Tate & Lyle has formed a joint venture to build and operate a sugar plant in Israel, a move that will partially replace traditional sugar imports from the European Union.
The move anticipates that imports will be restricted following European sugar regime reform and the WTO ruling on exports.
"This investment is another example of how we are reacting positively to changes to the European sugar regime," said Stanley Musesengwa, Tate & Lyle chief operating officer.
"It will enable us to continue serving our customers effectively by replacing our existing European Union exports to Israel."
Tate & Lyle will acquire 65 per cent equity in the new company, the net assets of which will be £ 8.1m. The company said that the venture company will supply sugars to a range of users in the Israeli market.
EU sugar reforms, which come into effect on 1 July 2006, feature a number of concessions designed to give European sugar producers a viable future. First there was the climb-down from the original proposed 39 per cent price cut to a figure of 36 per cent, and most significantly for sugar producers, there was agreement the sector would be compensated for, on average, 64.2 per cent of this price cut.
In addition, the EC's proposal for a one-year cut of 2.5 million tonnes (13.6 per cent) in sugar, isoglucose and inulin syrup production has been accepted.
The Commission has consistently argued that such a one-off reduction is necessary to ensure that the newly-reformed sugar regime gets underway without heavy surpluses undermining market balance.
Tate & Lyle therefore believes it is putting in place the necessary measures to ensure that its sugar business is not severely affected by the reforms.
The new Israeli plant, which forms a cornerstone of this strategy, will be designed by Tate & Lyle Process Technology, Tate & Lyles specialist engineering division.
"Tate & Lyle has been exporting white sugar from its London-based refinery to Israel for over twenty-years and has built a reputation for high sugar quality, prompt deliveries and good customer service," said Musesengwa.