Tate & Lyle issues profit warning

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Although hit by the uncertainty of big contract renewal, the
UK-based Tate & Lyle Group has said that it expects profit
before tax in the third quarter of the year to 31 March 2004 to be
in line with expectations.

The company said that while some of the 2004 sweetener sales contracts in the US havebeen completed at increased prices, the negotiation of major contracts isongoing and may take some weeks to conclude. This situation presents some uncertainty for the company, hence the necessity for the profit warning. "These contracts, which arebeing negotiated against a background of recent corn price rises, willinfluence the final outcome on sweetener product margins. Gains in citricacid selling prices have seen this product line return to profit,"​ a press statement said.

The company also reported that the negotiation of Amylum's annual contracts is not yet finished. Raw materialcosts in Europe, which have increased markedly in the interim, have continued to rise significantly. "These have reduced margins on Amylum's contracts agreed at that time andsubsequent pricing has not fully recovered higher net raw material costs. This has been exacerbated by recently increased competitive pressures and by weaker vital wheat gluten prices so that results from Amylum for 2004 willbe below our earlier expectations," the statement added.

The company said that profit before tax and exceptional items for the Group's financial yearto 31 March 2004 will now depend upon the final outcome of the pricingnegotiations in both the US and Europe and the translation impact ofexchange rates. Nevertheless, Tate & Lyle​ said that it anticipates results will be close to marketexpectations with a weaker Amylum result in the final quarter being offsetby a satisfactory performance in the rest of the business.

"Looking forward, based on our current experience of raw material costs andcontract negotiations to date, we expect Amylum's results for the financialyear to 31 March 2005 to be significantly below those of 2004. A review ofAmylum's operations is in hand in order further to reduce the cost base.Although we anticipate further progress in 2005 at our North Americanbusinesses, this is likely to be offset on currency translation."

Related topics Ingredients