On-target Tate & Lyle forms fermentation partnership

By Anthony Fletcher

- Last updated on GMT

Related tags Value added

Tate & Lyle has formed a partnership to speed up the
commercialisation of fermented ingredients after posting on-target
interim results.

The news underlines the success of the company's ongoing strategy to move towards value-added ingredient development.

The partnership with Microbia Precision Engineering has been formed in order to develop fermentation-derived renewable ingredients. Precision Engineering, a subsidiary of US-based entrepreneurial company Microbia, specialises in the development of microbial manufacturing technology.

Tate & Lyle is one of the worlds major fermentation producers, and its portfolio includes biogums such as xanthan gum and Aquasta, a natural source of astaxanthin. The firm is confident that the partnership will further speed up product development.

"In the last decade, Tate & Lyle has established fermentation as a core technological competency,"​ said chief executive Iain Ferguson.

"This has proved a catalyst for new product development, leading to ground-breaking ingredients such as Bio-PDO (developed with our joint venture partners DuPont).

"We look forward to partnering with Precision Engineering."

As part of the agreement, Tate & Lyle will invest $7 million to acquire a minority shareholding in Microbia Precision Engineering and take one seat on the board. In addition, Tate & Lyle will invest a further $13.75 million in research and development over a period of five years.

The two companies will work exclusively together within defined renewable ingredient markets and will share the profits from products commercialised through their collaboration.

The announcement of this partnership follows this morning's posting of interim results. The company said that overall trading since the update issued at the annual general meeting on 19 July 2006 has "continued to be in line with our expectations"​.

"We have started the year strongly,"​ said Ferguson. "Over the five months to 31 August 2006, group profit before tax and amortisation has comfortably exceeded the corresponding period of the prior year, before the benefit of lower depreciation as a result of the asset impairment in ingredients Europe in the year to March 2006."

The UK-based ingredients giant last year registered a £272m (€398m) impairment charge on its European assets due to the upheavals of the EU sugar reform, and challenges remain. The Food ingredients Europe division for example has had to deal with high raw material costs.

"As advised in the preliminary announcement of results on 25 May 2006, trading profits in the second half-year of the financial year ending March 2007 are expected to be significantly lower than in the corresponding period of the prior year,"​said Ferguson.

Profitability in the firm's EU sugar refining business has also been affected by lower domestic sales prices, but the group's expectations for the full financial year to 31 March 2007 remain unchanged.

"We continue to view the future with confidence and remain committed to our target for the profit contribution from total value added products to increase by 30 per cent in the year to March 2007."

Tate & Lyle issued the trading update on entering a closed period in respect of the interim results to 30 September 2006. The interim results will be announced on 1 November 2006.

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