Tate & Lyle is expecting to report £11m less profit that predicted for the year ended March 31, as a result of unfavourable exchange rates against the US dollar, but is still expecting to maintain levels seen in the first half.
Following today's trading up date in which it flagged the currency concerns, the UK-headquartered ingredients giant is now entering a closed period ahead of the announcement of its results of the year, which will be made on May 22.
However it is still expecting to fulfil predictions set forth in the February interim management statement, that profit from continuing operations will be "broadly similar" to that which it reported in the first half.
For the first six months Tate & Lyle reported adjusted pre-tax profits from continuing operations of £117 m. At the time of this announcement (October 31) it also expressed concerns about the impact of the weak US dollar on its profits, as well as an unstable sugar market.
Exchange rates with the US have worked out to the detriment of European firms this year, compared with last, and Tate & Lyle is not alone in citing this as a factor in reduced profits.
At the end of Tate & Lyle's year the dollar stood at 2.01 against the pound, compared to 1.89 at the same point of 2007. for the year ending March 2008 was the main factor behind this, although the impact of the translation of the US dollar was "partially offset by other currency movements, and in particular by the stronger euro".
Another economic factor that has put pressure on companies' bottom lines are rising raw material and energy costs. This has caused some to implement cost control strategies, and tread a fine line on passing on costs to customers.
Tate & Lyle said in October that high corn costs in Europe were a cause for some concern, but has recently taken steps to reduce its exposure to drastic shifts in commodities, by selling some of its European starch operations to Syral.
Its core focus going forward is on value-added ingredients, and here it seems to be reaping some rewards. Profits from these products were seen to have increased by 18 per cent in the first half, over the prior year period, at constant exchange rates.