By Michael Carolan
LONDON—Tate & Lyle /zigman2/quotes/205109332/delayed UK:TATE +0.39% PLC said Thursday it will focus its long-term investment on its speciality-food ingredients as part of new Chief Executive Javed Ahmed 's strategy, but stopped short of putting its low-growth bulk-ingredients and sugars businesses up for sale.
The announcement came as the U.K. sugar and food-ingredients producer reported a 77% fall in net profit for the year to March 31 to £15 million ($21.6 million) from £65 million a year earlier, with results hit by a £217 million impairment charge on a mothballed ethanol plant.
"I am announcing today that we are refocusing our strategy, with our speciality food ingredients business being the key focus of investment and long-term growth," said Mr. Ahmed. The core value-added starch business and the group's artificial sweetener Sucralose will make up the bulk of the speciality business, he added. These currently account for around 66% of the group's profit.
Investments in the business will be funded from the company's two remaining divisions, sugars and bulk ingredients—which is predominantly high fructose corn syrup and ethanol.
Mr. Ahmed, who joined Tate & Lyle from Reckitt Benckiser PLC on Oct. 1, said the speciality-food-ingredients market was currently growing at about 5% per year, with around 40% of the market based in emerging markets where Tate & Lyle has little presence. Tate & Lyle is also underrepresented among smaller business customers and private-label food producers. "We believe the potential is large," he said. "There's a huge opportunity to grow the current portfolio."
Tate & Lyle has struggled for years to move away from commodity-based products toward a more value-added position with little success.
Mr. Ahmed conceded that the new strategy bore some similarity to the strategy of his predecessor, Iain Ferguson. "The fundamental focus is on how we're going to execute the strategy," he said.
He said the investment strategy in the past hadn't reflected a focus on value-added products, with two-thirds of the company's spending going to the commodity businesses rather than speciality businesses. "That's going to be realigned," he said.
Mr. Ahmed warned, however, that the process of improving the business would take time. "This will not be a quick fix," he said.
The lack of radical changes, combined with a subdued outlook saw the shares dip 2.1% to 416 pence.
Mr. Ahmed said the company would always look to maximize shareholder value, "but our short-term focus is on executing changes and growing organically."
The first consequence of Mr. Ahmed's new focus has been the decision to permanently mothball a wet corn milling plant in Fort Dodge, Iowa. The closure of the plant resulted in a £217 million exceptional charge in the latest fiscal year.
Investec's Deboo said the Fort Dodge closure confirmed what many had expected, but added that a charge of this magnitude is always likely to grab headlines.
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