Tate & Lyle serves up first-quarter profit decline

24th Jul 2014 09:45

Sweetener specialist Tate & Lyle on Thursday admitted its operating profit for the first quarter had come in below expectations as the group continued to suffer the effects of the severe US winter, the temporary closure of its Splenda Sucralose facility in Singapore and the strength of sterling. On a constant currency basis, the year as a whole is still expected to be in line with previous expectations, although the performance of its Speciality Food Ingredients division is predicted to be slightly lower than previously anticipated following its first quarter performance. The group said the division had been affected more than had been expected by the lower inventory levels caused by the prolonged and severe US winter. Although the division delivered good volume growth in the emerging markets, volumes were only marginally ahead of the comparable period as a result of the supply constraints. The Bulk division was also affected by the US winter, although not by as much as expected, despite most of is production lines being affected. Splenda Sucralose volumes was slightly lower than had been forecast after a customer changed its order pattern, but overall pricing was in line with Tate's expectations. Following the industrial accident at the Singapore facility, which was closed for a longer-than-anticipate period, the group paid out £3m in costs to resolve the problem, £8m in manufacturing costs, and saw a reduction in profits. However, this is expected to reverse in the second half of the year, meaning group profits are expected to be weighted to the second half of the financial year.The facility has since returned to normal production levels. "Overall, the group's full year performance, before the impact of exchange rate movements, is expected to be broadly in line with our previous guidance," the company said. "The underlying divisional mix of profits in the first quarter is expected to be reflected in the full year and consequently we now expect the performance of Speciality Food Ingredients for the full year to be slightly lower than we anticipated. "However, demand continues to be strong and, notwithstanding current market conditions for sucralose, for the full year Speciality Food Ingredients is expected to deliver volume growth above the wider speciality food ingredients market."Net debt at the end of June dropped from £353m to £271m, aided by the translation effects of a stronger sterling. Shares had fallen 0.83% to 657p by 09:45.NR