Tate & Lyle posted a 26% rise in first half profits despite flat sales of the company’s biggest earner Splenda, as it increased sales of sweeteners and starches.

Pre-tax profits rose to GBP169m (US$322.45m), up from GBP135m, on the back on increased group sales, which were up 9% to GBP2.04bn. The company said that increased sales were driven by the performance of its food and industrial ingredients, Americas, and European sugars divisions.

Tate & Lyle said its food and industrial ingredients Americas unit, which makes high fructose corn syrup, saw profits before amortisation rise 58% to GBP87m. The company added that it will benefit from the free trade deal with Mexico that will allow US fructose corn syrup into the country from 2008, a move that will allow Tate & Lyle to improve margins at the next sweetener pricing round.

Profits at the company’s food and industrial ingredients, Europe, business rose GBP12m to GBP40m, aided by lower depreciation. The impact of increased cereal prices and energy costs were offset by higher selling prices, however, Tate & Lyle reiterated that European sugar profits in the second half would be well below last year’s, as a result of an oversupply of sugar in the market and changes to the EU sugar regime.

Earlier this month the company said it was considering a full or partial disposal of its food and industrial ingredients, Europe, business as it was “no longer an essential element of our strategy.”

Profits from Splenda remained flat in the half, totalling GBP33m (US$63m), while sales declined from GBP74m reported for the comparable period of last year to GBP73m this year. Splenda is a calorie-free sucralose sweetener that Tate & Lyle sells to food manufacturers and is marketed as a tabletop sweetener by the company’s partner McNeil Nutritionals.

Tate & Lyle said that sales were held back by two factors: “Firstly, our supply allocation policy was relaxed at the start of the financial year and customers took this as a signal to reduce their inventory to normal industry levels. Secondly, we experienced production disruptions in Alabama as we brought new equipment on-stream. As a consequence, during the commissioning period we remained cautious about committing significant capacity to customers to build sales until we had achieved reliable production ramp-up.”

The company has now doubled its Splenda production capacity in Alabama and the construction of a new plant in Singapore is on-track for completion in January. As a consequence of this expansion, start-up costs totalled GBP5m in the first half, up from GBP2m last year, and are expected to total GBP11m for the full year.

Looking to the full year, Tate & Lyle said: “Overall, we continue to expect further year-on-year progress in the second half, albeit that the intensifying impact of EU sugar reform together with higher cereal prices in Europe mean that profit growth is likely to be lower than in the first half.”

In morning trade today (1 November) Tate & Lyle shares dipped 1.33% to 777.50 pence at time of press.