Sugar company Tate & Lyle has welcomed the decision by EU farm ministers to reduce the amount by which sugar prices are to be cut and delay the implementation of the reduction, in the sugar sector reform agreement reached at their meeting on Thursday.
Tate & Lyle fully understands the need for reform of the EU sugar regime and welcomes the agreed proposals, the company said. It is positive for the industry as a whole that a final agreement has been reached within the agreed timetable, as is the extended period of stability until the end of September 2015 contained in the agreed proposals.
Whilst the long-term impact on Tate & Lyle remains significant, the final decision to make the cut in the sugar reference price of 36% (instead of the 39% previously proposed) and to delay the implementation of the price reduction is very welcome, it said. Tate & Lyle also welcomes the inclusion of short-term transitional aid to bring the impact on cane refiners and beet processors more closely in line, and the short-term reduction of the burden of the restructuring fund on isoglucose manufacturers.
These changes will reduce the potential impact on Tate & Lyle of the proposals published by the EU Commission on 22 June 2005. This impact was expected to be at least offset by the targeted improvement in operating results from value added products. The agreed proposals will have the effect of eliminating the negative impact on operating results before exceptional items in the financial years to March 2007 and 2008 and reducing it thereafter.
Tate & Lyle estimates that this impact can be mitigated by projects identified by management to replace earnings and to increase efficiency. Management initiatives are expected to improve operating results before exceptional items by approximately GBP10m (US$17.2m) in the financial year to March 2007, GBP23m in the year to March 2008 and GBP24m in the year to March 2009.
The actions that Tate & Lyle will take to respond to the agreed proposals may involve rationalisation and plant closures which will require prior consultation with our works council and trade unions, as well as with local government and regulatory bodies.
“We welcome the sensitivity shown by the commission in addressing some of the specific concerns we have raised in our lobbying,” said chief executive Iain Ferguson. “We also acknowledge the support we have received from the British and Portuguese governments in delivering an improvement to the scenario which faced us in June.”
“Tate & Lyle has a world class competitive refining business and is not afraid of competition,” he said. “However, as we have always said, the regulatory playing field needs to be level. We remain concerned about the long-term equity between beet and cane and the difficulties faced by our isoglucose business in the absence of transferable quotas.”
“Our culture of high efficiency and innovation has enabled us to identify initiatives to mitigate the adverse impact of the agreed proposals,” he said. “In our June announcement, we stated that we expected that the targeted improvement in operating results from value added products would at least offset the adverse effects we anticipated from changes to the institutional framework of the EU sugar regime proposed at that time. Given the reduction in these effects following the agreed proposals, our conviction that we will achieve this is stronger still. The continued successful execution of our long-term strategy to grow the value added component of our business enables us to look forward to the future with confidence.”