British-based multinational Tate & Lyle has reported a strong first half boosted by growth in its bulk ingredients and specialty food ingredients businesses which pushed earnings higher. As a result, company chief executive, Javed Ahmed, says full-year profits expectations will be increased.
In the six months to September 30, sales from continuing operations went up 6 percent to £1.4 billion (US$1.8 billion) and adjusted profit at constant currencies increased 13 percent at £169 million (US$224 million).
Speciality Foods played a significant part in profits. There was a £10 million (US$13.2 million) increase in Speciality Food Ingredients adjusted operating profit to £104 million (US$137 million).
Meanwhile, there was a 3 percent volume growth, return to growth in North America (+1 percent) and good growth in other regions. There was also 4 percent profit growth after investments to grow the business over the longer term.
A £29 million (US$38.4 million) increase in Bulk Ingredients adjusted operating profit to £93 million (US$123 million), a 16 percent profit growth in core, were driven by strong execution, good demand and firm margins.
Over the same period last year, the company experienced a £3 million (US$3.9 million) loss from Commodities, but this first half shows a £10 million (US$13.2 million) profit, while there was a 14 percent increase in sales from New Products, to US$58 million.
There was a 6 percent increase in adjusted diluted earnings per share from continuing operations to 27.6p (US$0.36) and the Interim dividend increased by 0.2p (US$0.26) to 8.4p (US$0.11).
“We have made a strong start to the year, with good performance across the Group and higher adjusted diluted earnings per share,” said Javed Ahmed, Chief Executive.
“Speciality Food Ingredients delivered broad-based volume growth in the core business, including North America despite market conditions in that region remaining challenging.”
“New Products once again delivered double-digit sales growth as customers continue to seek innovative solutions to reduce sugar, calories and fat in food and drink.”
“Bulk Ingredients had another period of excellent performance, well ahead of a strong comparative period, with improved overall earnings resulting from disciplined commercial execution and margin expansion.”
“Turning to the outlook, we expect underlying adjusted profit before tax in constant currency for the full year to be modestly higher than we anticipated coming into the year, driven by the strong first-half performance.”
The company specializes in using innovative technology to turn raw materials like corn, tapioca and oats into ingredients that add taste, texture, nutrients and increased functionality to food and beverage.
Speciality Food Ingredients
Speciality Food Ingredients excluding Splenda Sucralose and Food Systems Volume increased 3 percent, with sales also 3 percent higher in constant currency.
Adjusted operating profit of £66 million (US$87.4 million) increased by 3 percent in constant currency, with adjusted operating margins flat in constant currency reflecting both a focus on top-line growth and continued investment in customer-facing capabilities, in areas such as sales and applications, to deliver an increasingly solution-based approach for customers.
In North America, volume grew by 1 percent, which is “an improved performance in the face of continued challenging market conditions,” according to the company.
“The overall US food and beverage market remains sluggish, with consumers increasingly seeking alternatives to traditional brands. As a result, our largest customers in this region, where our top ten customers represent around 40 percent of sales, continue to see consumption softness,” it adds.
Modest volume growth was driven by progress on three fronts: share gains in larger food and beverage customers; developing the business over time in customer channels growing above market, such as foodservice and own label; and continuing to win new business in targeted higher-growth sub-categories in areas such as health and nutrition, where Tate & Lyle’s technical depth and expertise and solutions are providing increasing value to customers.
Sales for the region decreased by 1 percent in constant currency to £180 million (US$238 million), driven by product mix while gross margin was maintained.
In Asia Pacific and Latin America, volume was 6 percent higher, with especially strong growth in Mexico and China.
Sales for the overall region increased by 8 percent in constant currency to £79 million (US$104 million).
Latin America delivered double-digit volume growth, while in Mexico, the company saw broad-based growth, with particularly strong demand for its sweeteners helped by favorable market dynamics.
The business in Brazil grew modestly with continued good growth in other Southern and Central American operations. In Asia Pacific, Tate & Lyle experienced good volume growth in the first quarter, with the second quarter lower due to the phasing of sweetener shipments in the comparative period.
The company says it continues to perform well in China, particularly its fibers. During the period it added both sales and applications development resources in support of expansions to its applications facilities in Singapore, Shanghai and Mexico City.
In Europe, the Middle East and Africa, volume increased by 8 percent benefiting from good growth in all platforms, while the company saw double-digit growth in fibers and sweeteners, strong growth in Southern Europe including Turkey, and double-digit growth in Central Europe.
With volume of maltodextrin sweeteners in line in the period due to capacity constraints, Tate & Lyle has recently committed to an extension of capacity at its Slovakian facility.
Sales increased by 9 percent in constant currency to £80 million (US$106 million).
