Tate & Lyle: Starch and Sugar Giant Shows Promise in Q1

Is Tate & Lyle on the path to recovery?

According to the recent Interim Management Statement for Q1 by Tate & Lyle, one of the world's largest sugar and starch refiners, pretax profits are ahead of expectations.

The statement pertains to Q1 fiscal dates, April 1, 2009, through June 30, 2009.

The company credits cost cutting strategies and "stable" demand from customers for food and beverage ingredients for the success.

With regards to food ingredients, T&L reports that sucralose traded better than expected.

Recall that earlier this year that T&L shut down their sucralose plant in Alabama to produce all sucralose solely in Singapore. They reasoned that the technological advantages of the Singapore site yielded faster production of sucralose with cost savings.

Seems to be working out if we use the current results as a guage. T&L has seen a six percent increase in sucralose sales volumes versus this time last year.

Demand for industrial starch, on the other hand, has been weak. Based on T&L's catalog of products and their investment strategy, this won't be taken lightly.

Still, T&L's Food & Industrial Ingredients, Europe division continues to reap the benefits of lower corn costs.

The company also anticipates "satisfactory" performance for Q2, however they don't expect to see the metrics parallel those of Q2 in 2008 when commodity prices saw growth.

If we look at the numbers as a whole, there is hope for recovery. T&L shows a net debt reduction of $268.8 million (£163 million), from $2,030 million (£1,231 million) on March 31, to $1,761 million (£1,068 million) on June 30, of this year, which is encouraging.

Shares (TATE.L) were up 2.21% today, closing at £346.50 from £339.00.