Tate & Lyle reports pricing erosion in sucralose

by Jeff Gelski
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LONDON — Tate & Lyle, P.L.C. reported lower selling prices than expected for the high-intensity sweetener Splenda sucralose in the United States in the fiscal year’s second quarter. Javed Ahmed, chief executive officer, said he expects to see price erosion for the next couple of years, but the London-based company still sees a positive future in sucralose as it gains news customers, continues to improve scale efficiencies and continues to be a category leader.

“We clearly have seen the pricing erosion,” Mr. Ahmed said in a conference call on Oct. 4 when Tate & Lyle gave a trading update for the six months ended Sept. 30. Half-year results will be given Nov. 7.

“In sucralose, and high-intensity sweeteners overall, we saw mid-single digit volume growth for the half, and the pricing quantum broadly offset that,” Mr. Ahmed said.

Tate & Lyle is in the process of renewing contracts for sucralose while aggressively going after new customers, Mr. Ahmed said.

“And we’re winning new business, and we’re getting incremental volume, and we’re doing that in a competitive, dynamic environment,” he said.

The company is achieving scale efficiencies and investing to improve operational efficiencies, he added. Tate & Lyle has sucralose manufacturing facilities in Singapore and McIntosh, Ala.

“So, from that point of view, we feel pretty comfortable with the volume growth,” Mr. Ahmed said. “This is still a pretty good economic model for us.”

In the trading update, Tate & Lyle said performance in the second quarter was in line with expectations. The company expects adjusted operating profit in the first half will be lower than the same time period of the previous year, largely driven by softness in the U.S. beverage sector. In the United States, a cold spring and a slow start to the summer affected sweetener volumes, both in Tate & Lyle’s Specialty Food Ingredients division, which includes sucralose, and in its Bulk Ingredients division.

Within Specialty Food Ingredients, volume growth in emerging markets and Europe was offset partially by lower volumes in the United States.
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