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Britain's Tate & Lyle Plc, the world's largest sugar company,
on Thursday warned it saw no sign of recovery in a difficult U.S.
sugar market, and did not rule out a sale of its business there
after an on-going review.
In addition, the sugar and sweeteners group said it was selling
its Bundaberg Australian cane sugar operation, and also buying up
minority shareholdings in its U.S. sweeteners group Staley and
European starch manufacturer Amylum.
Confirmation of the poor U.S. sugar outlook and the issue of
shares to pay for the Amylum deal sent the shares down three percent
in early trade before recovering to close unchanged at 268 pence,
after the company reported a 30 percent rise in underlying annual
pre-tax profits.
The group reiterated it had seen extremely adverse conditions in
the U.S. sugar market, with prices at 10-15 year lows due to bumper
sugar crops which caused a profits warning in March and sent its
shares then to a 10-year low of 195p.
``Pricing is still low, there is still oversupply in the U.S.
sugar market, and we are not planning for any significant sugar
price increases in the immediate future,'' said group Chief
Executive Larry Pillard in a conference call.
'FOR SALE' SIGN ON U.S. BUSINESS?
Pillard hopes to report on its review of U.S. sugar operations in
November, and said its 350 million pounds ($530.8 million) of U.S.
assets were not delivering returns for shareholders. If exiting its
U.S. sugar businesses would deliver returns, then Tate would do
this, he added.
``Looking forward it would be unwise to assume any immediate
improvement in market conditions, particularly as they relate to
U.S. sugar,'' said group Chairman David Lees.
Analysts pointed out the Tate's immediately earnings outlook was
dull, although the strategic moves at Bundaberg, Staley and Amylum
were positive for the longer term.
``The outlook is poor, and there is no joy in any of the markets
that T&L are involved in,'' said food industry analyst David
Lang at Investec Henderson Crosthwaite.
Despite the poor outlook, the company reported slightly better
than expected pre-tax profits before reorganisation and exceptional
costs for the 52 weeks to March 25 up at 225 million pounds after
173 million, while sales were off six percent at 4.1 billion pounds.
The group paid an annual dividend of 21.4 pence against a
comparative shareholder payout of 17.2p, as the company changed its
financial year-end to March from October.
The improved profits came from a better than expected
October-March second half when its underlying pre-tax came in at 92
million pounds, after it said in March second half profits would
fall below the previous year's 93 million pounds.
Earlier, Tate & Lyle said it had sold its Australian sugar
business Bundaberg to Belgium-based Societe Finaciere des Sucres for
A$425 million or 162 million pounds, and spend a total of 274
million pounds buying up minority interests of 10 percent in Staley
and 36.7 percent in Amylum, making Tate and Lyle the 100 percent
owners of these two divisions.
Part of the transaction for Amylum will be paid for by issuing
24.08 million new Tate & Lyle shares, which in a unloved UK food
sector will go down like a lead balloon, said analysts.
Pillard said the group was selling Bundaberg as the expected
deregulation of the Queensland sugar industry never happened, and so
the company could not wring out value for shareholders.
Tate's shares have underperformed the FTSE All Share index by 40
percent over the last 12 months and the food sector by around 23
percent.
($1 equals .6594 Pound)
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