Tate & Lyle expects to report adjusted operating profit for the Group for the first half in line with expectations and the prior year period, which benefited from an exceptionally strong performance from co-products.
The company issued a trading update for the six months ending 30 September 2012 ahead of the announcement of half year results on Thursday 8 November 2012.
In Speciality Food Ingredients, the company says that it saw an improved performance in the second quarter. Volume growth for the first half is expected to be in line with the market and sales ahead of the prior year period with solid growth in the US and emerging markets offsetting a weaker performance in Europe.
Good growth in Sucralose volumes was seen in the second quarter, according to the company, although overall volumes in the first half are expected to be lower than the comparative period (which included an unusually large volume from customers’ new product launches) primarily due to the more difficult market conditions in Europe.
This, together with the impact of the strike in Turkey and the previously announced step change in fixed costs associated with the company’s business transformation initiatives , will result in first half operating profit in this division being lower than the prior year period.
Within Bulk Ingredients, operating profit is expected to be ahead of the comparative period with a strong performance from liquid sweeteners in both the US and Europe more than offsetting ongoing challenging market conditions in US ethanol. Income from co-products returned to more normal levels during the period.
Tate & Lyle said that, while US corn prices have eased slightly since publication of the USDA’s latest supply and demand estimates on 12 September 2012, prices remain high as a result of tight market conditions and continued uncertainty about the size and quality of this year’s harvest following the severe drought in the mid-west. European corn prices have followed a similar pattern to the US.
Looking to the future, Tate & Lyle expect continued challenging market conditions in Speciality Food Ingredients in Europe, but expects to achieve steady volume growth across all major product categories and solid sales growth for the full year.
In Bulk Ingredients, the company expects the firm demand for liquid sweeteners in the US to continue and demand in its other food markets to remain stable. In Europe, higher corn prices are expected to reduce isoglucose margins in the second half. Market conditions in US ethanol are expected to remain challenging.
Overall, said Tate & Lyle, while recognising the current level of uncertainty around the wider economy and volatile corn markets, it continues to expect to make progress this financial year.