Tate&Lyle shares tumbled to a three-year low after it cut its full-year profit forecast, blaming fierce competition for its Splenda sweetener and supply chain problems caused by a severe US winter.
The British company, which sells ingredients to packaged food and drinks makers, has had to renegotiate supply contracts at lower prices to protect market share in the face of intense Chinese competition.
It said yesterday it expected prices of its Splenda sucralose to fall by 25 per cent this year, rather than the 15 per cent decline it forecast in February.
It also said the prolonged and harsh winter in the US disrupted operations at its corn plants, causing global supply problems which ate into profits. The delays meant the firm had to deliver to some customers by air, rather than by shipping, and it was working to catch up. "If we had to air freight stuff, we air freighted. That cost us money," said chief executive Javed Ahmed.
Shares in Tate&Lyle closed down 16.7 per cent to 610 pence, more than wiping out the gains they had made since the February price warning.
“The fact that Tate has issued such a significant profit warning within two months of the last guidance update points to a serious lack of visibility, not only within one of its end markets [sucralose] but also internally,” said Canaccord Genuity, which downgraded the stock to “sell” from “hold”.
Tate&Lyle said it now expects adjusted pretax profit for the year to end-March 2015 in the range of £230 to £245 million.
That is well below analysts’ expectations for £293 million, according to a poll of 13 brokers – based on the company’s forecast in July for profit slightly below that of fiscal 2014’s £322 million.
“Clearly our performance in the first half has been extremely disappointing,” Mr Ahmed said on a conference call. The company is due to report results for the first half on November 6th. – (Reuters)
