February 10, 2012
Tate & Lyle posts stable Q3 results
Despite the impact of higher corn prices, food products producer Tate & Lyle reported a solid performance in Q3 up to the end of December, with operating profit in line with forecast.
Within Speciality Food Ingredients, the group achieved steady sales growth although the rate of volume growth was, as expected, lower than that achieved in the first half. In corn-based speciality sweeteners and starches, the group achieved good sales growth on higher volumes. Sucralose volumes grew but below the particularly strong levels seen in the first half. In Food Systems, it also delivered good sales growth with volumes in line with the prior year period.
Within Bulk Ingredients, North American liquid sweetener volumes continued to benefit from robust levels of domestic and Mexican demand. In Europe, higher sugar prices, which provide a reference price for isoglucose, enabled the company to increase liquid sweetener margins despite higher corn prices. While industrial starch margins were ahead of the prior year, volumes were lower as the group started to see some softening in demand from European paper and board customers reflecting the more uncertain economic environment. Towards the end of the period, US ethanol margins weakened on the back of lower prices in anticipation of the expiry of the blenders' tax credit.
Tate & Lyle said it continues to maintain full silos given the continued tight corn supply. The majority of the corn purchasing to keep the silos full through to the end of the harvest year has been paid for in January and at higher prices than the prior year. As a result, and based on current corn prices and exchange rates, the group currently anticipates that this will drive a net cash outflow in the final quarter of the financial year and continue to expect that net debt at March 31, 2012 will be somewhat higher than the GBP464 million (US$736.7 million) at the end of the last financial year.
The 2012 calendar year sweetener pricing round in North America for the Bulk Ingredients business is now substantially complete. This pricing round has been conducted against the backdrop of higher corn and process ingredient costs.
In North America, after recovering these higher input costs, overall Tate achieved a modest increase in corn sugar unit margins reflecting a continuation of high levels of industry capacity utilisation on the back of robust domestic and Mexican demand. Bulk Ingredients sweetener volumes are likely to be broadly in line with calendar year 2011. In Europe, where the group continues to contract over shorter periods to partially mitigate corn cost volatility, it has enhanced sweetener margins against a backdrop of higher sugar prices.
The Group said it has performed well during the first nine months of the financial year, and remains on track to deliver a good performance for the full financial year.
