Tate & Lyle sales struggle in poor weather

Colder-than-normal weather in the US has corresponded with a downturn in sales for the UK-based food additive and sweetener manufacturer.

Over the last couple of years Tate & Lyle has made efforts to shift focus from its original business model of sweeteners to bulk ingredients. The cooler-than-normal weather conditions experienced by the US in 2013 have led to reduced demand for sweet food types. This has affected Tate & Lyle’s figures due to the company’s high sales-weighting to the American market. The other issue the firm has encountered is the fact that its sales and profits are derived in US dollars, whereas its accounts are reported in sterling. A quick glance at the GBP/USD chart shows that the rate has moved from 1.4900 in early March up to the current levels around 1.6100.

Tate & Lyle has a solid-looking business plan, and the fundamentals have been strong for a long time, which explains why IG client accounts are currently 71% long. The current dividend yield is a respectable 3.55%, and the profits-to-earnings ratio is 12.96. As good as these figures might be, the shares have dropped by almost 15% in the last quarter, and there will be fears over the likely prospect of continuing weakness in the dollar.

Tate & Lyle chart

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa 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. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

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