Tate & Lyle - Update
Tate & Lyle PLC
6 February 2001
TATE & LYLE-UPDATE
With the majority of the contracts for the supply of high fructose corn syrup
(HFCS) for calendar 2001 completed by Staley, Tate & Lyle issues the following
update.
In the past few weeks, Staley has completed over 90% of its HFCS contracts in
the US, resulting in double digit percentage increases to average selling
prices, consistent with industry trends. The benefits of the price increases
will be partially offset by slightly higher net corn costs and increased
energy prices, but we anticipate an improvement in Staley's earnings in the
new financial year.
In Europe, Amylum's sweetener and starch pricing in January has seen selling
price increases of around 10%. In recent months Amylum margins have been
reduced by an unfavourable product mix and the price increases will have
little impact in the remainder of this financial year. We do, however, expect
to see a marked improvement in earnings in the year to March 2002. The
integration of Amylum's head office with Tate & Lyle has been completed and
several other areas of savings have been identified and implemented. Targets
include widening the Group's procurement initiative, optimising production
between US and Europe and establishing a global approach to export markets. We
remain confident of achieving our target savings of £50m p.a. within three
years.
Turning to the group's sugar businesses, in the US the sugar regime remains
unworkable and margins have been squeezed for an unprecedented period, with
the gap between raw and white sugar selling prices deteriorating further in
recent weeks. As a consequence, worse than expected trading results are being
experienced at Domino and Western. The sale of Western sugar, however,
remains on track and we continue to pursue alternatives for Domino. Our cane
refining sugar businesses in UK, Portugal and Canada have continued to perform
well, providing a strong cashflow.
At the time of our interim results on 8 November 2000 we stated that we
expected energy costs across all of our businesses for the financial year
ending March 2001 to be over £30m higher than in the previous year. We now
estimate the increases in direct energy costs to be more than £40m, mainly due
to further substantial price increases since November. These energy cost
increases coupled with a continued squeeze on margins have lowered our
expectations for the current financial year to March 2001. Looking ahead to
the 2002 financial year, improvements at Staley and Amylum provide grounds for
expecting a materially improved performance. This would be enhanced by a
strategic solution to US Sugar.
Enquiries: Mark Robinson 020 7626 6525
Chris Fox 020 7626 6525
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