Tate & Lyle looks set for full year results in line with expectations as its refocus on specialty ingredients pays off and it sells its mothballed facility in Fort Dodge, USA, to Cargill for US$57m (GB£36m)
The mothballing of the incomplete Iowa facility, which was to serve the ethanol, industrial starch and corn gluten feed markets, was announced by new CEO Javed Ahmed on publication of the full year 2010 results in May 2010 – in the same statement in which he unveiled the plan to focus on specialty ingredients. The decision left the company with a £217m write-off charge.
The bombshell was followed up with sweeter news in October: that the company is to establish a new global headquarters for its innovation and commercial development team in Chicago, as the next step of its new strategy to focus on specialty food ingredients and move closer to its customers.
The Fort Dodge sale, which took place yesterday, was announced in Tate & Lyle’s performance update as it enters its closed period ahead of the full financial results on 27 May.
“We have continued to deliver global volume growth in Speciality Food Ingredients across all the major product categories through the year,” the company said.
“Within Bulk Ingredients, sweetener volumes remained strong and margins improved in industrial starches, particularly in Europe where the market has tightened following a poor potato harvest. The higher co-product income primarily benefits the Bulk Ingredients division.”
Overall the group has seen operating performance similar to market expectations, it says, with the exception that increased corn prices in the last 3 months have driven a further increase in co-product income since January.
Returns for Fort Dodge sale
The sale of the Fort Dodge site will bring Tate & Lyle an accounting gain of around £16m, as the impairment taken in the year to 31 March 2010 took its book value down to £17m.
Also, some £20 million of the £25 million exceptional charge booked in the first half of the current financial year, relating to long term contracts will be reversed.
“Thus we expect an exceptional credit of £36 million in the second half of the current financial year and an exceptional credit for the full year of £11 million,” the company said.