Sucralose sweetener to offset profit fall at Tate & Lyle
sugar refining business have been "substantially reduced"
due to higher costs and oversupplies.
The London-based firm said this morning that business has also been hit by higher energy prices.
It added if these prices prevail into 2007 fiscal year, costs for the firm will rise by a hefty £40 million (€58.6m).
Costs incurred will be recovered by higher product prices, the company said.
Strong sales for the firm's popular sweetener sucralose, growing on the back of rising obesity concerns, are expected to offset the drop in profits at the sugar business, and the impact of proposed cuts in EU sugar subsidies.
Overall, expectations for the full financial year to March 2006 remain unchanged, the firm said today.
In Europe, Tate & Lyle said its ingredients unit had achieved "higher sales volumes with good growth in food ingredients".
But benefits there have been "partially offset" by lower sweetener selling prices and margins following the 2005 calendar year pricing round, as well as higher costs, particularly energy and transport.
"These cost increases will affect second half performance at the unit and will need to be recovered in the 2006 calendar year pricing round," warned the firm.
Strong gains at Tate & Lyle for its sucralose product may have a shelf life with market observers suggesting that the firm's artificial sweetener will face competition from alternatives, resulting from important patent expiry dates in 2006 and 2009.
Tate & Lyle filed the original product sucralose patent in 1976; this recently expired, opening the product up to competitors.
But observers believe a key threat will also come from the expiry of production process patents.
In other words, those which enable the laboratory-designed product to hit the shelves.
Tate & Lyle declined to comment on the 'individual patents', but said to FoodNavigator.com that the firm is "confident in the patents we have".
Earlier this week Tate & Lyle said its Ice Cream Rebalance 004 sweetening system had made the shortlist of eight finalists for the Fi Europe's 'Most Innovative Food Ingredients award': the winner will be announced in November at the FiE show.