Encouraging performance at Tate and Lyle

1st Feb 2011 07:44

Tate and Lyle, the food ingredients firm, remains on track to meet its full-year targets after an encouraging third quarter performance. Reporting on the October to December quarter, the group saw continued growth in sales volumes worldwide within its Speciality Foods ingredients division.Volumes within Bulk Ingredients and North American liquid sweeteners benefited from the continuation of firm demand patterns in Mexico. Higher corn prices drove an increase in co-product income which primarily benefits the Bulk Ingredients division, the company said. In Europe liquid sweetener margins declined slightly due to the impact of higher net corn costs. During the reporting period Tate & Lyle (T&L) started to increase industrial starch margins against a backdrop of a tighter European market following a poor potato harvest. Net debt at the end of 2010 was down to £462m from £540m at the end of September, largely as a result of the sale of its Molasses business for £70m. However, based on the need to increase levels of working capital because of rising corn prices T&L currently anticipates that this will drive a net cash outflow in the final quarter of the financial year and that net debt will revert to levels similar to those reported at 30 September 2010.With the majority of contract negotiations for 2011 now completed, the company said that it had achieved slightly higher margins on its annual fixed price corn sugar contracts in North America, despite corn price increases of more than 40%. However, some multi-year toll contracts, which had been struck against the backdrop of firmer ethanol margins and higher industry capacity utilisation, were renewed at slightly lower terms. "Overall we expect average unit margins to be broadly similar calendar year-on-year," the company said. In Europe, sugar prices, which typically set a ceiling on corn sugar selling prices, have not increased at the same pace as corn prices. Starch margins have firmed in Europe because of tightened industry capacity, caused to some extent by the poor potato crop. "Overall, for the remainder of the current financial year, we expect performance in Europe to be in line with expectations," the company said.