The global rush to reformulate products and cut sugar levels in food and drink has boosted ingredients specialist Tate & Lyle, even if the performance of its legacy business remains less sweet.
The sweetener and sucralose supplier posted double-digit sales and profit growth from continuing operations after shedding its US industrial starches business last year, with sales up 18% to £1.4bn and adjusted profit before tax increasing 14% to £145m.
The company said it saw improved customer demand in many key markets, despite a “challenging” trading environment. Its food & beverage solutions division saw strong demand as in-home consumption remained robust and out-of-home consumption recovered. Volumes were up 5% while revenues jumped 19%, with double-digit organic growth across all regions. Profits rose 12% as it benefited from positive mix.
Its sucralose division benefited from a combination of strong volume growth in beverages due to recovering out-of-home consumption and the optimisation of production at its plant in the US, while benefiting from being the only sucralose plant based outside China. Volumes were up 15%, led by strong demand in beverages and the benefit of production optimisation, with revenues up 13% as higher volume was partially offset by customer mix and profit up 15%.
Despite the strong growth, the hangover from its discontinued primary product operations hit statutory performance, with the division down 16% in constant currency on commodity inflation and operational disruption. Meanwhile, its retained primary products business in Europe saw losses widen.
Additionally, its continuing business saw cost inflation of £100m during the year in areas such as energy, labour, consumables and transportation, which the company said it mitigated by a combination of pricing, productivity, cost discipline, and volume growth and mix improvement.
Since the conflict in Ukraine caused significant further inflation in raw materials (including corn), energy and logistics costs globally, it has instigated a programme of price increases across its main markets to claw back these costs.
Jefferies noted the group’s “strong underlying momentum and a confident tone on the outlook”, which implied further bottom line growth in the current financial year.
Hargreaves Lansdown commented: “This was the first set of results under the new structure, and it didn’t disappoint… At first look, the new Tate & Lyle looks pretty sweet. As long as management are able to navigate the increasingly challenging environment, Tate could be in a strong position. So far the group look capable of doing just that.”
The group’s shares were up 2% on Thursday to 760p by early afternoon, having been up by 4.5% in early trading. However, the shares remain down more than 18% year on year after a stock split and special dividend payment in early May, after the $1.3bn part-sale of its US primary products business.
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