With the majority of the contracts for the supply of high fructose corn syrup (HFCS) for calendar 2001 completed by Staley, Tate & Lyle issues the following update.
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In the past few weeks, Staley has completed over 90 % of its HFCS contracts in the US, resulting in double digit percentage increases to average selling prices, consistent with industry trends. The benefits of the price increases will be partially offset by slightly higher net corn costs and increased energy prices, but we anticipate an improvement in Staley’s earnings in the new financial year.
In Europe, Amylum’s sweetener and starch pricing in January has seen selling price increases of around 10%. In recent months Amylum margins have been reduced by an unfavourable product mix and the price increases will have little impact in the remainder of this financial year. We do, however, expect to see a marked improvement in earnings in the year to March 2002. The integration of Amylum’s head office with Tate & Lyle has been completed and several other areas of savings have been identified and implemented. Targets include widening the Group’s procurement initiative, optimising production between US and Europe and establishing a global approach to export markets. We remain confident of achieving our target savings of £50m p.a. within three years.
Turning to the group’s sugar businesses, in the US the sugar regime remains unworkable and margins have been squeezed for an unprecedented period, with the gap between raw and white sugar selling prices deteriorating further in recent weeks. As a consequence, worse than expected trading results are being experienced at Domino and Western. The sale of Western sugar, however, remains on track and we continue to pursue alternatives for Domino. Our cane refining sugar businesses in UK, Portugal and Canada have continued to perform well, providing a strong cashflow.
At the time of our interim results on 8 November 2000 we stated that we expected energy costs across all of our businesses for the financial year ending March 2001 to be over £30m higher than in the previous year. We now estimate the increases in direct energy costs to be more than £40m, mainly due to further substantial price increases since November. These energy cost increases coupled with a continued squeeze on margins have lowered our expectations for the current financial year to March 2001. Looking ahead to the 2002 financial year, improvements at Staley and Amylum provide grounds for expecting a materially improved performance. This would be enhanced by a strategic solution to US Sugar.
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