REG-Tate & Lyle PLC Trading Statement <Origin Href="QuoteRef">TATE.L</Origin>

Tate & LyleAnnouncement

06/02/2015 07:00

http://pdf.reuters.com/htmlnews/8knews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20150206:nBw056308a 
 
LONDON--(Business Wire)--


Tate & Lyle PLC

TRADING STATEMENT

With the annual sweetener pricing round largely complete, Tate & Lyle issues the
following trading statement for the three months ended 31 December 2014. 

THIRD QUARTER OPERATING PERFORMANCE 
 
* Speciality Food Ingredients in line with our expectations 
* Bulk Ingredients weaker driven by lower US sweetener volumes and ethanol
margins 
* Diagnostic review of global supply chain confirms no material incremental
capital investment is required; improvements to operating and internal planning
processes being implemented 
 
SPECIALITY FOOD INGREDIENTS

Speciality Food Ingredients, excluding SPLENDA® Sucralose, performed in line
with our expectations, with volumes slightly ahead of the prior year period
driven by solid growth in Europe and Asia Pacific. Customer demand for new
products launched from our innovation pipeline remains high, with these new
products delivering another quarter of strong volume growth. 

SPLENDA® Sucralose performed in line with our expectations with volumes slightly
lower than the prior year period. The sucralose market remained, and looks set
to continue to be, extremely competitive and our approach remains only to
compete for volumes where we see value. We expect to conclude the project to
evaluate how best to maximise returns from this product by the end of the
current quarter. 

We continue to invest in the higher growth emerging markets. On 8 December 2014,
we acquired a majority equity interest in Gemacom Tech Indústria e Comércio S.A.
(Gemacom), the leading domestically-owned Food Systems business in Brazil. In
December, we also re-purchased certain distribution rights to sell crystalline
fructose directly to customers primarily in Asia Pacific for a consideration of
US$18million. This will be treated as an exceptional cost in the full year
income statement. 

BULK INGREDIENTS

Bulk Ingredients performed below the prior year period driven by the impact of
lower US sweetener volumes in part due to capacity constraints in the wider US
transportation network, weakening EU sugar prices which affected bulk sweetener
prices in Europe, and a sharp deterioration in ethanol margins near the end of
the period. The combined impact of these industry-related factors meant that
Bulk Ingredients performed below our expectations. 

Consistent with our strategy to dampen commodities volatility, we have
progressively re-positioned our Bulk Ingredients business such that tolling
contracts now represent around 75% of US corn sweetener volumes. Contracts in
the 2015 calendar year pricing round for the remaining 25% of corn sweetener
volumes were renewed at higher unit margins, although this benefit for the
overall division will be offset in the final quarter and into the 2016 financial
year by a combination of lower volumes as grind is diverted to Speciality Food
Ingredients and the impact of continued pricing pressure in US ethanol and EU
bulk sweetener markets. 

REVIEW OF DEMAND, SUPPLY AND PLANNING PROCESSES

The diagnostic review of global demand, supply and planning processes announced
in September 2014 has been completed. This confirms that the programme of
incremental capital expenditure announced as part of our May 2014 full year
results, together with ongoing actions to increase inventory held closer to our
customers, will allow us to better manage customer needs going forward.
Accordingly, no material incremental capital investment is required beyond the
already announced incremental capital expenditure which we expect to come on
stream in the second half of the 2016 financial year. The review also confirms
that improvements are needed to operating and supply chain planning capabilities
and to the robustness of internal planning processes. A programme to implement
these improvements is underway, with a number of short-term actions already in
place, and it is anticipated this will take 12 to 18 months to embed fully.
Together, these actions are expected to improve the capabilities required to
support future growth in our Speciality Food Ingredients business. 

As previously reported, we expect to incur costs of around £40 million in the
current financial year as a result of operational and supply chain disruption.
Of this, around £15 million relates to operational costs which are not expected
to reoccur in the next financial year. The remaining costs relate mainly to lost
sales due to product unavailability and while we expect a return to normal
levels of growth off a lower base, we do not expect to see the incremental
benefit of the recovery of these lost sales in the 2016 financial year. 

BALANCE SHEET

Net debt at 31 December 2014 was £466 million (30 September 2014 - £383
million), reflecting investments in future growth including the continued
deployment of capital expenditure previously announced, the acquisition of a
majority stake in Gemacom, and the repurchase of crystalline fructose
distribution rights. The effect of exchange translation was to increase net debt
by £15 million. 

OUTLOOK FOR THE YEAR ENDING 31 MARCH 2015

While Speciality Food Ingredients is anticipated to continue to perform in line
with our expectations, following the weak performance of Bulk Ingredients in the
third quarter driven by lower US sweetener volumes and pressure in ethanol and
EU bulk sweetener markets, which we anticipate will continue through the fourth
quarter, we now expect Group profits for the full financial year to be modestly
below the range stated in September 2014 of £230 to £245million1. 

1 Range based on forecast foreign exchange rates of GBP:USD £1.00:$1.69 in
September 2014 

END

Conference call:

A conference call will be held today at 8:00am GMT, hosted by Javed Ahmed, Chief
Executive and Nick Hampton, Chief Financial Officer. Participants are requested
to dial in at least 10 minutes before the commencement of the call. 

Dial in details are as follows:
Standard International Access: +44 (0) 20 3003 2666
Password: Tate & Lyle 

UK replay number: +44 (0) 20 3350 6902
Replay access PIN: 1243240 

A replay of this call will be available after the end of the live call for 14
days until 19 February 2015. 

For more information contact Tate & Lyle PLC:

Christopher Marsh, Group VP, Investor and Media Relations
Tel: +44 (0) 20 7257 2110 or Mobile: +44 (0) 7796 192 688 

Andrew Lorenz, FTI Consulting (Media) 
Tel: +44 (0) 20 3727 1323 or Mobile: +44 (0) 7775 641 807 

About Tate & Lyle:

Tate & Lyle is a global provider of ingredients and solutions to the food,
beverage and other industries, with operations in over 30 locations worldwide. 

Tate & Lyle operates through two global divisions, Speciality Food Ingredients
and Bulk Ingredients, supported by our Innovation and Commercial Development and
Global Operations groups. The Group's strategy is to become a leading global
provider of Speciality Food Ingredients through a disciplined focus on growth,
and by driving Bulk Ingredients for sustained cash generation to fuel this
growth. 

Speciality Food Ingredients consists of three platforms: Texturants, which
includes speciality starches and stabilisers; Sweeteners, which comprises
nutritive sweeteners and our range of no-calorie sweeteners including SPLENDA®
Sucralose; and our Health and Wellness portfolio which includes speciality
fibres and our salt-reduction offering. Additionally, our Food Systems business
provides a wide variety of blended ingredient solutions. 

Tate & Lyle Bulk Ingredients includes bulk sweeteners, industrial starches and
fermentation products (primarily acidulants). Corn co-products from both
divisions are primarily sold as animal feed. 

Tate & Lyle is listed on the London Stock Exchange under the symbol TATE.L.
American Depositary Receipts trade under TATYY. In the year to 31 March 2014,
Tate & Lyle sales totalled £3.1 billion. For more information, please visit
http://www.tateandlyle.com. 

SPLENDA® is a trademark of McNeil Nutritionals, LLC. 
 
Tate & Lyle PLC 

Copyright Business Wire 2015