Tate + Lyle: Sees Pretax Profit Below Guidance

London / UK. (tlp) Tate + Lyle PLC issued its second profits warning in three months but eased concerns over its debts by revealing it had cut borrowings much faster than had been expected. In a «Trading Statement On Entering Closed Period» the world-leading renewable food and industrial ingredients company issued the following update for the year ended 31 March ahead of the announcement of the full year results on 28 May:

Trading Statement On Entering Closed Period – Summary

Profit before tax for the year to 31 March 2009 is expected to be marginally below our previous guidance of an outturn approximate to that of the prior year. However the mix of profits has reduced the tax rate so earnings per share are expected to be broadly in line with market expectations.

Solid progress has been made on debt reduction. Net debt at 31 March 2009 was less than 1,25 billion GBP, around 300 million GBP less than at 31 December 2008, and more than 150 million GBP lower than net debt at 31 March 2008 once it has been adjusted for the effects of movements in exchange rates.

Trading Performance For The Quarter Ended 31 March 2009

Results at Food + Industrial Ingredients, Americas improved over the previous quarter as orders from most food and beverage customers began to return towards more normal levels. However, demand for sweeteners and industrial starches remained weak. Ethanol margins and volumes continued to be under severe pressure. As anticipated, we completed a sale of land in Mexico and have taken three million GBP to profit.

Food + Industrial Ingredients, Europe continued to perform well. The Single Ingredients business benefited from lower net corn costs, despite experiencing pressure on industrial starch volumes. The Food Systems business continued to trade in line with our expectations. Following the closure of the Greek factory, as anticipated we have taken four million GBP Restructuring Aid to profit.

In the Sugars division, the UK retail market remained extremely competitive. The company continues to be encouraged by the significant progress of the EU Sugar Regime reforms, which have now achieved the majority of the agreed target reduction in production quotas. However, the profit performance of the division until the next institutional price change on 01 October 2009 is expected to be modest.

Sucralose volumes and profits increased over the previous quarter although they were lower than a strong quarter in the comparative prior year period. The company continues to be encouraged by the considerable progress it is making in improving manufacturing yields as it implements process developments identified at its pilot plant. The International Trade Commission (ITC) has further postponed the publication of its binding decision in relation to litigation against a number of Chinese manufacturers and distributors concerning alleged infringement of certain of its patents.

Exchange rates have been relatively stable in the quarter, and continued to benefit the translation of profits earned in foreign currencies when compared with the prior year.

Fort Dodge

Construction activities at the Fort Dodge, Iowa (U.S.) plant have been progressing satisfactorily and are nearly complete. However, given the continuing short term severe pressure on ethanol margins and volumes, Tate + Lyle has postponed final completion of the construction and start-up of the plant until market conditions improve. The situation will be kept under review. The company continues to believe that the Renewable Fuels Standard underpins the long term viability of ethanol.

Taxation

The effective tax rate for the continuing operations for the year to 31 March 2009 is now expected to fall below the expectations of 30,4 percent as stated at the half-year results and to be around 28 percent. This reduction is due to change in the geographic mix of profits, in particular the higher proportion of non-US earnings.

Exceptional Items

During March Tate + Lyle received the first tranche of a cash settlement in respect of a dispute with the Mexican government over a tax on soft drinks containing HFCS between 2002 and 2006 and the company expects to receive the second payment in the coming months. Its share of the total settlement is ten million GBP and this will be treated as an exceptional profit. At Food + Industrial Ingredients, Americas, the company is in dispute with a supplier over the performance and suitability of certain equipment it has supplied. As a prudent measure, Tate + Lyle expects to take a 24 million GBP exceptional write-down relating to this issue in the year to 31 March 2009.

Disposal Of International Sugar Trading

The disposal of the international sugar trading business to Bunge was completed as scheduled on 31 March 2009. At completion, Bunge took over the remaining working capital of the disposed business, resulting in a total cash inflow of 81 million USD (56 million GBP), subject to closing adjustments.

Debt

Management remains focused on strong cash management and has taken a significant number of actions to reduce costs, optimise working capital and reduce capital expenditure.

Tate + Lyle indicated in its Interim Management Statement on in January 2009 that the company expected net debt at 31 March 2009 to be similar to the net debt at 31 March 2008 once it had been adjusted for movements in exchange rates. Solid progress has been made in the last quarter and net debt at 31 March 2009 was less than 1,25 billion GBP. This is around 300 million GBP less than at 31 December 2008, and more than 150 million GBP lower than net debt at 31 March 2008 once it has been adjusted for the effects of movements in exchange rates.

Undrawn committed bank facilities were 752 million USD (526 million GBP) at 31 March 2009 and, in addition, the Group´s cash resources were more than 350 million GBP. Average gross debt maturity at 31 March 2009 was 4,9 years and the first major refinancing will be the 300 million USD 144A bond maturing in June 2011.

Comment

Chief Executive Ian Ferguson: «In the face of the economic downturn and its uncertain impact on customer demand, we continue to focus on matters under our control, in particular through the active management of our cost base and by maximising cash flow. Through these actions we have made solid progress in reducing our debt which at the end of the financial year was lower than our previous expectations. We remain a well-financed business and confident of our ability to deliver positive cash flows».