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Tate & Lyle profits rise as bet on speciality products pays off

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Profits at Tate & Lyle have soared, as the company refocuses on speciality food products such as sugar substitutes, and away from its bulk ingredients business.

The turnaround reflects the success of its withdrawal from bulk ingredients production in Europe, which saw the handover of a number of factories in Eastern Europe and Turkey.

But the company warned that returns from its US ethanol business are likely to remain weak in the years to come.

Refocusing business

Strong performance from its speciality food ingredients division, which produces sugar substitutes such as Splenda, helped the company grow its profits and sales in the year to April 30.

Tate & Lyle, which sold its UK cane sugar refining business to American Sugar in 2010, has been pursuing a strategy of focusing on its speciality ingredients.

"The long-term structural growth drivers of the specialty food ingredients market continue to be strong," chief executive Javed Ahmed told investors, citing the "growing move toward healthier food and drink globally".

Pulling out of the bulk business

Last year Tate and Lyle pulled out of its European bulk ingredients business, selling its share of corn processing facilities in Bulgaria, Turkey, and Hungary to ADM, ending a decades-long joint venture between the two companies.

At the same time the business increased its exposure to speciality products, taking on full ownership of a specialist facility in Slovakia.

Sales in Tate's bulk ingredients division, which includes high-fructose corn syrup and ethanol production, have also declined after downsizing, down 1% year on year.

Mr Ahmed told investors he was "expecting returns from US ethanol to remain weak in the 2017 financial year".

Rising profits

But where bulk product sales are falling, the businesses' speciality segment has seen rising sales and profits.

Revenues in the specialty food ingredients division, which includes dietry fibre, sweeteners, and food additives, rose to £897m, grew by 4% to £897m.

Tate & Lyle's adjusted pre-tax profit — excluding one-off restructuring charges, rose by 5% in the year to April 30, to £193m.

The company's sales rose 1%, to £2.36bn over the same period.

Tate & Lyle shares were up 0.8% in afternoon deals in London, at 618.96 pence.

By Agrimoney.com

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