Tate shares sweeten after dispute

Unexpectedly high demand for no-calorie sweeteners and a fall in crop prices led British sugar and starch group Tate & Lyle to raise expectations for profits today.

Tate said all its major businesses met or exceeded plans in the first quarter and profits before exceptionals for the year were likely to be “somewhat higher” than envisaged at the start of June.

Investors also cheered an end to a long-running legal dispute in the US over alleged violations of anti-trust laws by Tate between 1988 and 1995.

Shares improved 5% as the group agreed to pay damages of $100m (€83m) to settle the class action involving its Staley unit across the Atlantic.

Tate, which has plants in East London and Selby, North Yorkshire, has struggled with the highest wheat prices since 1996 which put pressure on its European food starch arm Amylum.

But these fell by 25% over the past quarter at a time when sales of no-calorie sweetener sucralose, which is used in more than 3,500 branded products worldwide, also surged.

Sucralose is included in new diet drinks launched by Coca-Cola and Pepsi as well as sachets common on table tops in the US, giving the company an avenue into the growing market for healthier foods.

A further £24m (€36m) will be invested at its plant in Alabama to more than double the output of sucralose by April 2006. This is on top of expansion plans outlined earlier this year.

Tate today continued to deny any wrongdoing in the antitrust legal case in the US, but said it had settled the action “with great reluctance” to avoid the uncertainty of a jury trial.

City stockbrokers Citigroup Smith Barney said the litigation settlement was higher than expected, but it was mitigated by the positive outlook statement and news of a £22m (€33m) gain from an earlier disposal.

As a result, Tate & Lyle expects to record an exceptional loss of only £11m (€16.5m), which Citigroup said offered scope to lift its estimates for earnings for the year to March.