Tate & Lyle is to produce all its sucralose from its new plant in Singapore, ‘mothballing’ its facility in McIntosh, Alabama.
The company, which has its headquarters in the UK, says the decision was made due to a “breakthrough in sucralose manufacturing yields”. Over the last year its facilities have seen yield improvements of 25 per cent – not least because the Singapore plant, opened in April 2007, uses forth generation production technology.
The move was announced today as part of Tate & Lyle’s full year results, which included a 6 per cent increase in sucralose sales volumes compared to last year (with the biggest increase in Europe), and a 14 per cent increase in revenue to ₤169m. At constant currency rates, however, revenues were actually down 4 per cent as selling prices have been lower this year.
Outgoing chief executive Iain Ferguson told reporters this morning that the closure “has nothing to do with demand being weak” but “it has everything to do with a major scientific breakthrough”.
Tate & Lyle has reassured customers that service will not be affected, as the Singapore plant has more than enough capacity to meet current demand, and it will be able to maintain high safety stock levels.
The Alabama factory was itself the recipient of investment in 2004, when it was expanded to meet surging demand for the high intensity sweetener. The company pays tribute to McIntosh for its role in building the sucralose market over the last few years.
Tate & Lyle is planning to keep a core staff at McIntosh so it can re-start production if required within a few months. Indeed, it is common for food firms to spread their manufacturing across more than one location, so they have a back-up should unforeseen events occur at one site.
No indication has been given of job losses resulting from the move, but cash costs of $60m will be paid over the next three years. These will be covered by the operating savings from having a single plant.
The 2009 financial year results carry a £97m exceptional charge, from the impairment of carrying the McIntosh plant since the decision to mothball it.
High intensity sweeteners market
The firm said it estimates that the high intensity sweeteners market reduced by 11 per cent in 2008. It acknowledged that price competition continues in high intensity sweeteners, from both established suppliers and new entrants.
A particular blow to Tate & Lyle has been the ruling of the International Trade Commission that its sucralose patents were not infringed by a group of Chinese manufacturers and exporters against which it filed a suit.
It does not plan to appeal the final decision of a 6-person commission handed down in April.