Tate & Lyle volumes up in third quarter, but margins down

Tate & Lyle remained stable in its third quarter, reporting increased trading volumes in some divisions, but lower margins and continuing difficulties in the ethanol market.

In the three months to 31 December, the FTSE 250 agribusiness described trading in its Specialty Food Ingredients division as steady, with volumes ahead of the same period a year earlier.

"Strong volume growth in Europe and Asia Pacific more than offset softer demand in North America and Latin America," the company confirmed.

In the Food Systems division, Tate & Lyle's board said volume continued to grow in the quarter, benefiting from the acquisition of Gemacom in December 2014.

Margins in that business declined, however, as a result of a sharp increase in the cost of some ingredients.

"Splenda sucralose volume was ahead of the comparative period although, as expected, pricing was lower year-on-year," the board added.

In Tate & Lyle's Bulk Ingredients division, sweetener volumes in North America were slightly ahead of the comparative period. The company expected the next bulk sweetener pricing round would deliver modest margin gains in the fourth quarter.

The company's Commodities division was still having a negative impact on Tate & Lyle's performance, especially with continued weakness in the US ethanol market. The board said it now expected a small loss from the division for the full year.

Tate & Lyle's outlook for the year remained unchanged.

"As previously communicated, the group's adjusted profit before tax from continuing operations in constant currency and on an equity-accounting basis is expected to be broadly in line with that of the 2015 financial year, at £193m," the board said.

"At reported rates, adjusted profit before tax is expected to be modestly below this figure," it added.

On a longer term basis, Tate & Lyle's board remained confident. It was expecting the Specialty Food Ingredients division to grow at mid-single digits, with a long-term objective to grow ahead of the market and drive margin expansion.

"While in the near-term we expect weakness in commodity markets to persist, we will continue to target stable earnings from core Bulk Ingredients and to manage Commodities to dampen volatility," the board concluded.