Tate & Lyle is trading lower

The company will announce its second-quarter results on 8 October, and a string of profit warnings in the past two years has left a sour taste in investor’s mouths.

Source: Bloomberg

In May 2015, Tate & Lyle announced an 82% fall in annual profits, and it wasn’t out of the blue as the firm has issued several profit warnings in recent history. The bulk ingredients business and the Splenda sucralose operation were the main sources of Tate & Lyles poor performance throughout the year. This has resulted in reorganising the Splenda sucralose business and exiting the bulk ingredients division in Europe. The CEO, Javed Ahmed, stated the year was ‘very challenging’, and the company is now going to concentrate on the food business.

When the restructuring costs were accounted, for the group’s profits fell to £51 million in comparison with £277 million the previous year. Tate & Lyle’s issues have not been a secret, and until the company can turn a corner and map out a clear plan for the future it will find it difficult to gain shareholder confidence.

Tougher competition in the sweetener market equated a massive fall in profits in the Splenda sucralose operation. The bulk ingredients division also had a poor performance

Tate & Lyle reports its first-half results on 5 November, and the market is expecting profit of £84 million and revenue of £1.38 billion, and that compares with first-half revenue and net adjusted income of £1.15 billion and £95 million respectively. The firm will announce its full-year figures in May 2016, and dealers are anticipating revenue of £2.59 billion and net adjusted income of £161 million. These forecasts represent a 10% jump in revenue and an 8.5% fall in adjusted net income.

Equity analysts are moderately bullish on Tate & Lyle, and out of the 17 ratings, six are buys, nine are holds, and two sells. The average target price is £6.12, which is 4% above the current price.

The stock has been slipping since July 2013, and the August low of 492p is the target. The stock has traded higher throughout September and should this continue the £6.30 will be the next level to watch. For over two years the stock has printed a set of lower lows and highs, and I will remain bearish will the stock is under 666p.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.