Tate & Lyle warns of profit loss from EU reforms

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The Independent Online

A warning from the sugar and starch group Tate & Lyle that changes to the European Union's sugar regime will drag down profits, drove its shares sharply lower yesterday.

A warning from the sugar and starch group Tate & Lyle that changes to the European Union's sugar regime will drag down profits, drove its shares sharply lower yesterday.

Sir David Lees, the chairman, said: "Reform will adversely affect the future performance of our European sugar and food and industrial ingredients businesses, although we cannot quantify the consequences at this stage." The shares posted their biggest one-day fall since last July, and were down 19.5p at 465.5p.

Vishnu Gopal, at Goldman Sachs, said his research indicated that EU sugar refining profits - 23 per cent of group profits - could tumble more than 40 per cent on the back of the EU reforms.

The World Trade Organisation is forcing the EU to open up its sugar regime to bring down prices. Iain Ferguson, Tate's chief executive, said: "The world sugar price has trended down and the EU price has ended up being three times that of the world price - that's really not a sustainable price." He said the company would quantify the impact of the reforms after the European Commission publishes its proposals on 22 June. The changes will take effect in July next year. Mr Ferguson said the group's innovative sweetener, Splenda, would not be affected.

Splenda, which contains no calories, has been a massive success for the company and was one of the main drivers behind profit growth last year. Profits before tax, amortisation and exceptional items in the year to the end of March climbed 12 per cent to £255m. A large exceptional charge of £55m was booked after the group settled US litigation over corn syrup price-fixing allegations.

Splenda is used in 4,000 products and has just been launched in the US in Diet Coke, Diet Pepsi and Diet Dr Pepper.

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