UK ingredients and sweeteners group Tate & Lyle today (27 May) delivered its long-awaited strategic update, detailing plans to drive growth and increase efficiency.
The company, which booked a 3% dip in sales and 77% drop in net profit on one-off charges for the full year ending 31 March, said that it would focus on developing its value added ingredients business.
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Outlining Tate & Lyle’s plans, chief executive Javed Ahmed, who joined the company from Reckitt Benckiser last year, said that the Sucralose maker wanted to address its exposure to volatile commodities markets without the benefits of being a diversified commodity company that would also bring a “cyclical upside”.
“There is a real need for making some clear choices and a real need for focus,” he told analysts at a briefing this morning. “We want to become the leading provider of speciality ingredients and food solutions worldwide.”
This, Ahmed said, could be achieved through realigning the company’s investment priorities – with 70% of investment currently being spent on commodities-based businesses – “significantly stepping-up our game on innovation” and fostering growth in developing markets.
Ahmed insisted that the focus on speciality ingredients was sound because growth of this sector is underpinned by “mega trends”, such as increased demand for health and wellness products.
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By GlobalDataMeanwhile, he added that there is scope for consolidation in the “highly fragmented market”, with the potential to grow both organically and through bolt-on acquisitions as Tate & Lyle looks to expand its customer base to include small- and medium-sized manufacturers and private label processors and increase its presence in developing markets.
While Tate & Lyle is increasing its focus on value added ingredients in order to reduce its exposure to the volatility of its commodities businesses, Ahmed seemingly ruled out divesting the group’s bulk ingredients businesses – including sugar, corn and biofuels.
These businesses, he said, were large, cost-effective, cash generative units where the company benefited from strong customer relationships. However, they serve consolidated markets where, in many cases, Tate does not hold a leading position and does not “see any path to leadership”.
Ahmed said that the company viewed these units as cash flow generators that would allow the group to drive growth in speciality ingredients. He added that the group is always looking to “maximise shareholder value” but was not currently planning any sell-offs.
The company also unveiled plans to develop a performance-based company culture, cut costs by introducing a less complicated operating structure and overhaul its IT infrastructure.
Tate & Lyle said that it would reorganise its product and regional-based businesses into three global operating units – sugars, bulk ingredients, speciality ingredients.
