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Tate & Lyle hails 'excellent' ingredients performance

By Anthony Fletcher , 02-Nov-2006

Tate & Lyle's unaudited interim results have given the firm reason to be confident that stronger growth can be expected in the near future.

Sales were up 9 per cent at £2,039 million, mainly due to a strong first half in Food & Industrial Ingredients, Americas and a good performance within Sugars, Europe from sugar trading.

"We have started the year strongly, mainly due to an excellent performance from Food & Industrial Ingredients, Americas which saw profit growth of 58 per cent," said chief executive David Lees.

"The increase in our Splenda Sucralose capacity is proceeding to plan. We expect to achieve further margin improvement in the US sweetener pricing round for the 2007 calendar year.

"Overall, we continue to expect further year-on-year progress in the second half, albeit that the intensifying impact of EU sugar reform together with higher cereal prices in Europe mean that profit growth is likely to be lower than in the first half."

Tate & Lyle had a difficult year last year, when profits fell 79 per cent to 62 million euros. Changes to the EU sugar regime hit the firm hard, and Tate & Lyle has been working hard to develop a strategy that addresses the new situation.

For example, the publication of the results for the six months up to 30 September 2006 followed the recent news that the UK-based ingredients giant is considering the sale of its Food & Industrial Ingredients, Europe (TALFIIE) division, a move that would further sharpen its focus on value added ingredients.

The announcement followed a review of the business after the EU's adoption of a new sugar regime in July this year. According to Tate & Lyle, the review determined that the firm's 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.

This would certainly be in keeping with the firm's recent strategic behaviour. 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.

The company also said that it intends to continue to develop its value added food ingredients business in Europe through its Global Food Ingredients Group, and expects to supplement its value added business through the acquisition of bolt-on ingredient companies.

For example, Tate & Lyle acquired Cesalpinia Food in December 2005 in a bid to broaden its European portfolio by adding stabilising systems and gums.

For the six months ended 30 September 2006, operating profit before exceptional items and amortisation was up 26 per cent at £193 million, while profit before tax, exceptional items and amortisation was up 27 per cent at £173 million.

Food & Industrial Ingredients, Europe profits were £12 million higher than in the corresponding period of the prior year. Profits benefited from a £12 million reduction in depreciation as a result of the impairment charge taken in the year to 31 March 2006.

Since 31 March 2006, net debt has been reduced by £95 million to £771 million.

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