Shares in UK food ingredients group Tate & Lyle fell today (1 February) after the company said rising corn costs had weighed on margins and would hold back further reductions to the group’s debt.
Tate & Lyle’s stock was down 3.4% at 532.5p at 12:00 GMT this afternoon after the company issued a trading update for the three months to 31 December.
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Tate & Lyle chief executive Javed Ahmed said the company had managed to achieve price increases from its food and drink customers of 15-20% on its corn sweeteners to offset the rising cost in corn.
In North America, the company said the new pricing round for its bulk ingredients business was “substantially complete”.
Tate & Lyle said “average unit margins” would be “broadly similar” year-on-year as the company improved margins on annual fixed-price contracts on corn sugar but renewed multi-year “toll” contracts “at slightly lower terms”.
In Europe, Tate & Lyle revealed, sugar prices had not increased at the same rate as corn prices.
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By GlobalData“We have shortened corn sugar contracts wherever possible to match the period over which we can cover corn costs to try to mitigate price volatility, an approach we have also taken for industrial starches,” the company said. “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.”
Ahmed said that, over the nine months of Tate & Lyle’s fiscal year that run until the end of December, the group had put in “an encouraging performance [that] continues to underpin our confidence that we will make progress in the full financial year”.
