At the Annual General Meeting of Tate & Lyle PLC to be held in London today, Sir David Lees, Chairman, will make the following statement:
Trading Update
Trading in the current financial year has started in line with our expectations with total operating profit at constant exchange rates for the first three months similar to the prior year.
Profit from continuing operations* at constant exchange rates was below the exceptionally strong first quarter of the prior year.
Sales of SPLENDA® Sucralose in the first quarter were ahead of the comparator period with customer de-stocking thus far having less of an effect than anticipated. The predicted increase in fixed costs arising from the start of production at the new Singapore facility impacted profits which nevertheless for the quarter were ahead of last year. At this stage of the year we continue to expect satisfactory sales growth for the year but that any increase in operating profit is likely to be modest and second half weighted.
Profits from continuing operations* in the Ingredients divisions for the quarter were somewhat below last year. Whilst the main operations at Ingredients, Americas were ahead of the prior year, this was more than offset by lower returns from ethanol and citric acid. Profit from the continuing operations* in Ingredients, Europe was better despite higher raw material prices. While corn prices in America have reduced following US Department of Agriculture forecasts of a good harvest this year, prices for both wheat and corn in Europe have significantly increased. European sales prices will be increased where possible in order to offset these higher costs.
Profits from continuing operations in the Sugar division as a whole were significantly lower than the comparative period principally due to a return to a more normal level of profitability in sugar trading and continuing difficult market conditions in the EU and Vietnam.
The Group generated positive free cash flow for the three months to 30 June 2007.
There have been no material changes to the Groups net assets since 31 March 2007.
Transaction Update
In the last three months, certain previously announced transactions have been completed or progressed as contributors to our strategy of creating a stronger value added business building on our low cost commodity base whilst, at the same time, reducing the impact of our exposure to volatile markets.
The sale of Tate & Lyle Canada Ltd for a net consideration of £131 million was completed on 21 April 2007. The profit on disposal was £55 million, subject to closing adjustments, and will be reflected as an exceptional item in the results for the first half year.
On 15 June 2007 we completed the acquisition of an 80% holding in German specialty food ingredients group G. C. Hahn & Co for a total cash consideration of £78 million. This investment will broaden both our value added product offering and our customer base.
In early May we announced that we were in exclusive discussions with Syral SAS (a subsidiary of Tereos of France) for the disposal of our interest in the facilities of Food & Industrial Ingredients, Europe in the UK, Belgium, France, Spain and Italy. We announced today that we have signed an agreement for the disposal of these facilities for a consideration of €310 million (£209 million), subject to closing adjustments. The disposal is expected to result in an exceptional loss of approximately £20 million after restructuring costs. The transaction, which is subject to antitrust approval, will reduce the impact of our exposure to volatile markets and to the EU sugar regime.
The disposal of our interest in Occidente, our joint venture cane sugar producer in Mexico, is being explored with a number of interested parties. At 31 March 2007 Tate & Lyle’s share of the net operating assets of Occidente was £42 million. Tate & Lyle’s share of the operating profit for the year to 31 March 2007 was £6 million. Further announcements on this transaction will be made as appropriate.
Outlook
As advised in our preliminary results statement we regard 2007/8 as a year of transition. The development of our core Ingredients and Sucralose businesses is progressing satisfactorily and our expectations for these businesses have not changed. As described above, we are experiencing market weakness affecting our sugar, ethanol and citric acid businesses and a challenging European cereals market. In addition, the strength of sterling is likely to adversely impact our reported results and as a consequence, our current expectation of continuing operations* results for the year to 31 March 2008 is slightly lower than when we announced our results for the previous financial year in May.
Taxation
We have made good progress in improving our tax management and will be implementing revised financing arrangements over the next few months. The part year impact in 2007/08 is likely to be modest and is dependent on expected regulatory approval. The anticipated full-year saving in 2008/09 should be substantial.
Return of Capital to Shareholders
Subject to the renewal of authority from shareholders at today’s AGM, the Board intends to commence an on-market share buy back programme for an amount of up to £275 million. In deciding on the quantum of the buy back programme, the Board took into consideration the future capital expenditure requirements of the business, discussions with the credit rating agencies and the importance we attach to maintaining our investment grade rating. *continuing operations relates to the Group as a whole less results relating to Redpath, Eastern Sugar and those facilities of Food & Industrial Ingredients, Europe which are being sold as announced today and referred to above.
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About Tate & Lyle:
Supported by our 160-year history of ingredient innovation, we partner with customers to provide consumers with healthier and tastier choices when they eat and drink. We are proud that millions of people around the world consume products containing our ingredients every day.
Through our expertise in sweetening, fortification, and texture, we develop ingredient solutions which reduce sugar, calories, and fat, add fibre and protein, and provide texture and stability in categories including beverages, dairy, bakery, snacks, soups, sauces, and dressings.
We have more than 3,500 employees working in around 57 locations across 39 countries. Science, Solutions, Society is our brand promise and how we will achieve our purpose of Transforming Lives Through the Science of Food. By living our purpose we believe we can successfully grow our business and have a positive impact on society. We live our purpose in three ways, by supporting healthy living, building thriving communities and caring for our planet.
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 2023, Tate & Lyle revenue from continuing operations totalled £1.75 billion. For more information, please visit https://www.tateandlyle.com or follow Tate & Lyle on Linkedin, X (Twitter), Facebook or YouTube.
