LONDON — Tate & Lyle P.L.C. said it will make its specialty food ingredients business its “key focus of investment” as it makes changes to the company’s organization and builds its platform for long-term growth. The new strategy was unveiled by chief executive officer Javed Ahmed as part of the company’s release of full-year fiscal 2010 results.
In the year ended March 31, Tate & Lyle said profit for the year totaled £15 million ($21.6 million), down sharply from £65 million a year earlier. The company said results were adversely affected by a £217 million impairment charge on a mothballed ethanol plant in Fort Dodge, Iowa.
Sales for the full year totaled £3,506 million ($5,063 million), down narrowly from £3,553 million the previous year.
“Tate & Lyle delivered a solid performance in the face of challenging conditions in a number of our markets,” said Mr. Ahmed, who took over as the company’s c.e.o. in November 2009. “In particular, our core value-added food ingredients delivered a strong result, reflecting steady demand and firmer pricing. I am also pleased that, through resolute focus on the financial priorities we set ourselves at the beginning of the year, we have significantly strengthened the group’s balance sheet.
“I am announcing today that we are refocusing our strategy, with our specialty food ingredients business being the key focus of investment and long-term growth, as well as making a number of important changes to the group’s organization. Through these changes, and a strong focus on operational excellence and execution, we will build the platform to deliver sustainable growth.”
Reflecting on the change in its investment focus, Mr. Ahmed said over the past four years, approximately two-thirds of Tate & Lyle’s capital was invested in its commodity business with one third in specialty business. He added that most of the investment focus had been on developed markets. The strategy will change going forward.
“Over time, our investment focus will be realigned to our strategy: our engine of growth and the focus of acquisitions will be specialty food ingredients, with greater emphasis on emerging markets,” Mr. Ahmed said. “Our bulk ingredients and sugars businesses remain strong and valued businesses, and we will continue to invest appropriately in order to increase their efficiency and generate cash.”
To accommodate the change in strategy and focus, Mr. Ahmed said Tate & Lyle will form a new unit, the Innovation and Commercial Development group, under which the specialty food ingredients business will be folded. He said the core value-added starch business and the group’s artificial sweetener Sucralose will make up the bulk of the specialty business.
As one of the first steps in its new focus, Mr. Ahmed said the company decided to permanently mothball its wet corn milling plant in Fort Dodge. The decision followed a detailed analysis of the end markets which the plant would have supplied.
“The continuing depressed and volatile outlook for ethanol, and uncertain conditions in industrial starch and corn gluten feed markets, do not provide any basis to complete and commission the plant,” Mr. Ahmed said. In order to complete the plant, Tate & Lyle would have needed to spend an additional £70 million. Instead, the company will mothball the plant, leading to an impairment charge of £217 million that has been recorded as an exceptional charge in fiscal 2010. A further charge of £25 million will be recorded in fiscal 2011, he said.
Looking ahead, Tate & Lyle said it expects steady demand patterns for value-added food ingredients to continue. The company said it also expects continuing modest decline in U.S. domestic sweetener demand to be largely offset by increased demand from Mexico. Stable demand in other markets for primary food ingredients also is expected to continue.