Tate & Lyle and Italian sugar producer Eridania Sadam have formed a joint venture for the marketing and sales of all sugar products to the Italian market, seen as an important step in developing new sugar markets following EU sugar reform.
Tate & Lyle does have a history of supplying the Italian market, where Eridania, a sugar beet manufacturer, is the market leader. But as Eridania recently surrendered 50 per cent of its sugar quota, Tate & Lyle's input into the JV is required to satisfy Italian demand.
Tate & Lyle will hold 35 per cent of the JV and is making an investment of £2m (€2.8m). Eridania, for its part, will hold the remaining 65 per cent. The commercial operation of the JV will commence as of April 1.
Massimo Maccaferri, president of Eridania Sadam and Eridania Tate & Lyle said: "Eridania Tate & Lyle is a joint venture between two important European sugar producers with different competences, and will give a new boost in terms of competitiveness to the Italian sugar market.
"Eridania Tate & Lyle will plan a new logistic/distribution network and extend its product portfolio range, adding new value to the sugar category."
EU sugar policy reforms, which were formally adopted by the EU Council in February earlier this year, were designed to close unprofitable sugar operations in Europe.
Italy was amongst the countries to be particularly affected in 2006/7, with the closure of 13 of its 19 sugar factories (5 of Eridania's, 3 of SFIR facilities, 4 of Italia Zuccheri facilities and 1 COPRO B facility).
The Italian sugar beet area was forecast to fall by 64 per cent in 2006/07, to 90,000 hectares. Over the longer term, as sugar stocks fall, Italian imports were predicted to increase - particularly from the Balkans.
The news of the joint venture comes as Tate & Lyle issued a positive trading update, saying that performance since its January 23 update has been "in line with market expectations and has continued to comfortably exceed the corresponding period of the prior year".
The firm will announce its preliminary results for the year ended March 31 on May 23. It has indicated that sales and profits of its sucralose product Splenda are expected to only modestly exceed the prior year.
Under the financial results, Eastern Sugar, which renounced its sugar quota in October last year, will be treated as a discontinued business. Tate & Lyle's share of net cash proceeds of approximately £51m will be payable in two instalments in the March 2009 financial year; the net exceptional gain is estimated at £15m.
The planned disposal of Tate & Lyle Canada, announced in February, is still subject to regulatory approval. Consideration of a full or partial disposal of Food & Industrial Ingredients, Europe, is on-going, and an update is expected in the next few weeks.