Statement - Financial Period to 25th March 2000
Tate & Lyle PLC
29 March 2000
Tate & Lyle PLC
Statement For Financial Period Ending 25th March 2000
Prior to routine meetings with analysts, Tate & Lyle makes the following
announcement.
'Trading
The US sugar market has deteriorated significantly since our second interim
report to shareholders last November. As a result profit before tax,
re-organisation costs and exceptional profits and losses on disposals for the
six month period to 25th March 2000 is expected to fall somewhat below the
equivalent £93m in the corresponding six month period. This £93m excludes a
profit on disposal of £5m and re-organisation costs of £2m.
Staley's operating profit for the six months to March 2000 will exceed that of
the corresponding six month period with improved margins and increased profits
from value added products. The annual high fructose corn syrup (HFCS) pricing
in respect of the calendar 2000 year has been completed. Pricing is broadly
in line with 1999 levels but with higher net corn costs, HFCS margins in the
new financial year are expected to be lower. Staley continues to benefit from
its expanding value added food ingredient portfolio and also from cost
reduction initiatives.
The citric acid business has performed well with capacity being increased at
the UK plant and doubled in the US.
The North American sugar businesses have had mixed results. In Canada,
Redpath's profitability has improved over the corresponding period. In the
US, however, market conditions have deteriorated significantly since December
1999 and losses have increased. An oversupply of beet and cane sugar,
following unusually large crops, has driven down selling prices to their
lowest level since 1979. The Brooklyn Refinery remains operational despite
the continuation of a strike which began last summer.
A fundamental review of the strategic options is well under way and a new
management team is in place.
Amylum continued to progress due to cost reductions, higher sales volumes and
a gradual increase in selling prices. Production levels at the Nesle plant
are improving and benefits are being realised from the use of lower cost wheat
as a raw material compared to maize. Further progress is expected in 2001.
European Sugar performed well, providing strong cashflow. However, the
strength of sterling is likely to reduce margins in the new financial year in
spite of operating cost reductions.
The results of the Rest of the World activities for the six months will be
lower than in the corresponding period, principally due to very depressed
world raw sugar prices, which particularly affect Bundaberg in Australia.
Strong management and tight control on costs have helped to mitigate the
impact of this lower pricing but the immediate outlook is for no improvement
in market conditions.
Re-organisation
Good progress has been made in consolidating the UK activities and expenditure
is expected to achieve a cash payback in less than two years. The costs of
this Business Improvement Project in the six month period to 25th March 2000
are expected to be £4m; a further £7m is expected to be incurred in the year
to March 2001.
Other Group re-organisation costs during the six month period to 25th March
2000 are expected to total £7m.
Disposals
With continued focus on the key activities of the Group, further disposals
have been made in the six month period. Sale proceeds for the six month period
have totalled more than £90m. These disposals include the sale of the 50%
holding in Midwest PMS (US animal feeds), the 92% holding in Garbow (Polish
sugar factory), the sale of two East London sites and the sale of the Group's
shareholding in Argentina-based Industrias de Maiz SA ('IMASA'). A separate
announcement has been made on the IMASA disposal.
Proceeds from the disposals are being used to reduce Tate & Lyle Group
borrowings.
Borrowings
Although profits for this period are expected to be somewhat less than we
anticipated last November, cash flow has been strong. Our disposal programme,
together with lower capital expenditure and improved working capital
management, is expected to result in net borrowings at 25th March 2000
considerably below the corresponding figure twelve months ago.
Continued focus on the asset base of the Group will lead to further disposals,
improving interest cover and a reduction in debt.'
Enquiries Anthony Williams 020-7626 6525
Chris Fox 020-7626 6525 (Press)
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