Tate resumes upward trend: Profits offset by 4m pounds cost of strike at cane sugar refinery

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The Independent Online
AFTER a buffeting from poor US weather and overcapacity in the American starch industry, the fortunes of Tate & Lyle, the international sweeteners group, resumed their upward trend in the six months to 27 March with a 20 per cent rise in pre-tax profits to pounds 107.6m. Some pounds 7.4m of that pounds 17.9m rise stemmed from currency effects.

Neil Shaw, chairman, emphasised yesterday that there was enough growth in the core businesses of Tate to keep it going for five or even 10 years. Sugar privatisation opportunities in Mexico, Thailand and Eastern Europe were particularly attractive.

The results, along with a 7.5 per cent rise in the half-time dividend to 4.3p, were in the middle of the stock market's range of expectations. This left the shares, which have been dull performers since the unexpected departure in March of Stephen Brown, chief executive, 8p lower at 397p.

Tate's figures rose pounds 7m in the UK, including a pounds 3m inventory profit, from the devaluation of the green pound, which determines EC agricultural prices, following sterling's devaluation in September.

But this was offset by the pounds 4m cost of a five-month strike at its Brooklyn cane sugar refinery, a pounds 4m charge for improved funding of pensions in Canada and Portugal and a near pounds 1m item, as expected, for compensation payments to Mr Brown for loss of office.

These special factors, coupled with lower sugar prices and volumes because of an excessive winter beet crop, accounted for a sharp fall in US cane and beet sugar profits from pounds 17m to pounds 12.2m despite a recovery at Western.

The drop in the green pound accounted for most of a rise in UK profits from pounds 25.4m to pounds 34m. Australian profits increased from pounds 5.3m to pounds 9.1m.

The company admitted yesterday that progress with Stella, a fat replacement product, had been slower than expected because of reluctance among big food manufacturers to change formulations.

Paul Lewis, deputy chairman and group finance director, said that around dollars 45m had been invested in Stella so far. Tate has a plant capable of producing 12 million pounds of Stella a year and is using only a quarter of capacity but this should rise to half next year after a deal with a leading US meat product group.

Tate's other breakthrough, Splenda, a sugar substitute, is sold in Canada but is still awaiting approval from the US Food and Drug Administration.

Tate and its US licensee, Johnson & Johnson, have spent pounds 150m over the past 15 years in developing the product, which analysts reckon could eventually bring in pounds 10m of profits.

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