Tate & Lyle reports sweeter profits

Sugar and starch group Tate & Lyle delivered a profits boost today as it braced itself for a tougher few months.

The London-based business has already admitted that the impact of EU sugar reform and higher cereal prices in Europe will mean that profits growth will be lower in the second half of its financial year.

In the first six months of the year – covering the period to September 30 - Tate said pre-tax profits rose 25% to £169m (€252m).

It benefited from an “excellent performance” at its American food and industrial ingredients division, with profits up £32m (€48m) to £87m (€130m). Tate has been concentrating on “value added business” which includes ingredients for food such as soups, sauces and dressings.

Underlying profits were flat at the operation’s European counterpart, as higher selling prices were offset by the impact of higher cereal prices and energy costs.

Oversupply and the changes to the EU sugar regime, which came effective from July, mean that profits from the division will be “significantly” lower for the second half of the financial year.

Tate added that it hoped to mitigate cost increases through higher selling prices in 2007 pricing reviews.

While EU reforms are expected to consign sugar mountains to history and allow producers in the world’s poorest countries to prosper, the aftermath of last November’s announcement by the EU meant the European market was flooded with cut-price produce as companies looked to dispose of surpluses.