Not so sweet for Tate and Lyle

Related tags Sugar Maize

Major British sugar and sweetener group Tate and Lyle has reported
a sixper cent decrease in half year profits today and the success
of agreementsfor future prices for it starches and sweeteners will
have a major impact onthe profits made in the second-half.

The company, which makes a range of branded soft drink sweeteners andindustrial starches amongst the many sugars and syrups posted underlyingpre-tax profits of £119 million (€103 million) for the six months prior toSeptember 30th, which were in line with the company's forecasts.

"The delivery of higher profits in the seconds half will besignificantly influenced by our success in prevailing substantially higherwheat and corn costs in Europe and second to achieve a satisfactory outcomein the annual sweetener price around in the USA,"​ said Chairman DavidLees in the results statement.

The company's segmental report examines the European impact on the profitmargin. Profits in the segment improved to £71 million, up £12million fromthe comparative period last year. Exchange translation increased profit by£3 million. The recent hot weather experienced in most parts of Europereduced new crop expectations and therefore wheat and maize prices havesharply risen. Raw material prices were lower, but while there was animprovement in volumes, selling prices were lower than in the comparativeperiod.

The 82 year old group believes that profits in its second half year willdepend on annual talks to set the prices for its products, in which it hopesto replenish the costs it had suffered from the higher prices of wheat andcorn input prices. Share prices for Tate and Lyle have suffered on worriesthat poor harvests for these commodities will push up raw materials pricesand squeeze its margins.

Currently the group is rapidly re-inventing itself as a value-added brandedbusiness that is much less reliant on the fluctuating price swings incommodity sugar and sweeteners businesses, which led to a series of warningsthree years ago.Tateand Lyle​ operates more than 40 plants in 24 countries, almost all inEurope and the Americas. They employ 6,700 people in their subsidiaries witha further 2,800 employed in joint ventures.

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