Tate and Lyle considers sale of EU starch, sweeteners business
Food & Industrial Ingredients, Europe (TALFIIE) division, in a
move designed to sharpen its focus on value added ingredients, the
firm announced yesterday.
The announcement follows a review of the business after the EUs adoption of a new sugar regime in July this year.
According to Tate & Lyle, the review determined that the firms TALFIIE division is primarily a commodity led business, and as such is no longer an essential element of its strategy to focus on value added ingredients.
The company is therefore exploring the possibility of the full or partial disposal of the division.
TALFIIE, which employs around 2,500 people in 15 operating facilities across Western and Eastern Europe, currently makes up almost 20 percent of total group sales. In the year ended March 31 2006, the division posted sales of £719m (€1.1bn). Profit before interest came in at £46m (€68m). The division is almost entirely a commodity sweeteners and starches business.
At Tate & Lyles full year 2006 results, which saw profits fall by 79 per cent, management announced that the division was an asset impairment following the EU sugar reform ruling on sweeteners.
This was implemented on July 1 2006 following complaints from several World Trade Organisation (WTO) members and consumer groups that subsidised sugar production in the EU gave member states an unfair advantage. As a result the EU - the world's third-largest sugar producer - agreed to lower sugar production by 4m tons a year.
And with its European sugar and sweeteners business exposed to this regulatory change, Tate & Lyle said that the interests of TALFIIE and its employees may be best served by the transfer of all or part of the business to an owner whose objectives and strategy are more closely aligned with the business and its investment opportunities.
According to Tate & Lyle chief executive Iain Ferguson, the decision to explore a disposal of the division builds on the recently announced consultation on the surrender of quota in the firms Eastern Sugar joint venture.
Earlier this month, the firm revealed that it could cease its sugar processing operations in Central Europe, which operate in the region through its subsidiary Eastern Sugar, as producers looked to lower quotas in light of the new sugar reforms.
The company yesterday said it will continue to develop its value added food ingredients business in Europe through its Global Food Ingredients Group, which includes Cesalpinia Foods.
It expects to continue to seek to supplement its value added business through the further acquisition of bolt-on ingredient companies.
Tate & Lyle said it will make further announcements as appropriate.