Re: Eastern Sugar
Tate & Lyle PLC
Tate & Lyle PLC – 10 October 2006
Tate & Lyle to Exit Eastern Sugar Beet Processing Operations in Central Europe
under EU Restructuring Fund
Tate & Lyle announces that Eastern Sugar ('ES'), its joint venture with Saint
Louis Sucre SA (a subsidiary of Suedzucker AG) in which Tate & Lyle owns 50%,
has today begun the consultation process with employees, beet growers and other
stakeholders with a view to renouncing its quotas in Hungary, Czech Republic and
Slovakia and applying to the restructuring fund for compensation. This action
has been taken following an extensive review of the impact of the new EU Sugar
regime on the ES business.
ES was formed in 1991 and consists of three separate operating companies in
Hungary, Czech Republic and Slovakia with a total of approximately 800
employees. It operates five beet processing plants and holds combined annual
quotas of 280,699 tonnes of sugar. As required under EU legislation, ES will
submit restructuring plans to each Government to secure compensation from the EU
restructuring fund for the closure of all of these plants and the clearance of
the sites.
The ES consultation proposals envisage that the plants will cease processing
beets by the end of February 2007, when all of the current campaigns will have
been completed, although sugar production will continue for several months at
one Czech facility. If the consultation proceeds satisfactorily, a formal
application for restructuring aid will be lodged towards the end of November
2006, with the final decision on the grant of restructuring aid expected at the
end of February 2007.
Stanley Musesengwa, Chief Operating Officer of Tate & Lyle said 'This step is a
direct consequence of the EU Commission's reform of the sugar regime which
provides a compensatory framework to encourage the early surrender of EU sugar
quotas in order to bring EU sugar production, and particularly exports, within
the limits imposed by the World Trade Organisation.
'This is the right time to enter into this consultation as the business will
inevitably face significant further pressure as the progressively negative
impacts of reform of the sugar regime take effect on ES over the next three
years. ES would also remain exposed to the possibility of further quota cuts
being imposed by the EU across the industry in the event that the voluntary
surrender of quota is not successful in obtaining a balance of supply and demand
in the EU sweetener market. The EU Commission is monitoring the working of the
restructuring fund and will deliver a report on progress by the end of 2008.
'ES's achievements in Czech Republic, Hungary and Slovakia have been made
possible by the hard work and ingenuity of our employees and the support of our
farmers and suppliers. We are very mindful of the impact on our workforce and
beet growers, whom we thank for their commitment and dedication over the last
fifteen years. We have achieved an excellent start to our beet campaign this
year in all of the ES locations and we are sure that we can rely on the
continuing support of our employees and suppliers as we all adapt to the
realities of the new EU sugar regime.' FINANCIAL EFFECTS
Tate & Lyle recorded an operating profit of £10 million from its share of ES in
the year ended 31 March 2006, the last full year before the reform of the sugar
regime. Tate & Lyle's share of fixed assets at that date was approximately £19
million.
Subject to the availability of sufficient funds, compensation from the EU
restructuring fund is payable at EUR 730 per tonne of quota surrendered. This
amounts to a gross, pre tax value of £139 million (EUR 205 million) for 100% of
ES's quota. The EU regulations governing surrender require that a proportion of
this amount is allocated to beet growers and machinery contractors. This must be
a minimum of 10% of the total and a number of precedent transactions have been
concluded at or very near that level. The likely final value of compensation
payable to ES cannot be determined with any degree of accuracy until the
consultation process has been concluded with all stakeholders and the final
redundancy, site decommissioning and associated costs are known, likely around
the end of November 2006. A further announcement will be made when appropriate.
Under the regulations, 40% of the compensation will be due to be paid in June
2008 and 60% in February 2009.
rector of Corporate Communications (Press)
Tel: 020 7626 6525
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 65 production facilities in 29 countries, throughout Europe,
the Americas and South East Asia. It employs 7,000 people in its subsidiaries
with a further 4,800 employed in joint ventures. Sales in the year to 31 March
2006 totalled £3.7 billion. Additional information can be found on this website
www.tateandlyle.com.
SPLENDA® is the trademark of McNeil Nutritionals, LLC