Tate & Lyle Profit Rises On Restructuring
Smiles all round as Tate Lyle as the company known for products like Golden Syrup has just reported a staggering turnaround in its fortunes. Having to recover from a crash in recent years, sending its share price tumbling, the company has just reported a fivefold increase in profits.
The group was forced into a restructure after disruption to its supply chain, a factory closure and a dramatic fall in the price of sucralose left the company reeling and having to announce a string of profit warnings. Its chief executive, Javed Ahmed, said having completed a difficult major restructure it was, following the two years of financial difficulty in 2014 and 2015, now in a good place to go forward in the coming year. Transformation, he said, was never going to be easy because of the amount of restructuring that would be needed.
As a result of the changes made during the last 12 to 15 months, the company is now stronger both operationally and strategically. The transformation plan included dramatically reducing the production costs of products such as Splenda, and investing in specialist products with higher profit margins appears to have paid dividends.
The company, originally founded in London in 1921, saw its best performance from its speciality food ingredients arm, which produces products such as Splenda. Pre-tax profits grew from £25m to £126m in the 12 months to April 30 on sales that rose 1 percent to £2.36bn. Future plans include focussing on speciality foods, where margins are greatest, and reducing its dependence on a small number of markets and products. Total sales were also up by 4% for the year.
The results also follow the company’s restructure to its bulk ingredient division, which manufactures ingredients such as high-fructose corn syrup. The company has also substantially reduced its European presence by pulling out of operations in Bulgaria, Hungary and Turkey. In March, the company closed a site in Singapore and has streamlined its operation in the United States to a single facility, thereby decreasing overall operational costs.
The company can now look to the future with renewed confidence. Its CEO commented that he had always believed that the company would be able to survive the trauma and bounce back. It is, he said, now operating in long-term attractive markets but with a clear strategy and a strong business model. What sets this workforce apart has been the resilience, deep loyalty and the ability to cope with significant change – all attributes food and beverage headhunters frequently look for. The plan for Tate and Lyle is focussing on consistency of execution.
All the changes come as part of the company’s “2020 Ambition” outlined in November 2015. The company aims to generate $200m of sales from new products by 2020 as well as increasing the proportion of profits to 70% from its speciality range of foods. The company also plans to achieve 30% profit from the sale of its speciality food ingredients in Asia Pacific and Latin America markets.