EU sugar sector reform

Tate & Lyle PLC
                  

23 June 2005 - Tate & Lyle PLC

EU sugar sector reform - potential impact

Tate & Lyle issues an update following the publication by the Commission of the
European Communities on 22 June 2005 of the 'Proposal for a Council Regulation
on the common organisation of the markets in the sugar sector' together with
other proposals ('the Proposals').

Tate & Lyle considers the current Proposals to be seriously inequitable and will
be seeking a fairer and more satisfactory outcome in the next few months.
However, Tate & Lyle believes that it is in the best interest of all
stakeholders to provide its best estimate of the potential impact on Tate & Lyle
were the Proposals to be enacted in their current form.

As detailed below, the first year in which the full effect is expected to be
felt is the financial year to March 2009 when the potential impact arising
purely from changes to the institutional framework is estimated as a reduction
in the operating results of around £85 million.

However, by the financial year to March 2009 Tate & Lyle's targeted improvement
in operating results from value added products would at least offset the
anticipated adverse effect estimated above for currently proposed changes in the
EU sugar regime. Tate & Lyle has successfully grown the profitability from the
value added component of its business over a period of years, achieving a
contribution of 49% of profit before tax, amortisation and exceptional items
from 18% of sales in the year to 31 March 2005.

Reform of the EU sugar regime is scheduled to take place on 1 July 2006, in the
Tate & Lyle financial year to March 2007, and therefore no impact is expected in
the current financial year to March 2006. The financial years to March 2007 and
March 2008 are expected to be transition years and the potential impact arising
purely from changes to the institutional framework is estimated as a reduction
in the operating results of around £20 million and £60 million, respectively.
The targeted improvement in operating results from value added products by those
years is also expected to at least offset the anticipated adverse effect of
currently proposed changes in the regime.

There remain a number of uncertainties and there are three points that should be
particularly noted:

--  The Proposals remain subject to negotiation and probable further amendment
    at the Council of Ministers, a process that is expected to last until at
    least November 2005. The Proposals will also be presented to the European
    Parliament. Tate & Lyle will be lobbying vigorously with the Commission,
    national governments and authorities during this period to seek a more
    equitable outcome for its businesses and raw sugar suppliers.

--  The potential impacts that are therefore being quantified above exclude the
    possible effect of market forces across the range of industries that are
    likely to be impacted by the Proposals. It is not possible to quantify this
    as the interactions and inter-dependencies among affected industries are
    complex. In particular, an important aspect would be any impact on current
    commercial premia above the reference price for sugar in domestic markets.
    The potential impacts have therefore been quantified purely from changes to
    the institutional framework, being principally changes to sugar and
    isoglucose quotas, the reference price for sugar (previously the
    intervention price), changes to the price for sugar beets and raw cane
    sugar, and the application of two funding mechanisms - the restructuring
    fund (which would be used to compensate beet producers, isoglucose and
    inulin manufacturers that elect to surrender quota) and a production levy
    (primarily to be used to fund export subsidies).

--  The potential impacts exclude the benefit of mitigating actions that Tate &
    Lyle will undertake to respond to actual structural and commercial change.

In comparison to the White Paper of July 2004 ('the White Paper'), the Proposals
in their current form would have a greater impact on Tate & Lyle's businesses,
primarily because of a deeper reduction to the reference price for sugar and the
disproportionate and discriminatory reduction in cane refining margins. The
following areas would be impacted by the Proposals:

--  Food & Industrial Ingredients Europe produces isoglucose and other products
    which compete with and are typically priced at a discount to sugar, where
    the raw material (wheat and corn) prices are not linked to that of sugar.
    The reduction in the sugar price now envisaged in the Proposals would have a
    significant impact on this business. Food & Industrial Ingredients Europe
    would have to contribute to both the restructuring fund and the production
    levy and these costs would also impact upon profitability. Despite the
    partial compensation of increased isoglucose quotas, the most significant
    part of the impacts on Tate & Lyle, quantified above, would be felt in Food
    & Industrial Ingredients Europe. This could be partially mitigated if
    isoglucose quotas were freely transferable across borders;

--  The cane sugar refineries in London and Portugal would suffer reduced
    margins as reductions in sugar selling prices would not be fully offset by
    reductions in input raw sugar prices. Tate & Lyle's major concern with the
    Proposals is that margins for cane refiners would be reduced to a greater
    extent than beet producers such that the competitive imbalance between beet
    and cane producers would be further widened. This is inconsistent with the
    Commission's stated undertaking to ensure that the refining of sugar is
    carried out 'under the fairest possible conditions of competition'. The
    impact of the Proposals on this business and our raw sugar suppliers would
    be significant. Tate & Lyle does, however, welcome the security of raw sugar
    supply through to September 2009 contained in the Proposals, and will be
    seeking to extend this period;

--  Eastern Sugar, the beet joint venture in East and Central Europe, would also
    see reductions in sugar selling prices and in input raw material prices.
    Overall we would expect only a small change in the results from Eastern
    Sugar; and

--  The Proposals address the issue of continuation of supply of raw materials
    at world market prices for the chemical and pharmaceutical industries, and
    so returns at the citric acid plant in Selby would not be expected to be
    impacted materially.

Iain Ferguson, Chief Executive, said, 'We are deeply concerned about the
inequitable nature of the proposals and in particular the disproportionate and
discriminatory reduction in cane refining margins. However, it should be borne
in mind that the publication of these Proposals on 22nd June is an important
step in a process that is expected to continue until at least November this year
and the indications are that the final legislation is highly likely to be
different in some aspects. As always we are dependent upon the Commission and
the Council of Ministers to ensure fair treatment of cane refiners and raw sugar
suppliers and to address the needs of the cereal sweetener sector. You can be
sure that we will be vigorously representing our position with a view to
obtaining a more equitable outcome for our businesses, our raw sugar suppliers
and our people.

'When we have certainty over the final outcome of the regime reform we will be
in a position to begin the process of consulting with the workforce of the
affected businesses and to finalise our plans to mitigate the impact on our
various businesses. We will make a further announcement on developments
following publication of the final proposals, which is expected to occur in
November 2005.

'We are encouraged that the 2008 mid-term review of price and quota levels
envisaged in the White Paper has been removed and that the Proposals provide
that the new arrangements would apply until end September 2015. This would give
an extended period of stability after the Proposals have been finalised.

'These reform proposals underscore the importance of the successful
implementation of our strategy, which remains on track, to grow the value added
component of our business. These include our range of functional starches,
SPLENDA® Sucralose, Bio-3GTM and AquastaTM - none of which will be impacted by
the changes in the sugar regime. It is anticipated that in each of the financial
years to March 2007, 2008 and 2009 the targeted improvement in operating results
from value added products, will at least offset the adverse effects we
anticipate from currently proposed changes to the institutional framework of the
EU sugar regime.'

Please note, a conference call for analysts and investors will be held today at
09.00 (BST).

UK dial-in: [phone]
UK replay: [phone]
Replay passcode: 7804258


An additional conference call for analysts and investors in the US will be held
today at 16.00 (BST), 11.00 (Eastern).

UK dial-in: [phone]
US dial-in: [phone]
UK replay: [phone]
US replay: [phone]
Replay passcode: 1694464


Replays of both these conference calls will be available for seven days until 30
June 2005.
                         n contact Tate & Lyle PLC:

Mark Robinson, Head of Investor Relations
Tel: [phone] or Mobile: [phone]
Email: [e-mail]

Ferne Hudson, Head of Media and Public Relations
Tel: [phone] or Mobile: [phone]


About Tate & Lyle:

Tate & Lyle is a world leading manufacturer of renewable food and industrial
ingredients.

It uses innovative technology to transform corn, wheat and sugar into
value-added ingredients for customers in the food, beverage, pharmaceutical,
cosmetic, paper, packaging and building industries. The Company is a leader in
cereal sweeteners and starches, sugar refining, value added food and industrial
ingredients, and citric acid. Tate & Lyle is the world number-one in industrial
starches and is the sole manufacturer of SPLENDA® Sucralose.

Headquartered in London, Tate & Lyle is listed on the London Stock Exchange
under the symbol TATE.L. In the US its ADRs trade under TATYY. The Company
operates more than 60 production facilities in 28 countries, throughout Europe,
the Americas and South East Asia. It employs 6,700 people in its subsidiaries
with a further 4,500 employed in joint ventures. Sales in the year to 31 March
2005 totalled £3.3 billion. Additional information can be found on
www.tateandlyle.com.

SPLENDA® and the SPLENDA® logo are trademarks of McNeil Nutritionals, LLC