The UK-based company’s interim report for the six months ending 30th September
shows that worldwide sales volumes of sucralose, sold under the brand name Splenda, increased by 20 per cent. A large part of this growth is accounted for by high-volume customers who intentionally ran down their existing stocks after the firm opened its new sucralose production facility in Singapore last year.
Tate & Lyle recorded sucralose sales of £78m (€96m), 11 per cent ahead of the comparative period last year (7 per cent in constant currency). However, operating profit was down by 6 per cent (9 per cent in constant currency) at £30m (€37m).
Margins dropped from 46 per cent to 39 per cent, for which the company blamed the current economic situation. It said that the number of new product launches of fast moving consumer goods (FMCG – products which sell at low cost but quickly and in large quantities), many of which use sucralose as an ingredient, has declined. This is more noticeable in the USA than in Europe.
The firm said: “We expect further sales growth from our fully invested sucralose business and operating margins to remain at levels similar to those seen in the first half for the rest of the financial year.” It also pointed out that in spite of the drop-off in FMCG launches, “we continue to win the major share of these launches”.
Looking at the overall picture, Tate & Lyle’s sales grew to £1,698m (€2,100m), an increase of 25 per cent (18 per cent at constant currency) over the comparative period sales of £1,359m (€1,675m). Its adjusted pre-taxation profit for the period was up 4 per cent from last year’s figure of £123m (€152m), to £128m (€158m), although in constant currency this represents a drop of 2 per cent.
Europe and the US
The firm reports a better-than-expected performance in its European food and industrial ingredients market, although an increase in corn prices, which increased to $8 (€6) a bushel from a starting point of $4 (€3) meant that operating profits were down to £19m (€23m) from last year’s £26m (€32m). However, this was offset by corresponding higher by-product prices.
Total sales for the sector were up, though, with value-added ingredients performing particularly well. The firm puts this down to the recent upgrade of its crystalline fructose facility in Turkey, leading to a sales growth of £40m (€50m, 62.5 per cent) to £104m (€130m).
The firm described its food and industrial ingredients, Americas, division as “the engine of growth”, seeing as it did sales growth of 21 per cent (16 per cent in constant currency) to £811m (€1,000m) and an increase in operating profit of 30 per cent (25 per cent in constant currency) to £109m (€135m).
Following a good corn harvest, and the corresponding drop in prices, the firm anticipates that “our food and industrial ingredients businesses in the Americas and Europe will continue to perform well in the second half of the year”.
One area of concern for Tate & Lyle this year has been its sugars business, which in spite of a substantial increase in sales to £517m (€640m, 22 per cent in constant currency), saw a drop in operating profit of 61 per cent in constant currency to £7m (€9m).
The firm blamed the market disruption caused by the reform of the EU sugar regime but noted that “we remain confident that, during the second half of the year, equilibrium between supply and demand for EU sugar will be restored”.