Thursday, British renewable food and industrial ingredients company Tate & Lyle plc (TATE.L,TATYY.PK) reported a plunge in its fiscal 2009 profit, primarily on exceptional charges taken at its U.S. operations, which offset a 24% revenue growth amid difficult economic conditions. The company maintained dividend payment at last year's level, but pulled back from providing any outlook for fiscal 2010, citing uncertainties.
The sugar and sweetener firm's full-year profit was GBP 70 million, down 63% on actual basis, or 67% in constant currencies, compared to GBP 187 million reported in fiscal 2008. Profit attributable to equity holders plunged to GBP 65 million from GBP 194 million last year. Earnings per share attributable to equity holders dropped 65%, or 69% in constant currencies, to 14.1 pence from 40.4 pence in the prior year.
Tate & Lyle reported a loss from discontinued operations of GBP 24 billion in fiscal 2009, versus the GBP 81 million gain recorded from discontinued operations in the prior year. The company recorded an exceptional loss of GBP 22 million on disposal of its International Sugar Trading business to New York-based agribusiness and food company, Bunge Ltd. (BG) in July last year.
Excluding the loss from discontinued operations, profit from continuing operations amounted to GBP 94 million, a decline of 11%, or 21% in constant currencies, compared with last year's GBP 106 million. The company had set a target of GBP 254 million- GBP 282 million for the year. Earnings per share from continuing operations decreased to 19.4 pence from 23.6 pence in fiscal 2008.
In January, the company had predicted fiscal 2009 income from continuing operations to be flat with the lower end of market expectations, due to decline in oil prices, lower demand for sweeteners and economic slowdown, hitting its ethanol business.
Adjusted earnings from continuing operations rose to GBP 174 million or 38.0 pence per share from GBP 166 million or 34.6 pence per share last year. Per-share earnings increased by 10%, but declined by 8% in constant currencies.
Tate & Lyle's pre-tax profit decreased 38%, or 47% in constant currencies, to GBP 113 million from GBP 182 million in the previous year, primarily due to changes in the geographical origin of profits, especially lower levels of profits in the US, and the implementation of its internal financing plan.
On an adjusted basis, profit before tax declined 2%, or 18% in constant currencies, to GBP 247 million from GBP 253 million a year earlier. The company had forecast in April that adjusted pre-tax profit would be marginally below its previous forecast of an outturn approximate to that of the prior year.
Adjusted results in fiscal 2009 have been calculated prior to exceptional charges of GBP 119 million and amortization of acquired intangible assets of GBP 15 million. The company noted that the mothballing of its McIntosh, Alabama sucralose facility and shifting the same to its Singapore facility produced an impairment charge of GBP 97 million in fiscal 2009.
As previously reported, within its Food & Industrial Ingredients, Americas division, the company has provided for an exceptional charge of GBP 24 million that relates to its ongoing dispute with a supplier over the ethanol dehydration equipment at its Tennessee and Iowa, plants. Another GBP 9 million in impairment charges has been recognized this year, following its review of its Israeli sugar refining operation.
Annual sales for the year ended March 31, 2009, grew by 24% reaching GBP 3.553 billion from GBP 2.867 billion in the prior year. After excluding the effects of exchange, sales were 8% higher.
The company noted that its results were positively impacted in fiscal 2009 by exchange rate translation, especially due to the strengthening of the US dollar and euro against the pound sterling. However, the strong performance in the first half within Food & Industrial Ingredients, Americas, was offset by the weaker second half with deterioration in industrial starch volumes and ethanol margins.
On a divisional basis, the company reported growth in all divisions. Primary sales jumped 25%, or 10% in constant currencies, to GBP 2.584 billion, with exchange accounting for GBP 290 million of the increase. All divisions, except Food & Industrial Ingredients, Europe, reported growth in primary sales on a constant currency basis.
Value-added sales increased by 21%, or 4% in constant currencies, to GBP 969 million, driven by a full-year's contribution from Hahn together with exchange effects. Adjusted operating profit from its core value-added food ingredients was up 20%, or 3% in constant currencies, to GBP 107 million.
Iain Ferguson, the incumbent chief executive, remarked, "Overall, Tate & Lyle delivered a sound set of results underpinned by continuing growth from core value added food ingredients. Market conditions over the past few months have proved challenging, but our focus on the food and beverage sector, which comprises over 70% of our total sales, gives us a measure of resilience, although not immunity, to the economic downturn." Effective November 15, Ferguson will be succeeded by Javed Ahmed, who is at present the Executive Vice President, Europe, for Reckitt Benckiser Plc (RB.L), as announced by the company on May 19.
Despite its downbeat results, the Board has recommended the payment of a final dividend of 16.1 pence, in line with last year. The dividend will be payable on July 31 to all shareholders on record on July 3. This brings total dividend to 22.9 pence a share, up 1.3% from last year.
The company also announced that, at the July 23 Annual General Meeting, it will seek shareholder approval for issuing scrip dividends, where shareholders can elect to accept newly issued shares in lieu of a cash dividend. If approved, scrip dividends will be offered for the first time at fiscal 2010 year end.
Looking ahead, the company said it has begun fiscal 2010 in line with its expectations, but refrained from giving any outlook for the year, citing the continuing global recession and its uncertain impact on customer demand. But, added that in the near-term, the actual level of customer demand and net corn costs will be key factors in determining performance.
The company also sees its second-half performance being influenced by pricing in the EU sugar operations, following the final institutional price reduction on October 1, 2009, and resulting in improved margins. The company acknowledged that the International Sugar Trading disposal has helped it to reduce its exposure to commodity pricing volatility and working capital requirements.
Further, anticipated cash costs of GBP 60 million related to the McIntosh decision, which will be paid over three years, will be recognized as an exceptional charge at the end of fiscal 2010.
TATE.L is currently trading on the LSE at 290.50 pence, down 1.75 pence, or 0.60%, ranging between 274.00-293.25 pence a share for the day, with a volume of 2.69 million shares. For the 52-wk trading period, shares have been ranging between 225.75 and 468.50 pence a share.
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