Sweeteners and food products group Tate & Lyle said that third-quarter profits, while lower than they were last year, were in line with its expectations.

However, the company did warn about the elevated levels of volatile corn prices and the impact of the hot summer last year.

The company said that adjusted profit before tax was down year-on-year in the three months to December 31st due to the step change in fixed costs associated with its "business transformation initiatives", which include the restart of the McIntosh facility and the development of the Commerical and Food Innovation Centre in Chicago.

The press release on Friday said: "The group has made a solid start to the final quarter. Despite facing a number of headwinds and before the impact of exchange rate movements, we expect to make modest progress this financial year."

In Speciality Ingredients, the division which makes sweeteners such as SPLENDA sucralose and dietary fibre product PROMITOR, Tate said that it has achieved good sales growth with volume growth outperforming the wider market. Full-year operating profit in this division is expected to be flat.

The Bulk Ingredients division, which manufactures products such as high-fructose corn syrup and acidulates, has seen "solid" demand in North America for liquid sweeteners.

Corn prices

Tate revealed that corn supplies in the US and Europe remained tight over the quarter and prices are expected to remain high with some volatility over the coming months until the new harvest.

The firm added that corn during the third quarter was affected by aflatoxin, a fungus caused by the unusually hot and dry conditions last summer, but it has taken a number of steps to mitigate the impact.

The statement said: "We expect a further small increase in net corn costs in the final quarter of the financial year and estimate the impact of aflatoxin will be to reduce operating profit by around £7.0m for the full year. We will continue to take action to manage the risks posed by aflatoxin during the first half of next financial year up to the new harvest."

"Cautious in tone"

Analyst Martin Deboo from Investec said that Tate's third-quarter statement is "cautious in tone" and has a "downgrading influence on numbers".

He highlighted the company's "modest progress" this year, saying that Tate had trimmed its earlier guidance from "progress".

He said: "We are likely to modestly downgrade our FY13E numbers and consequently place our target price under review, but we expect to maintain our 'hold' recommendation."

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