Tate & Lyle has warned that full-year profits will be “slightly lower” than its previous guidance due to market weakness affecting its sugar, ethanol and citric acid businesses and a challenging European cereals sector.
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The UK-based sugar and ingredients group also said that the strength of sterling is likely to adversely impact results.
The company also announced the latest in a series of disposals, with the sale of its European starch business, which was put on the market in October, to French sugar group Tereos for EUR310m (US$427m). The purchase price equated to GBP209m, below the GBP220m which some analysts were expecting.
Tate & Lyle said the sale is expected to result in an exceptional loss of GBP20m after restructuring costs. But the company said the sale, which remains subject to antitrust approval, will reduce its exposure to volatile markets and to the EU sugar regime.
The disposal of its participation in Occidente, its joint venture cane sugar producer in Mexico, is being explored with a number of interested parties, the company added.
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By GlobalDataIn a first-quarter trading statement issued as the group held its AGM in London, the company said that trading in the current financial year had started in line with expectations, with underlying operating profit for the first three months similar to the prior year.
However, Tate & Lyle added that profit from continuing operations, net of disposals, at constant exchange rates was below the strong first quarter of the prior year.
Sales of the company’s Splenda Sucralose brand were ahead of the comparable period last year, the company reported. It also said that even though the predicted increase in fixed costs arising from the start of production at its new Singapore facility had impacted on profitability, profits from Splenda were ahead of last year.
Profits from its continuing ingredients operations were “somewhat below last year”, the company said. Lower returns from ethanol and citric acid had negatively impacted on profits from ingredients operations in the US, but profits from the continuing operations of its Ingredients, Europe division improved despite higher raw material prices.
Profits from continuing operations at Tate & Lyle’s sugar division were significantly lower than the comparative period, which was principally attributed to “a return to a more normal level of profitability in sugar trading and continuing difficult market conditions in the EU and Vietnam”.
In what has been interpreted as a move to soften the impact on shareholders of successive profit warnings, Tate & Lyle announced that it would be returning up to GBP275m to investors through a share buyback scheme.
Analysts had not been forecasting an improvement in the trading outlook at Tate & Lyle and were also anticipating the buyback move, which is expected to be welcomed in the City.
