturn for our continuing operations in the secondhalf of the year to 31 March 2008 will be broadly similar to that of the firstsix months. END A conference call will be held today at 8.30am, hosted by Iain Ferguson, ChiefExecutive and John Nicholas, Group Finance Director. Participants are requestedto dial in at least 5 minutes before the commencement of the call. Dial indetails are as follows: \* TParticipant dial in number: + 44 (0) 20 7138 0820 Replay telephone number: + 44 (0) 20 7806 1790 Replay passcode: 5844714\* T The replay of this call will be available for 7 days until 21 February 2008. For more information contact Tate & Lyle PLC: \* TTim Lodge, Director of Investor RelationsTel: 020 7626 6525 or Mobile 07798 837 317 Ferne Hudson, Head of Media and Public RelationsTel: 020 7626 6525 or Mobile 07713 067433\* T Copyright Business Wire 2008Related Shares:
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