Tate & Lyle issues third profits warning in year

The sour taste for investors in Tate & Lyle persisted yesterday as the world's biggest sugar manufacturer reported a near halving in interim profits and added that the second half was unlikely to be any better. It was the company's third profits warning of the year.

The sour taste for investors in Tate & Lyle persisted yesterday as the world's biggest sugar manufacturer reported a near halving in interim profits and added that the second half was unlikely to be any better. It was the company's third profits warning of the year.

David Hallam, an analyst at Williams de Broe, said: "Tate & Lyle has difficult markets everywhere in its four main businesses. And underlying all that is rising energy costs. They are being squeezed from every direction at the moment."

Pre-tax profits, before exceptional items, slumped to £68m, for the six months to 30 September, from £127m previously.

The company said that it had signed a memorandum of understanding for the sale of Western Sugar, its US sugar beet refining business. But this meant a £75m exceptional write-off, as the sale price will be far below the £103m net asset value in the company's accounts. Tate & Lyle said it continues to "explore options" for Domino, its US cane refiner which, analysts said, would prove very difficult to sell.

Larry Pillard, chief executive, said: "Unprecedented poor market conditions have resulted in continuing losses in US sugar. A rise of over 10 per cent in US raw sugar prices at the end of September and the beginning of October has resulted in a further squeeze on margins."

The US sugar business has been hit by the high cost of its basic material, raw sugar, coupled with an oversupplied market for refined sugar, leading to low selling prices, and rising fuel costs. Overall, profits in the Americas declined by £35m to £57m. Elsewhere, Tate & Lyle's UK sugar business was hit by the strength of sterling and its sweeteners were affected by lower demand from the soft drinks industry. The company said that energy costs this year would be £30m higher than last year, due to the high cost of fuel. Analysts reduced full-year forecasts from about £150m to £130m, having already dropped their estimates for the year several times.

Tate & Lyle shares closed down 8 per cent at 228p, having fallen from 479.5p a year ago.