LONDON — Lowering the manufacturing costs for sucralose and generating more sales from newer products are two ways that Tate & Lyle, P.L.C. expects to emphasize specialty ingredients.
The company has a goal of generating 70% of its profit from specialty food ingredients, including sucralose. The percentage increased to 60% during the fiscal year ended March 31, said Javed Ahmed, chief executive of London-based Tate & Lyle, in a May 26 earnings call.
Tate & Lyle closed a sucralose manufacturing facility in Singapore on March 31. Now, the company only manufactures the high-intensity sweetener in a plant in McIntosh, Ala.
|Javed Ahmed, chief executive of Tate & Lyle|
“As a result of the restructuring, which has now been completed, Splenda sucralose is a more focused low cost and sustainable business, and generated higher profitability in the year than we had anticipated,” Mr. Ahmed said.
Splenda sucralose volume rose 7% in the fiscal year while sales increased by 4% to £156 million ($229 million).
“In Splenda sucralose, following the closure of the Singapore facility, we expect double-digit volume decline in F.Y. 17, in line with our lower overall capacity although we expect this to be offset at the adjusted operating profit level by the benefit of lower manufacturing costs, driven by our restructuring,” Mr. Ahmed said.
Tate & Lyle wants to generate annual sales of $200 million from new products, or those in the first seven years after their launch. Sales of new products in the fiscal year grew by 34% in constant currency to $86 million.
In Europe, Tate & Lyle completed the realignment of its Eaststarch joint venture corn wet milling business with Archer Daniels Midland Co., Chicago. Tate & Lyle acquired full ownership of the more specialty-focused facility in Slovakia and exited the predominantly bulk ingredients plants in Bulgaria, Turkey and Hungary.
“With the completion of these initiatives, Europe is now largely focused on specialty food ingredients, with nearly all the region’s profit coming from that business,” Mr. Ahmed said.
Tate & Lyle wants to broaden the geographic mix of specialty food ingredients’ sales as well, shooting for 30% of those sales coming from Asia Pacific and Latin America.
“We delivered an increase of 60 basis points with these two regions now accounting for 21% of sales,” Mr. Ahmed said.
In the United States, carbonated soft drink sales volume declined by about 0.5% in the fiscal year. While the overall food and beverage market remains relatively mature in North America, Tate & Lyle is seeing growth in some areas, Mr. Ahmed said.
“Our expertise in sugar and calorie reduction and fiber enrichment play well into sub-categories such as yogurt and nutrition bars, which are seeing above-market growth in the U.S. as the trend for healthy snacking continues to build,” he said. “While this approach is seeing some encouraging early traction with customers, it will be embedded gradually, and we would expect volume growth also to build gradually over time.”
Specialty food ingredient sales in the fiscal year reach £897 million ($1,316 million), up 4% from the previous fiscal year. Adjusted operating profit rose 10% to £150 million. Profit was adjusted to exclude exceptional charges, net retirement benefit interest and amortization, said Nick Hampton, chief financial officer.
Bulk ingredient sales dipped 1% to £1,458 million. Adjusted operating profit in bulk ingredients increased 1% to £84 million. Commodities faced a challenging environment as high ethanol inventories and low gasoline prices in the United States pressured industry margins.
“The fundamentals of the U.S. ethanol industry do not show any near-term signs of improving and, therefore, we expect returns from U.S. ethanol to remain weak in the 2017 financial year,” Mr. Ahmed said.Companywide, Tate & Lyle in the fiscal year posted adjusted profit before tax of £193 million, up 5% from £184 million in the previous fiscal year, and sales of £2,355 million, up 1% from £2,341 million.