Tate & Lyle spins off sugar trading unit to Bunge

By Lindsey Partos

- Last updated on GMT

Related tags High-fructose corn syrup Glycemic index Corn syrup Tate & lyle

UK sweetener group Tate & Lyle reduces risk to earnings from
today's volatile commodity markets, announcing the sale of its
international sugar trading operations to US oilseed giant Bunge.

Without disclosing the value of the deal, the maker of the successful sweetener sucralose said today that it did not expect to make "a material profit or loss on disposal".

Set up to purchase sugar for their refineries, the recent sale of Tate & Lyle's sugar businesses in the Americas saw a reduction in need for the firm's physical trade operation.

Further, the sale of the sugar trading operations reduces Tate & Lyle's exposure to volatile trading markets, that in good years can boost earnings, while in more challenging times can impact the bottom line.

In April and May 2008 the unit made £2 million (€2.5m) in profits, but this follows rollercoaster figures that showed an operating loss of £9 million (€11.2m) in the year ended 31 March 2008, and an operating profit of £22 million (€27.5m) in the 2007 fiscal year.

"The sale adds to stability of earnings, and could be seen as good news," a London analyst told ConfectioneryNews.com today.

Subject to regulatory approval, Tate & Lyle said the working capital in the business will remain with, be collected and be paid for, by Tate & Lyle until March 31, 2009, at which point, on the deal closing, it will be assumed by Bunge.

Tate & Lyle added that the group's EU sugar refining operations will be "strengthened to ensure it has the appropriate resources going forward to support and develop its key supplier relationships."

The Tate & Lyle sale of sugar trading operations also reflects a further step away from the firm's roots as a commodity processor and trader and towards higher value products and gains.

In recent years the UK firm has benefitted from strong interest by food and beverage makes in its added-value sweetener ingredient sucralose, popular for its strong shelf-life and low calorie appeal.

But the recent end to a collection of patents and the launch of generics from rival firms is today putting pressure on the company's sucralose business.

In addition, the UK firm, along with all other sweetener suppliers, is likely to be soon confronted by a formidable competitor on the market in the form of stevia.

A natural sweetener with clean label appeal and low glycaemic index status and currently making first steps onto the market, food and beverage makers are reportedly already excited about this new sweetener.

Between 250 and 400 times sweeter than regular sugar, stevia is an emerging threat to players in the $1 billion high intensity sweetener market.

Last month Bunge acquired US corn-based sweetener supplier Corn Products International for $4.8bn (€3bn), and a major competitor of Tate & Lyle in the domain of high fructose corn syrup, a popular ingredient in soft drinks.

The purchase led industry observers to speculate that Bunge might be interested in acquiring Tate & Lyle, although anti-trust issues are rife with any such deal.

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