Weather, Singapore plant shutdown hinder Tate & Lyle
July 24, 2014
by Jeff Gelski
LONDON — The expected and the unexpected combined to affect profits negatively for Tate & Lyle, P.L.C. in the first quarter ended June 30. As expected, a prolonged and severe winter in the United States led to lower inventories. The temporary shutdown of a sucralose plant in Singapore, which was not expected, also posed a challenge.
As a result, adjusted operating profit for the quarter was below expectations, the London-based company said July 24 in an interim management statement. Company profits now are expected to be weighted to the second half of the financial year.
An industrial accident in Singapore in April temporarily suspended production. As local authorities investigated, the suspension lasted longer than originally anticipated. Tate & Lyle incurred £3 million ($5.1 million) in costs. Customer orders largely were met from inventories. Fixed manufacturing costs of £8 million ($13.6 million) were expensed, reducing profits for the quarter, but that should reverse in the fiscal year’s second half, the company said.
Tate & Lyle extended running time at a sucralose facility in McIntosh, Ala. The Singapore plant is back to running at normal production levels.
“When you actually bring these plants back up, you’re not talking days here,” said Javed Ahmed, chief executive of Tate & Lyle, in a July 24 interim management statement call. “These are not simple plants. They take weeks to come back.”
In the United States, the winter weather caused operational difficulties at corn plants. The resulting lower inventories in the United States constrained North American sales in Tate & Lyle’s Bulk Ingredients division.
“We expected that the issue would be contained within our Bulk Ingredients business,” Mr. Ahmed said. “However, as we went through the quarter, it became evident that depleted inventories were an industrywide issue, and market supply was very tight, with our suppliers unable to pick up the shortfall.
“Consequently, we had to adapt our plans and balanced reduction in order to best meet our customers’ needs, and this moved some of the impact onto Speciality Food Ingredients. We have now put the supply issue behind us, and inventories are beginning to normalize.”
Volumes for Splenda sucralose, a high-intensity sweetener within the company’s Speciality Food Ingredients division, were slightly lower than expected in the quarter, predominantly because a large customer changed its order pattern.
Mr. Ahmed said Tate & Lyle has had discussions with the customer, and it seems to be “a phasing issue from their point of view.”
“So for the full year we’re not really looking at any major deviation in terms of what they expect to be sourcing from us, but from a quarterly point of view, yes, we have seen a deviation,” he said.