Business

Mark Titus, Sunday Business Reporter

Leading corn and sugar refiner, the United Kingdom (UK)-based Tate & Lyle, with which Jamaica recently signed a forward sale-export agreement for sugar worth US$46 million, has reported a dip in annual profits, while reporting it will be placing its food-ingredients business at the forefront of its growth strategy, nudging its planned fuel business expansion and possibly its retail supply of sugar and other processed sweeteners on the back burner. The development, Jamaican government and sugar industry officials suggest, underscores the point that the country pulled off a good deal when it inked the agreement to get the upfront cash for the supply of 100,000 tonnes of raw sugar over two years, replacing a less lucrative deal with the Swiss sugar importer, Eridania, for the 2009-2010 crop.

Tate & Lyle's most recent annual results showed a seven per cent drop in underlying profits to £229 million, while the decision to abandon plans for an ethanol plant in the United States resulted in a bottom-line loss of £61 million, against profits of £113 million.

Operating profits on its sugar rose by 150 per cent to £30 million, reflecting improved margins on its EU sugar business, but the 89-year-old Tate & Lyle, which, through various business arrangements, has been involved in purchase of sugar and corn from North America and the Caribbean for more than a century, warned that profitability this year would be constrained by short-term supply challenges.

No wonder then, the firm was keen to better the Eridania US$15 million deal for the supply of 79,000 tonnes in the current crop year now closing. Under the Tate & Lyle agreement, the Jamaican government-owned Sugar Company of Jamaica (SCJ) Holdings, the vehicle which manages the state-owned entities, will receive US$46 million over two years in exchange for the sugar, US$26 million for the 2010 crop year, and US$20 million the following year.

JA IN BEST POSITION

As part of the arrangement, which guarantees the supply of a total 100,000 tonnes to Tate & Lyle's refineries for two years, approximately 40,000 tonnes of the sweetener must be delivered to Tate & Lyle by March 31, 2011.

Recent developments concerning the company have fuelled speculation in the international trade press about Tate & Lyle's long-term future presence in sugar.

"This has nothing to do with us," chief executive of SCJ Holdings, Aubyn Hill, told Sunday Business, of the British firm's declining profitability and media reports.

He said that in a worst-case scenario, Jamaica is in the best position.

"We have already got the first drawdown (of €8 million) and in fact, will be getting the second portion in a couple days."

According to Hill, the possibility of Tate & Lyle's long-term exit from sugar never came up during the negotiation. With a contract already signed, he said, all obligations will have to be met by both parties.

While international commentators have described the deal with Jamaica as a desperate scramble for supply on the part of the refiner, Christopher Tufton, the Jamaica agriculture minister, said in the circumstances, Jamaica got a sweet deal.

"Any such development won't affect us," he said.

"We have already got some of the money and our obligation is to supply them with sugar."

Tate & Lyle, though head-quartered in the UK, is a global company currently operating more than 45 production facilities mainly in the Americas, Europe and South East Asia.

mark.titus@gleanerjm.com