Tate & Lyle issues the following trading update for the six months ending 30 September 2010 ahead of the announcement of the Half Year Results on Thursday 4 November 2010.
Javed Ahmed, Chief Executive, said: “The encouraging start to the year has continued in the second quarter, particularly within Speciality Food Ingredients, with good operational performance and solid demand in a number of our markets. This underpins our confidence that we will make progress in the full financial year.”
OPERATING PERFORMANCE – CONTINUING OPERATIONS
In Speciality Food Ingredients, growth in speciality sweeteners and starches remained steady. Sucralose volume growth was robust albeit, as expected, at lower average selling prices. Our single plant Sucralose manufacturing base continues to deliver substantial cost efficiencies.
Within Bulk Ingredients, corn sweetener volumes benefited from a continuation of the firm demand patterns for HFCS in Mexico and good demand over the summer in both the US and Europe. Industrial starch volumes in both the Americas and Europe were ahead of the prior year, although margins continued to be weak. Ethanol margins improved slightly in the second quarter, although the market remained under pressure.
CORN PRICES
Corn prices across the US and Europe have risen through the summer. In the US, where we fully hedge the gross cost of corn for use in each sales contract, higher associated co-product prices delivered a benefit in the quarter. In Europe, where hedging options are more limited, while we benefited from higher co-product prices during the first half of the year, higher corn prices are expected to have a modest impact on profitability on current contracts during the final quarter of the 2010 calendar year.
SUGARS – DISCONTINUED OPERATIONS
We are completing today on the sale of our EU Sugar Refining operations for a cash consideration of £211 million after initial working capital adjustments. The proceeds are subject to working capital finalisation and completion on the related sales of two small minority shareholdings in Italy and Laos. The disposal processes of the remaining businesses within our Sugars division, principally Molasses and Vietnamese Sugar, are progressing well.
DEBT MANAGEMENT
We expect to report further underlying net debt reduction in the second quarter despite anticipated higher grain inventories at the end of September as a result of the earlier harvest in the US. We paid £46 million in respect of the final dividend for the year ended 31 March 2010 in July.
Reported net debt will reduce further following today’s receipt of the proceeds from the disposal of our EU Sugar Refining operations.
OUTLOOK
In Speciality Food Ingredients, we expect a continuation of the growth patterns experienced during the first half of the year.
In Bulk Ingredients, we expect the firm demand for corn sweeteners into Mexico to continue alongside the modest ongoing decline in US domestic demand, subject to normal seasonal patterns, and stable demand in our other food markets. As usual, the outcome of the 2011 calendar year sweetener pricing rounds will influence performance in the final quarter of the financial year. Despite some improvement in demand, the industrial starch markets remain under pressure.
The encouraging first half performance underpins our confidence that we will make progress in the full financial year.
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