T&L turns to new pastures for profits

TATE & LYLE'S PR man was just winding down for the Christmas break at the head office in London's Sugar Quay when the phone rang.

The call went something like: 'ITN here. One of your ships has just been boarded by Scotland Yard officers. They've had a tip-off that it's heading for London full of terrorist materials. What have you got to say about it?'

The MV Nisha had picked up a cargo of raw sugar from Mauritius and was heading for Tate & Lyle's Thames refinery at Silvertown in East London. Police intercepted it in the English Channel and for days the nation waited on tenterhooks during their thankfully fruitless fingertip search.

Chris Fox's daily updates to the media during that Christmas period made a stark change from his normal role in recent years of explaining to the public and investors how one of Britain's oldest manufacturers was transforming itself into a hi-tech starch and sweeteners group.

Still best-known for slogans such as the famous 'Out of the strong came forth sweetness' on Lyle's Golden Syrup tins, the company these days advertises itself as: 'World leader in carbohydrate ingredients.'

That may not be the catchiest line ever, but it is meant to convey Tate & Lyle's increasingly wide spread of products beyond the straightforward branded foods that housewives have been buying from the company since the Victorian era.

Tate & Lyle is now just as likely to be behind the product that makes your face cream creamy or your toothpaste soft as it is to be in your sugar bowl.

It is even working with DuPont to develop polymers that are derived from maize to be spun into fabrics, hopefully one day cashing in on the need for environmentally-friendly materials.

Under the stewardship of Iowa-born chief executive Larry Pillard, Tate & Lyle now aims to make some 50% of pre-tax profits from higher-margin products such as these, plus the famous Lyle's Golden Syrup and Tate & Lyle Sugar brands.

But the job of Pillard and his team to convince investors of the company's new guise has not been an easy one. Investors remember the gloomy recent years that culminated in a £228m loss in the year to March 2001.

The decline was down to a disastrous move into the US sugar market during the 1980s. Soaring energy prices and a huge oversupply in the crucial North American sugar market were the main cause of the profits slide.

Analysts say that at best, the division only came up with a few erratic good years over the previous decade.

In the year to March 2001, the US sugar businesses lost £20m after a £15m loss the previous year. Pillard declared the operations were up for sale, taking a £338m write-off. He has been mostly successful, selling off both the disastrous Domino and woeful Western businesses in the past 12 months.

Now he has a strategy of using the group's core European and Canadian cash-generating businesses to support the bigger growth potential of the value-added operations at Amylum and Staley in Europe and the US.

These have applications in industries ranging from foods to paper and packaging and pharmaceuticals. In addition, annual savings of £50m should be delivered by 2004 from Amylum.

Analysts predict there will be an upswing in profits for the near future, but warn that, for all the talk of hi-tech products, the group remains highly exposed to the vagaries of the commodities markets. Affected by capacity and politics, such factors are largely outside Tate & Lyle's control.

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