Ingredients giant Tate & Lyle has said that group operating profit from Q1 fell below expectation after it was hit by poor weather and exchange rates.
The speciality ingredients supplier said it is optimistic that full-year results will be 'broadly in line' with expectations, despite missing its Q1 target by. The firm said its first quarter operating profit was hit by severe weather in the US this winter, in addition to foreign exchange issues and an unexpected shutdown of its sucralose plant in Singapore.
"The first quarter started slowly in the US following the prolonged and severe winter which caused operational difficulties at the corn plants and led us to enter the current financial year with much lower inventories than usual," said Tate & Lyle in its interim statement. "Although the impact on Bulk Ingredients was less than originally anticipated, it was greater on Speciality Food Ingredients, as we had to balance production to best meet our customers’ needs."
"Inventories continue to re-build and are expected to return to more normal levels in the current quarter."
The firm said that its Speciality Food Ingredients business saw good volume growth in emerging markets, but conceded that overall growth was held back by the US "where, despite firm demand, volumes were only marginally ahead of the comparable period as a result of the supply constraints."
"Sales in Bulk Ingredients in North America were constrained by entering the financial year with much lower inventories in the US than usual following the prolonged and severe winter," it said. "This impacted most product lines, although it was less than originally anticipated, and was also partially mitigated by firmer ethanol margins."
Full year outlook
Tate & Lyle noted that its performance in the first half of the year will be impacted by the supply constraints seen in the first quarter and the temporary Singapore shut down, "while the second half will benefit from the reversal of the Singapore costs."
"Accordingly, Group profits are expected to be weighted to the second half of the financial year," it said.
The firm added that it expects the performance of Speciality Food Ingredients business for the full year to be slightly lower than anticipated.
"However, demand continues to be strong and, notwithstanding current market conditions for sucralose, for the full year Speciality Food Ingredients is expected to deliver volume growth above the wider speciality food ingredients market."
"Overall, the Group’s full year performance, before the impact of exchange rate movements, is expected to be broadly in line with our previous guidance"