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Tate & Lyle has posted continued strong growth in its core food and beverage solutions business in the third quarter to upgrade full year expectations for the division.

Food and beverage solutions revenue growth continued to be strong, increasing by 19% from higher volume, price mix, the benefit of acquisitions and strong growth from new products.   

Looking through the impact of the Covid-19 pandemic, compared to the quarter to 31 December 2019, volume was 12% higher and revenue 31% higher. 

It said North America and Europe each delivered double-digit revenue growth reflecting good commercial performance and mix management.  In Asia, Middle East, Africa and Latin America revenue growth accelerated strongly in the quarter helped by robust growth in China, South-East Asia and Mexico.   

Sucralose revenues were 8% higher reflecting good customer mix and solid demand. 

The division it is planning to spin off that focuses on bulk sweetners and industrial starches, with broadly in line with expectations, with starch volume slightly lower than the comparative period.   

However, as expected, overall performance was significantly weaker due to cost inflation and actions taken to reduce costs in the comparative period to mitigate the impact of the pandemic. 

The transaction to split the businesses is on track for completion at the end of March 2022. 

Tate & Lyle said the outlook for total operations remains unchanged with the performance of continuing operations expected to be stronger and discontinued operations weaker. 

Its continuing operations will see growth in adjusted profit before tax in constant currency in the low double-digit percent range 

However, the ·change in adjusted diluted earnings per share in constant currency will be lower at mid single-digits due to the performance of discontinued operations and cost inflation. 

CEO Nick Hampton said: “Food & Beverage Solutions delivered another excellent quarter with double-digit revenue growth across all regions and continued high demand for New Products from our innovation pipeline. 

“We enter 2022 in a strong position.  Our new business pipeline in Food & Beverage Solutions is healthy and in both our businesses we have renewed 2022 calendar year customer contracts that offset inflation.  In addition, the transaction we announced last year to create two focused businesses is progressing well and we remain on track for completion at the end of March. 

“With Tate & Lyle re-positioned as a growth-focused, global food and beverage solutions business serving faster growing markets, we see significant opportunities ahead.  Consumer demand for healthier food and drink is accelerating globally and with our leading expertise in sweetening, mouthfeel and fortification, the new Tate & Lyle is well positioned to capture this growth.” 

Tate & Lyle shares are up 7.6% on the news to 742.8p.

Morning update 

Global tobacco giant British American Tobacco saw sales edge backwards in 2021 as strong growth in tobacco alternatives was mitigated by weaker cigarrete sales. 

New category consumables volume growth accelerated and was up substantially (over 50% in all three categories).  

Revenue from non-combustibles now represents 12.4% of Group revenue, up from 10.1% in 2020 (and 4.2% in 2017), reflecting strong new category revenue growth of 42.4% (or 50.9% at constant rates of exchange). 

Cigarette volume was broadly flat and cigarette volume share down 10 bps with emerging markets beginning to recover from the impact of COVID-19 last year, which was more than offset by volume decline in Indonesia, U.S., Ukraine, Russia and Japan. 

On a reported basis, revenue declined by 0.4% to £25.7bn. 

Profit from operations on a reported basis was up 2.7% at £10.2bn, driven by an improvement in the group’s operating performance, despite a transactional foreign exchange headwind of 1.7%.  

The group’s operating performance also benefited from a reduction in one-off charges, which included, in 2021, costs of £358 m related to the sale of its operations in Iran. 

Reported operating margin was up 120 bps to 39.8%, largely due to pricing in combustibles, the reduction in adjusting items and cost savings. 

It further increased new category investment by £496m in 2021, while reducing losses for the first time by nearly £100 million,  with a “clear pathway” to profitability by 2025. 

The company said it expects constant currency revenue growth of between 3%-5% in 2022 despite an expected 2.5% drop in industry tobacco volumes. 

It expects further strong new category revenue growth and further reduction in losses in the category. 

CEO Jack Bowles commented: “In 2021 the business delivered on our transformation journey to build A Better Tomorrow.  

“Putting ESG at the heart of our strategy and corporate purpose is delivering sustainable growth, encouraging more consumers to transition to reduced risk products and reducing the health impact of our business. We are also on track to achieve our other ESG targets, including carbon neutrality from our operations by 2030. 

“These strong foundations enable us to embark on the next phase of our journey - Faster Transformation - towards A Better Tomorrow.  We are on a path to deliver £5bn of revenue and profitability from New Categories by 2025 and are developing opportunities Beyond Nicotine, leveraging our knowledge and capabilities from New Categories. 

“These foundations also provide the financial flexibility to be more active in our capital allocation to deliver sustainable long-term value for shareholders.   

“The BAT of tomorrow will be a high-growth, consumer centric, multi-category consumer goods company. We are confident in delivering a Faster Transformation, continued robust financial performance and superior cash returns to shareholders.  We are confident of delivering A Better Tomorrow.” 

British American Tobacco is up 0.4% to 3,283.1p on the news.

On the markets this morning, 

Other that Tate & Lyle, risers include Nichols, up 4.2% to 1,568.6p, McBride, up 2.8% to 51p and Unilever, up 1.7% to 3,843.9p.

Fallers include Just Eat, down 5.5% to 3,247p, THG, down 2.7% to 128.7p and Ocado, down 1.9% to 1,296.5p.

Yesterday in the City 

The FTSE 100 closed up 0.4% at 7,672.4pts yesterday. 

Unilever fell back 1.3% to 3,779p after posting its annual results and warning it would push through further price rises to cope with inflation, which could hit sales volumes 

The day’s risers included McBride, up 4.6% to 49.6p, Virgin Wines, up 3.6% to 158.5p, DS Smith, up 2.4% to 386.2p, SSP Group, up 2.4% to 303.2p and Greencore, up 2.2% to 140p. 

Fallers include Just Eat, down 6.3% to 3,435p, Hotel Chocolat, down 5.4% to 456p, THG, down 3% to 132.2p, Deliveroo, down 2.4% to 145.5p and Naked Wines, down 2.2% to 467p.