LONDON (SHARECAST) - First half profits will be level rather than heaped at sweeteners firm Tate & Lyle (T&L).
"Overall, we expect to report adjusted operating profit for the group for the first half in line with our expectations and the prior year period, which benefited from an exceptionally strong performance from co-products," the group said in a trading update.
Speciality Food Ingredients
Operating profit in this division, which primarily focuses on the food and beverages markets with products such as the Splenda sweetener, will be lower than in the first half of last year.
This is because of lower volumes shipped this time round - though T&L notes that the first half of last year included an unusually large volume from customers’ new product launches - as demand in Europe remains subdued.
The impact of the strike in Turkey and the previously announced step change in fixed costs associated with its business transformation initiatives have also put a dent in operating profits for the division.
On the upside, the group saw an upturn in performance in the second quarter, with "good growth" in Sucralose volumes, although overall volumes in the first half are expected to be lower than the comparative period.
Sales are set to be ahead of the prior year period with solid growth in the US and emerging markets offsetting a weaker performance in Europe.
Operating profit in the Bulk Ingredients division, which supplies ingredients such as high fructose corn syrup, is expected to be up year-on-year, with a strong performance from liquid sweeteners in both the US and Europe more than offsetting tough times in the US ethanol market.
Income from co-products, such as corn gluten meal used in pet food, returned to more normal levels during the period.
"While US corn prices have eased slightly since publication of the USDA’s latest supply and demand estimates on September 12th 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," the T&L statement said.
Things are expected to remain tough in Europe for the Speciality Food Ingredients business, but the group still expects to achieve steady volume growth across all its major product categories and solid sales growth for the full year.
In Bulk Ingredients, T&L expects the firm demand for liquid sweeteners in the US to continue and demand in 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, while recognising the current level of uncertainty around the wider economy and volatile corn markets, we continue to expect to make progress this financial year," the group said.