Tate and Lyle's sugar-free future still hangs in the balance

It's shocking, isn't it, how casually some companies trade their heritage? Yes, it is, and the declines of ICI and GEC were disasters caused in part by deal-hungry managers who forgot what made their companies great. So Tate & Lyle's new chief executive, Javed Ahmed, needed to provide a very good explanation today for the decision to get out of sugar refining . He passed – just. His language was suspiciously wishy-washy ("focus, fix and grow" is jargon) but the logic of selling Tate's EU sugar operations is robust. The reality is that Tate & Lyle has been undone by the EU quota system. It has failed to make decent profits in refining for years and now finds itself struggling to secure supplies of raw cane sugar. The company faced a choice between acquiring market muscle via acquisitions or accepting a decent offer. Shareholders would not support the former route. So it boiled down to whether £211m was an acceptable price. Tate's refining businesses had gross assets of £374m; you can understand why the buyer, American Sugar Refining, is keen. For Tate's point of view, it gets a respectable sum to recycle into its bigger (and much more successful) food ingredients operations. Over time, the clouds might have cleared from the refining operations and far greater amounts of cash might have been generated. On balance, though, the certain risks outweighed the uncertain rewards; a sale is reasonable. Tate's employees in east London can console themselves that job prospects might be brighter under the ownership of a committed sugar refiner. Tate's shareholders shouldn't celebrate just yet, however. Ahmed has to complete the second part of his disposal programme – selling the rest of the sugar division, specifically the molasses operation and the sugar refinery in Vietnam. If he can clear that hurdle, Tate's sugar-free future starts to make sense. After all, Rolls-Royce, the aerospace engines group, hasn't done badly since the cars departed.