Tate & Lyle 18 per cent profit fall

Tate & Lyle has unveiled an 18% fall in underlying profits

Sugar and ingredients group Tate & Lyle has warned over uncertain prospects as it unveiled an 18% fall in underlying profits.

Although current trading is in line with hopes, the firm said a global recession and its impact on demand made the outlook "difficult to predict with confidence".

The firm's focus on more resilient food and drink sectors - accounting for 70% of sales - gave it some immunity to the downturn, it said.

But sales of industrial starches used in papers and packaging were down by between 20% and 25% in the dire economic climate.

The company added that easing corn prices would be critical to prospects after "unprecedented" rises last year.

Corn is used to make ethanol, an alcohol used in fuel.

Following the oil price spike to 147 dollars a barrel, there was a oversupply of ethanol on the market which combined with higher corn prices to hammer margins.

Tate last month mothballed a new US corn processing plant at Fort Dodge, Iowa until conditions improve.

The firm's pre-tax profits adjusted for currency effects were down 18% to £247 million in the year to March 31.

Other factors denting the group included a 66% fall in sugar operating profits to £12 million due to an oversupply in Europe and an "extremely competitive" UK market.