CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Tate amp Lyle in sticky spot over Sucralose

Article By: ,  Financial Analyst
September 23, 2014 11:23 AM

Tate & Lyle shares traded around 17% lower this morning after the company warned supply chain disruption and increased competition would hit annual profits.

The veritable British company famous for its eponymous sugar brand said the environment for its Splenda Sucralose sugar substitute had become more competitive in the second quarter.

Tate said it now expected to incur additional previously unforeseen costs of about £20m in its second quarter, bringing total costs for the first half to £40m, plus an additional £10m in the second half of the year.

The effect of these added costs will be group adjusted profit before tax for the full year in the range of £230m to £245m.

This compares with £322m in the previous full year and £327m the year before that.

This is the second profit warning by the food ingredients firm this year.

In February, Tate scaled back its outlook for the full year, saying weak sales volume in developed markets dampened third-quarter results.

It said at the time profits for the full year to 31st March would be in line with the prior year, whereas before the company had forecast growth.

 

Sucralose and supply chain issues seem deeply-rooted

This further instance of the firm apparently being unable to predict or smooth-out disruptive operational effects over the medium term suggests structural issues, both in its ingredients supply chain (although these might be cyclical) and in the Sucralose business.

Therefore, it looks likely market forecasts will need to fall into line with the company’s revised guidance.

Note the prospective price-to-earnings ratio of 14.6 is still trending significantly higher than the firm’s 10-year median.

With earnings forecasts expected to fall, the impact on Tate’s FTSE 250-listed shares is likely to be more losses, even after this morning’s fall wiped-out the gains made since July.

The stock looks underpinned on a very long-term basis, though the current loss appears to be challenging trend line support originating in March 2009.

The nearest floor of that support today would be 594p, although that is highly unlikely to be breached today.

Should the level break in the near term though, next visible support would come in around 559p-to-560p.

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.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024