LONDON — The benefit of a one-off, sell-down of excess sucralose inventory and good U.S. bulk sweetener demand in the summer beverage season lifted results for Tate & Lyle, P.L.C. in the six-month period ended Sept. 30.
London-based Tate & Lyle posted sales from continuing operations of £1,321 million ($1,644 million) in the six-month period, which was up 13% from £1,170 million in the same time period of the previous year. Profit before tax was £128 million ($159 million), up 83% from £70 million. Adjusted profit before tax was £140 million, up 37% from £103 million. Currency translation increased profit before tax by £15 million.
The company’s specialty food ingredients segment recorded adjusted operating profit of £94 million, up 25% from £76 million in the same time period of the previous year, and sales of £487 million, up 9% from £446 million.
Within the segment, volume for Splenda sucralose, a high-intensity sweetener, increased by 3% in the six-month period. Tate & Lyle had carried Splenda sucralose inventory that was higher than normal into the six-month period as the company transitioned to a single manufacturing facility in McIntosh, Ala. Tate & Lyle closed a sucralose manufacturing facility in Singapore earlier this year. The transition to a single manufacturing facility reached planned production levels earlier than expected and allowed the company to reduce inventory over the six-month period.
“The refocusing of sucralose on a value-based market approach is progressing well, and the transition to a single production facility is now also complete,” said Javed Ahmed, chief executive of Tate & Lyle, in a Nov. 3 earnings call. “Our objective was to reposition sucralose as a more focused, low-cost and sustainable business, and we are on track with this.”
Tate & Lyle recorded an 18% increase in sales from new products to £37 million from £28 million in the same six-month period of the previous year. A cereal bar launched in the United States contains the company’s Dolcia Prima allulose, a sweetener with 90% fewer calories than sucrose, Mr. Ahmed said.
“We continue to be very encouraged by the progress we are making in commercializing new products and the quality of our innovation pipeline and expect volume growth to further accelerate in the second half,” he said.
In the company’s bulk ingredients segment, six-month adjusted operating profit of £64 million was up 51% from £42 million due to solid demand, robust margins and a strong manufacturing process. Six-month sales in the segment were £834 million, up 15% from £724 million. Volume increased 2% driven by modest sweetener growth in the core U.S. business and the acquisition of a facility in Slovakia.
Mr. Ahmed said two factors drove performance in bulk ingredients.
“Firstly, the fundamentals of the end markets we operate in have been relatively stable with the U.S. corn wet milling industry well balanced and U.S. corn prices currently low,” he said. “The commodities environment is still challenging, albeit relatively stable, with U.S. ethanol margins continuing to be under significant pressure and showing no near-term signs of improvement.”
For the second factor, reshaping the bulk ingredients business is paying off for Tate & Lyle.“With bulk ingredients now primarily focused on North America, at the start of the year we modified our operating model by moving from a regional to a product line approach focused on the three key areas of bulk sweeteners, industrial starches and acidulants,” Mr. Ahmed said. “This approach is driving a more granular and stronger focus on customer account management and service. For example, in industrial starch, where we have a leading market position in the U.S., our sales team has built a very deep knowledge of our paper and board customers' manufacturing processes and machinery, enabling them to provide tailored and timely solutions on a site-by-site basis.”