Tate & Lyle, PLC has expanded its role as a global supplier of specialty ingredients. Now, the company is seeking better ways to keep its global customers supplied.
Costs related to operational and supply chain disruption in the six-month period ended Sept. 30 were £31 million ($49 million), the company said Nov. 6. Tate & Lyle anticipates further supply chain-related costs of about £10 million in the second half of the fiscal year.
Operating profit fell 31% to £117 million ($185 million) in the first half of the fiscal year, said Javed Ahmed, chief executive officer, in a Nov. 6 earnings conference call.
In the six months ended Sept. 30, Tate & Lyle recorded profit of £68 million ($108 million), down from £130 million in the same time period of the previous year, and sales of £1,200 million ($1,901 million), down from £1,516 million.
“As stated in our trading update on Sept. 23, the group’s results were significantly held back by operational and supply chain disruption and an increasingly competitive market for Splenda sucralose,” he said.
The proportion of specialty food ingredients’ sales in emerging markets has nearly doubled in the past four financial years, Ahmed said.
“With an SFI supply chain, as you globalize the business — more SKUs, more customers, more countries, more warehouses — it gets very complex,” he said.
Nick Hampton, chief financial officer, is leading a review of Tate & Lyle’s planning and supply chain processes.
“There’s no doubt we’ve got to reassess the manufacturing and supply chain capability we’ve got in the network given what we experienced,” he said in the Nov. 6 call. “I think that’s really a combination of two things: what’s the manufacturing flexibility and head room we need? And frankly, where do we put inventory in a global business model?”
The company has committed to £100 million in incremental capital spending, which will support specialty food ingredients growth, he said.
“The shame of it is, unfortunately, it doesn’t come on stream until next year,” Hampton said. “In hindsight, it would have been very easy to say it would have been nice to have today. So in 12 months’ time, as that capacity comes on stream, we’re in a better place based on the £100 million we’ve already committed to.
“It may be that the supply chain study concludes that we need to put inventory in different places around the world as well, but the facts will come out, and we’ll make those judgments as we go.”
Tate & Lyle will seek to develop a more integrated demand, supply and financial forecasting capability, he said. The company will reassess manufacturing and supply chain network flexibility and wants to ensure the company has appropriate manufacturing capacity headroom and inventory capabilities across the world. An upgraded information technology platform in Europe, North America and Singapore already is assisting the global supply chain.
Supply chain problems in the first half were the result of bad winter weather in the U.S. and an industrial accident at a Splenda sucralose facility in Singapore that led to an unplanned extended shutdown.
Within the company’s specialty food ingredients’ segment in the six-month period, adjusted operating profit was £66 million, down from £112 million, and adjusted sales were £446 million, down from £519 million. Lower Splenda sucralose pricing had a negative impact of £18 million on profit. For the full financial year, Tate & Lyle expects the average level of pricing for Splenda sucralose to be about 25% lower than the previous year.
“While Splenda sucralose remains a valuable part of our sweetener platform, it now represents approximately 10% of specialty food ingredients’ profit and is no longer the key driver of this division’s profitability.” Mr. Ahmed said.
Source: World Grain