Sucralose yields soar at Tate & Lyle

Tate and Lyle’s decision to mothball its sucralose plant in McIntosh, Alabama, has “nothing to do with weak demand” but follows a scientific breakthrough that has significantly increased yields, bosses have claimed.

Speaking as the company posted a 2% drop in adjusted pre-tax profit to £247M on sales up 24% to £3.6bn in the year to March 31, chief executive Iain Ferguson said sales of the high intensity sweetener were up 14% to £169M above the prior year.

Tate & Lyle had also seen “solid volume growth for sucralose in international markets, particularly Europe where there were significant gains in retailer own-label ranges,” added Ferguson.

However, process improvements had boosted sucralose yields by 25%, which meant that the firm’s Singapore sucralose plant was enough to meet demand for the foreseeable future, he said.

The technical breakthrough was made as scientists were conducting analytical research at the plant during the recent patent infringement case against rival manufacturers of sucralose, said Ferguson. Although Tate & Lyle lost the case, the discoveries made by the scientists had been "instrumental" in delivering the yield improvements, he said.

“In the last year, our sucralose manufacturing facilities have achieved significant and sustainable yield improvements of over 25% which has had the effect of significantly increasing production capacity. Consequently, we have taken the decision to mothball our McIntosh, Alabama facility, and produce all our sucralose from our newer and more efficient fourth generation facility in Singapore."

To “sustain the health of our business in the face of challenging and unpredictable market conditions”, he had also accelerated cost reduction projects and initiated a pay freeze across the business.

There would also be a “wide-ranging review of discretionary expenditure and headcount reductions across the business”, he added.

Panmure Gordon analyst Graham Jones issued a sell rating on the company’s stock, adding: “Tate’s results produced few surprises, but the headline number of profit before tax down just 2% is flattered by the strength of the dollar. In constant currencies profit before tax fell by 18%, and the outlook remains difficult to predict.”

The decision to mothball the US sucralose plant would help protect adjusted profits in 2010, but with a difficult pricing round ahead for high fructose corn syrup, very poor margins on ethanol margins and the dollar now weakening, “we expect forecasts for March 2010 to continue to drift off”, he said.