Ingredients demand is stable, says Tate & Lyle

22-Jul-2009 - Last updated on 23-Jul-2009 at 11:17 GMT

Food and beverage ingredient demand has been ‘stable’ in Tate & Lyle’s Q1, says the company in its interim statement, and the year so far has exceeded expectations.

The recession has caused some consternation in the food industry. Although food is a human necessity and therefore may be less affected than other industries, cost-cutting by consumers trickles nonetheless trickles through the food chain to have an effect on upstream suppliers, such as ingredients firms.

Tate & Lyle’s encouraging statement was made in advance of the annual general meeting; precise sales and operating profit data were not circulated prior to chairman Sir David Lee’s presentation.

It said that profits before tax and exceptional items are “in line with the comparative period and ahead of expectations”.

Food and beverage customers are still showing demand for its ingredients, and value-added ingredients in particular are said to see growing profits.

As for sucralose, trading is said to have been above expectations. This continues a rosier glow from the full year results, which included a 6 per cent increase in sucralose sales volumes compared to last year (with the biggest increase in Europe).

When it released its last full year results in May the firm announced the ‘mothballing of its sucralose plant in McIntosh, Alabama, at a cost of £56m.

All of its sucralose is now to be produced at the new plant in Singapore. Outgoing chief executive Iain Ferguson said at that time that the decision was not due to demand, but to a major scientific breakthrough. The technology used in Singapore is more advanced.

Corn costs and sugar

The company has said that its European ingredients business has continued to benefit from lower corn costs; demand for industrial starches has remained weak.

Sugar performed above expectations, but still below the comparative period. Molasses, too, was below the comparative period, but this was expected with the drop in global cereal prices since the second half of 2008, which had driven demand in preference over grain-derived sweeteners.

In the US, performance in Q1 is said to be “marginally below the comparative period”.

As for the outlook, Tate & Lyle is being cautious in its predictions, since the economic environment means short term predictions are possible.

While Q2 is looking “satisfactory”, the company said it is not likely to match last year’s Q2, which benefited from the commodity price surge.