Tate & Lyle plans £240m investment in ethanol fuel plant

The company will invest £140m in the first phase of a plant in Iowa that should boost its ethanol production and increase its participation in the rapidly growing US market for renewable fuels. There is an as yet unconfirmed second phase.

Iain Ferguson, Tate & Lyle's chief executive, said the plant, which will come on stream in March 2009, would free up capacity at another US plant to produce more higher-value food starches.

"This investment will capitalise on our world-class renewable ingredients capabilities, alleviate projected capacity constraints in our value-added starch facilities, and increase our participation in the rapidly growing US renewable fuel market," he said.

The move is the latest evidence of a shift in focus away from sugar in the wake of proposed changes to the European Union's subsidy system in the next few years. The EU will slash sugar prices by 36 per cent to comply with World Trade Organisation reforms.

The company announced an exceptional charge of £272m for its European starch and sweetener business. It declined to rule out plant closure or job cuts in addition to shutting its Greek corn processing plant by September 2008. The writedown pushed Tate & Lyle into the red for the first time since 2001, posting a loss of £30m in the year to March.

Underlying pre-tax profits before amortisation and exceptionals were £295m, up 16 per cent. This beat forecasts of £265m to £274m, with a strong year-end boost from the North American sweeteners business and sugar trading. Tate & Lyle's shares closed up 30p at 564p.