The CEO of Tate & Lyle discusses potentially dividing the corporation into two companies.
LONDON: On April 25, Tate & Lyle PLC, a London-based corporation, announced that it was looking into the possibility of splitting its Food & Beverage Solutions and Primary Products businesses. This announcement raised questions about the company’s future. Tate & Lyle CEO Nick Hampton provided more information on an earnings call on May 27 to go over fiscal-year results.
He stated that talks are still going on with possible partners for Primary Products.
“And there’s no guarantee that the deal will close,” he declared. “More announcements will be made as needed.”
Mr. Hampton continued, “If completed, the transaction would create two distinct businesses.” One company, Tate & Lyle, would lead the world in mouthfeel, fortification, and sweetening. The other company is called Primary Products, and it has a new investor. It is a pioneer in plant-based products for the industrial and food markets.
Regarding a possible new investor, Mr. Hampton stated, “It’s really important for us that we find somebody who believes in the future growth potential of that business and is prepared to invest alongside us to execute the strategy that we think will drive accelerated growth.”
Tate & Lyle incurred £19 million ($27 million) in extraordinary expenditures for work related to the proposed acquisition during the fiscal year that ended on March 31st, primarily for external advisers.
Mr. Hampton remarked, “It’s obviously very difficult for us to comment too much on the transaction at this point.” “We’ve done a lot of preparatory work to understand the practicalities of separation, including looking at how the plants would operate under separate ownership and looking at the kind of long-term supply agreements that would satisfy both businesses,” the spokesperson said. “Discussions are ongoing with interesting parties, and we’ll update the market in more detail.”
The Food and Beverage Solutions division of Tate & Lyle has benefited from recent purchases. In November of last year, Tate & Lyle purchased the outstanding majority stake in Sweet Green Fields, a multinational stevia company.
“This acquisition brings a fully integrated stevia supply chain, including dedicated production and lab facility in China, as well as leaf sourcing and established agricultural programs,” Mr. Hampton stated. Since stevia is one of the low-calorie sweeteners with the quickest rate of growth, especially in beverages, dairy products, and snacks, it further improves our sweetener platform.
In February of this year, Tate & Lyle successfully acquired an 85% stake in Thailand’s specialist tapioca food starch company, Chaodee Modified Starch Co. Ltd.
According to Mr. Hampton, “this strengthens our texturants platform, adds new tapioca capabilities and raw material sourcing expertise, and expands our customer offering in categories like dairy, bakery, and noodles.” Additionally, it creates a tapioca-specific facility in Asia, which we plan to fund in order to greatly expand capacity. Both acquisitions increase our solutions offering and aid in our efforts to diversify away from corn. We are happy to have the two companies join Tate & Lyle, and the integration process is going smoothly for them.
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According to Mr. Hampton, Food and Beverage Solutions is looking at ways to increase the capacity of allulose, a sweetener that is used to lower the amount of sugar in food and beverage products.
“In the markets where allulose has received regulatory approval, we have seen an incredibly strong pickup in interest in the product,” he stated. That is truly beneficial. The process of developing allulose belief has been fairly slow. That is really taking off in the foreseeable future, and I believe that reflects some of the trends that are occurring in the world at large. We’re working with a lot more clients on it as a result, and it’s becoming more crucial to our company.
Tate & Lyle’s overall operating profit for the fiscal year dropped to £287 million ($407 million) from £296 million the year before, a 3% decline. At £339 million, adjusted operational profit increased by 2%. From £2.88 billion to £2.81 billion ($3.98 billion), revenue decreased by 3%.
Adjusted operating profit for Food and Beverage Solutions increased by 10% to £177 million from £162 million in the prior fiscal year. At £970 million, revenue increased by 6%. Reduced demand for ingredients used in food and drink consumed outside the home was more than compensated by stronger consumer demand for components used in packaged and shelf-stable meals consumed at home. In constant currency, revenue from new products—those introduced within the last seven years—rose by 21% to £133 million, or 14% of total revenue.
Primary Products were negatively impacted by COVID-19. To £158 million, adjusted operating profit decreased by 1%. Constant currency sales fell by 2% to £1.69 billion, with lower volume offset by better mix and greater income from commodities where co-product prices were higher. Sweetener volume was 7% lower in Primary Products, indicating lower consumption outside the home.