28th Sep 2007 07:00
Tate & Lyle PLC - 28 September 2007 TRADING UPDATE In line with its regular practice, Tate & Lyle issues the following tradingupdate prior to entering a closed period in respect of the interim results to 30September 2007. The interim results will be announced on Wednesday, 31 October2007. A copy of the proforma results for the six months to 30 September 2006 inthe revised segmental reporting format is attached for reference. FIRST HALF OUTTURN First half results from SPLENDA(R) Sucralose and continuing* operations in ourUS and European Ingredients businesses are expected to be similar to those inthe prior year on a constant currency basis. However, our sugars business hasexperienced a substantial reduction in the performance of sugar trading, which,after a particularly difficult August, is now forecasting a small loss for thefirst half against a profit of £15 million in the comparable period. As advisedin our statement at the Annual General Meeting on 18 July 2007, the translationimpact of weakness of the US Dollar is expected to reduce pre-tax profits forthe first half. We estimate this impact to be approximately £12 million over thecomparable period. DIVISIONAL PERFORMANCE In Ingredients, Americas sales and profits of value added starches have improvedas expected. This progress has been offset to some extent by a weaker HFCSmarket. As previously indicated, ethanol profits have been well below lastyear's exceptional levels. Operating losses and closure costs of Astaxanthin(which was announced on 16 August 2007 and will be reported in continuingoperations) are expected to total £5 million in the first half year. Total operations in Ingredients, Europe have performed ahead of the prior yearwith continuing operations in line with the prior year. The well publicisedincrease in European wheat costs further supports our decision to dispose of ourinterest in the facilities in the UK, Belgium, France, Spain and Italy to SyralSAS (a subsidiary of French cooperative group Tereos). We expect thistransaction to close in the next few days and the businesses concerned will betreated as discontinued operations in the interim results. Once this disposalcompletes, we will have no exposure to wheat. We are pleased with the operatingperformance of the German specialty food ingredients group G. C. Hahn & Co,which joined the Group on 15 June 2007. Profits for SPLENDA(R) Sucralose have been similar to the prior year on aconstant currency basis. Sales have grown, with customer de-stocking thus farhaving less of an effect than anticipated, though we believe that surplusinventories continue to be held by some of our customers. The start-up of theSingapore plant is proceeding well. Profits from continuing operations in the Sugars division have been sharplylower than in the comparative period principally due to a forecast small loss insugar trading for the first half compared to a profit of £15 million in theprior year. Molasses trading has made a good start to the year and we expectsugar trading to be profitable in the second half. The European refiningbusinesses have performed in line with our expectations and are making goodprogress in improving efficiency and competitiveness. EU SUGAR REGIME We welcome the announcement by the Commission on 26 September regardingagreement on a package of measures to repair and strengthen the reform of the EUsugar regime. The changes are designed to make the restructuring fund moreattractive to both beet growers and processors given that it has performed belowexpectations in the first two years of its four year term. The result of theagreement is expected to be an increase in the surrender of quota starting withthe next deadline for surrender on 31 January 2008. The Commission is aiming fora further 3.8 million tonnes of quota to be surrendered under these improvedconditions in order to bring the EU sugar market back into the supply and demandbalance envisaged in the original November 2005 agreement on sugar reform.Whilst these changes will have little direct benefit to our sugar refineries,which are not part of the restructuring fund, we believe that in the long term abalanced and stable market is good for the whole industry. TAXATION Although the overall tax rate for the Group as a whole is forecast atapproximately 30% for the year to 31 March 2008, the restructuring following thedisposal of businesses in Western Europe (together with their associated taxlosses) is expected to result in a proforma effective tax rate for continuingbusiness in the current year of approximately 34%. Implementation of revisedfinancing arrangements, which remain dependent upon regulatory approval, isprogressing satisfactorily and we continue to expect a substantial reduction inthe effective tax charge for the next financial year, albeit from this higherbase. OTHER ITEMS In line with previous guidance, interest costs are higher than the prior year.The share buyback programme has commenced with 8.8 million shares having beenbought by close of business on 27 September at a total cash consideration of£48.5 million. Exceptional items are expected to include a £55 million profit on the disposalof Redpath in Canada and an estimated loss on disposal of facilities ofIngredients, Europe of £20 million. OUTLOOK Three particular factors influence the outlook for our continuing businesses Firstly, while our continuing Ingredients, Europe businesses have performedsatisfactorily in the first half, as our cover on raw materials expires thesignificantly higher corn (maize) costs in Europe will, if sustained, have anincreasingly severe effect on the profitability of this division. Sales priceswill be increased where possible in order to offset these higher costs but wethink it prudent at this stage to assume only modest profits from thesebusinesses in the second half year. Secondly, the ongoing dispute between the USA and the EU over geneticallymodified corn has resulted in US corn gluten feed exports to the EU beingprohibited. This has caused oversupply in the USA and has depressed by-productprices and margins. It is not clear when this dispute will be resolved. Thirdly, the translation impact of weakness of the US Dollar will, if sustained,reduce pre-tax results in the second half of the year, although to a lesserextent than that forecast for the first half. Given the importance of these factors, the Board views the near term outlookwith caution. However, our trading experience during this transitional yearreinforces the importance of, and our confidence in, Tate & Lyle's strategy ofbuilding a stronger value added business whilst reducing our exposure tovolatile markets and regulated regimes. CONFERENCE CALL A conference call for analysts and investors will be held at 8.30 am today. Thecall will be hosted by John Nicholas, Group Finance Director and Mark Robinson,Director of Investor Relations. Participants are requested to dial in at least 5minutes before the commencement of the call. Dial in details are: \* TParticipant dial in number: +44(0) 20 7806 1951Replay telephone number: +44(0) 20 7806 1970Replay passcode: 2469821#\* T The replay of this call will be available for 7 days until 4 October 2007. CONTACTS Mark Robinson, Director of Investor RelationsTel: 020 7626 6525 or Mobile: 07793 515861 Ferne Hudson, Head of Media and Public RelationsTel: 020 7626 6525 *continuing operations relates to the Group as a whole less results relating toRedpath, Eastern Sugar and those facilities of Food & Industrial Ingredients,Europe which are being sold as announced on 18 July 2007 and referred to above. About Tate & Lyle Tate & Lyle is a world leading manufacturer of renewable food and industrialingredients. It uses innovative technology to transform corn, wheat and sugarinto value-added ingredients for customers in the food, beverage,pharmaceutical, cosmetic, paper, packaging and building industries. The Companyis a leader in cereal sweeteners and starches, sugar refining, value added foodand industrial ingredients, and citric acid. Tate & Lyle is the world number-onein industrial starches and is the sole manufacturer of SPLENDA(R) Sucralose. Headquartered in London, Tate & Lyle is listed on the London Stock Exchangeunder the symbol TATE.L. In the US its ADRs trade under TATYY. The Companyoperates more than 60 production facilities in 23 countries, throughout Europe,the Americas and South East Asia. In the year to 31 March 2007, it employed6,900 people in its subsidiaries with a further 2,300 employed in jointventures. Sales in the year to 31 March 2007 totalled £4.0 billion. Additionalinformation can be found on http://www.tateandlyle.com. SPLENDA(R) is a trademark of McNeil Nutritionals, LLC \* TPROFORMA REVISED SEGMENTAL INFORMATION External sales - Six months to 30 September 2006 As previously Reallocation of Discontinued Restated reported Sugars £m £m £m £m Food & Industrial Ingredients, Americas 615 - - 615Food & Industrial Ingredients, Europe 413 - (256) 157Sucralose 73 - - 73Sugars, Americas & Asia 151 (151) - -Sugars, Europe 787 (787) - -Sugars Total - 938 (138) 800Central - - - - ------------- --------------- --------------- --------------Total 2,039 - (394) 1,645Discontinued - - 394 394 ------------- --------------- --------------- --------------Total 2,039 - - 2,039 ------------- --------------- --------------- -------------- Operating profit * - Six months to 30 September 2006 As previously Reallocation of Central Discontinued Restated reported Sugars £m £m £m £m £m Food & Industrial Ingredients, Americas 87 - 6 - 93Food & Industrial Ingredients, Europe 40 - 2 (19) 23Sucralose 33 - 1 - 34Sugars, Americas & Asia 7 (7) - - 0Sugars, Europe 26 (26) - - 0Sugars Total - 33 7 (6) 34Central - - (16) - (16) ------------- --------------- --------------- -------------- --------------Total 193 - - (25) 168Discontinued - - - 25 25 ------------- --------------- --------------- -------------- --------------Total 193 - - - 193 ------------- --------------- --------------- -------------- -------------- * Operating profit is stated before exceptional items and amortisation of acquired intangible assets\* T Copyright Business Wire 2007Related Shares:
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