Anticipating Tate & Lyle’s coming trading update
City Index April 1, 2014 10:20 PM
<p>This Thursday (3rd April), Tate & Lyle is set to report on trading for its year ended March and it’s likely to garner much focus, […]</p>
This Thursday (3rd April), Tate & Lyle is set to report on trading for its year ended March and it’s likely to garner much focus, given the company’s dismal most recent update.
In February, the company stated that its third quarter results were lower-than-expected and warned that full-year results were likely to be broadly flat.
That was, according to the company, as a result of increased competition from China, which has driven down prices of sucralose (the core ingredient for its sweetener offering, Splenda).
Additionally, weakness in developed markets (which is core) offset relatively good performance in emerging markets.
Expectations are already particularly low
So, focus on Thursday is likely to be on the current situation with the sweetener maker’s sucralose palaver.
Tate & Lyle has already stated that it expects sucralose prices to continue to decline (it reckons that by 2015, prices will be 15% lower than current levels). Indeed, expectations as to whether that situation would improve soon have been carefully managed.
Meanwhile, further disappointing news from the company is possible. After all, Tate & Lyle has no control over the changing competitive landscape on that part of its business – as well as any potential further adverse impacts.
And the company’s shares have certainly paid the price. Tate & Lyle’s shares felt the heat of its update in February – closing around 6% down on the day.
Over the last year alone, the company has seen around 24% wiped off its stock. That decline caused the recent relegation of Tate & Lyle from the FTSE 100 to the FTSE 250.
But the company does have good long term prospects
Aside from the fact that Tate & Lyle’s other products seem to be faring well (with the company expecting those to grow), it’s working on a new product line-up which ought to help combat deterioration brought on by low sucralose prices.
And let’s not forget that Tate & Lyle has the potential to broaden further via acquisitions – like its swoop last month on China-based, Winway Biotechnology, for an undisclosed sum.
Its debt currently seems manageable. As of September 2013, its net debt to earnings before interest, tax, depreciation and amortisation stood at 0.8x, which is low by historical standards.
All that said, near-term challenges are likely set continue to drag on the company for now.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.