Tate and Lyle produces liquid sweeteners

Tate & Lyle today laid bare the effects of its supply chain disruption and the increased sucralose market competition as its half-year pre-tax profit plunged by 40%.

The UK-listed sweetener producer had issued a shock profits warning in September as it outlined its struggled to overcome operational problems in the US stemming from the severe winter.

Tate & Lyle said that results for the six months to 30 September were “significantly held back” by these issues and the increasingly competitive sucralose market.

Adjusted sales of £1.38bn were 21% lower year-on-year (13% lower on a constant currency basis), while adjusted operating profit of £117m was 37% lower and adjusted profit before tax of £104m fell by 40% (34% in constant currency).

Operational and supply chain disruption incurred costs of £31m during the period, while the effect of price erosion for accounted for £18m.

Nevertheless, Javed Ahmed, chief executive, said: “The fundamentals of our business are robust with particularly strong growth in the emerging markets for our speciality food ingredients business excluding Splenda sucralose, a high quality innovation pipeline and a resilient, cash generative bulk ingredients business.

“We are firmly focused on taking the necessary steps to work through the issues we face and improve the group’s performance.”

The company made no adjustment to its outlook for the full year to 31 March 2015 from profit warning announcement on 23 September 2014.

For the second half, its expects speciality food ingredients excluding Splenda Sucralose and bulk ingredients to continue to perform “solidly”, but this will be “more than offset by a softer performance in Spenda and additional supply chain costs”.

This, together with the first half performance, will result in full-year group adjusted profit before tax to be in the range of £230m-£245m.

Jefferies analyst Martin Deboo said the figures were “reassuring, relative to the lowered expectations and associated trauma of the Q2 warning”, adding: “This feels like a platform from which to rebuild, backed by the confidence implied by a 5% dividend increase.”