Tate & Lyle sales rise in year, as do corn costs
by Jeff Gelski
LONDON — Sales and adjusted operating profit rose for Tate & Lyle P.L.C. in the fiscal year ended March 31 despite the company facing several cost issues.
Headwinds in the Specialty Food Ingredients segment came in fixed costs associated with the restart of a Splenda sucralose facility in McIntosh, Ala., and in higher corn costs. Future growth in the segment may come from recently introduced ingredients Soda-Lo salt microspheres, which are designed to reduce sodium in products, and Purefruit, the company’s brand name for its natural high-intensity sweetener sourced from monk fruit.
The Bulk Ingredients segment also faced headwinds from the rising corn prices brought on by last year’s drought in the United States.
Fiscal-year profit companywide dropped to £278 million ($423 million), which compared with £309 million in the previous fiscal year. Adjusted operating profit was £358 million ($545 million), up from £348 million in the previous fiscal year. The adjusted operating profit was profit before a net exceptional charge of £12 million and amortization of acquired intangible assets of £10 million.
Fiscal-year sales were £3,256 million ($4,953 million), which marked a 5% change as reported and a 6% change in constant currency from £3,088 million.
“I am pleased to report that the underlying business continues to perform well and that despite having entered the year facing a number of headwinds, we have made progress,” said Javed Ahmed, chief executive of London-based Tate & Lyle, when results were reported May 30.
In Specialty Food Ingredients, adjusted operating profit for the year ended March 31 was flat at £213 million, which compared with £214 million in the previous fiscal year. Fiscal-year sales in the segment rose to £947 million from £887 million.
Volume for the high-intensity sweetener sucralose dipped 1% in the fiscal year. Competition from natural alternatives in the table-top segment affected sucralose volume negatively as did a slow start to the year driven by weakness in Europe.
Tate & Lyle now has its own natural high-intensity sweetener (Purefruit) on the market.
“The inclusion of our zero-calorie, fruit-based sweetener, Purefruit, in table-top products has created a greater awareness of this ingredient and driven a number of other new product launches and incremental sales,” Mr. Ahmed said in a May 30 earnings conference call.
Besides Soda-Lo and Purefruit, Tate & Lyle recently launched Tasteva stevia natural high-intensity sweeteners, but Tasteva was launched last year in Europe and Latin America and not in the United States.
“At this point in the development of new products, what we don’t look at is our sales, because there is a development cycle and a gestation period as projects go through with customers,” Mr. Ahmed said in the earnings conference call. “The key metrics that we do look at in terms of whether we’re on the right track or not are number of customer projects, and the quality of customer projects, because that’s what’s going to translate into sales.
“And there I’m pretty satisfied that the number of projects that we’ve got — and in fact, a lot of launches that we’re doing, we’re taking them globally now.”
Tate & Lyle in May of this year also acquired Biovelop, an early-stage manufacturer of oat beta-glucan.
In June 2012 Tate & Lyle formally opened a commercial and food innovation center in Chicago.
“To date, we have held over 100 customer visits or events at the new facility, with an encouraging number of repeat visits,” Mr. Ahmed said in the earnings conference call. “As well as a step change in the level of customer activity, we have also seen a significant improvement in the quality of customer interaction, with visits involving participants from a much broader range of functions.
“We are also increasing the international – by that, I mean non-U.S. – focus of the center, with customers from Latin America and Asia having visited Chicago in the last few weeks alone.”
In Tate & Lyle’s Bulk Ingredients segment, adjusted operating profit in the fiscal year ended March 31 increased to £182 million from £172 million. Fiscal-year sales in the segment increased to £2,309 million from £2,201 million.
In the Americas, volume for bulk corn sweeteners decreased 1% but sales increased 8%. In Europe, volume of bulk corn sweeteners was in line with the previous year while sales increased 4%.
Sales of industrial starches, acidulants and ethanol decreased 2% in the fiscal year. Volumes were down 5%. Sales of co-products increased 9%.