Tate & Lyle has reported an 11 per cent drop in pre-tax profits to £244m (c €307.3m) for full year 2008, a result of troubles in international sugar trading and inclement exchange rates.
The British ingredients and sugar group has been performing a strategic shift with more emphasis on value-added ingredients, but on a low-cost commodity basis. It has also been working through a four-year capital investment programme, which is nearing completion.
Group chief executive Iain Ferguson said: "We expected 2008 to be a year of transition and that prove to be the case."
Sales from continuing operations were £3.424bn (€4.325bn), up from £3.225bn (€4.062bn) in 2008.
But exchange translation resulted in a £11m (€13.9m) dent in profits. And in international sugar, it suffered an operating loss of £9m (€11.3m), compared to £22m (€27.7m) profit last year.
This has been attributed to hedging of market-to-market charges for freight costs in the first half of the year, as well as lower trading profits.
Ferguson said Tate & Lyle has "taken the necessary actions to restructure its activities and re-focus management priorities to ensure that this year's result is not repeated."
During the 2008 financial year Tate & Lyle sold its Redpath and Occidente business, and five of its European starch plants.
In so doing, it removed itself from the risky Canadian and Mexican sugar markets, as well as wheat in Europe - markets where it could not "hedge to an acceptable level [its] exposure to raw material and commodity pricing volatility and regulation".
On the up side, Ferguson drew attention to the profitability of the rest of the group's operations, "demonstrating considerable resilience in the face of both the unprecedented increase in global commodity prices and the impact of the EU sugar regime reform".
Core value-added food ingredients actually reported a 13 per cent increase in profits for the year to £89m (€112m). This has been an area of investment, with the acquisition of an 80 per cent share in specialty ingredients firm GC Hahn in June 2007, for instance, for £78m (€116m).
Splenda Sucalose sales also increase 6 per cent. This result followed grim predictions in February that sucralose profits would be hit by exceptional costs.
Tate & Lyle said that the Sucralose business is now fully invested. Although the costs of the new Singapore facility, opened in April 2007, will restrict profit growth in the first half of the 2009 financial year, over the full 12 months sales growth is expected to offset these costs and lead to improved profits overall.
As for the new EU sugar regime, the big players are starting to see a rosier outlook in the horizon as all but 6 per cent of the quota production capacity earmarked for reduction was been eliminated.
It remains to absorb surplus refined sugar costs over the first half of 2008, and Tate & Lyle expects "the market to remain very difficult and challenging" during this time.
"However we look forward to market equilibrium being re-established during the second half of our financial year which, together with the actions we have taken on international sugar trading, should enable a progressive restoration of margins in the sugars business," it said.