Shares in Tate & Lyle sank to the bottom of the FTSE 100 index yesterday after the sweeteners group admitted that high world prices for corn – a key raw material for its products – would eat into its profits this year.
Full-year operating profit would be £7m lower, Tate & Lyle warned.
It laid part of the blame on aflatoxin, a fungus that thrived in the the unusually hot and dry conditions on corn fields last summer.
It added: "Corn supplies in the US and Europe remained tight and … prices are expected to remain high with some volatility over the coming months until the new harvest."
Another problem flagged up by the City was a surprise slowdown in sales of sucralose. The company makes about a fifth of its profit from the sweetener, which is derived from sugar and sold under the Splenda brand.
Tate & Lyle admitted that sucralose sales were "not as strong as anticipated and we now expect volumes for the full year to be slightly lower than last year." Analysts say that is mainly because of competition in Europe.
Tate & Lyle concluded: "Despite facing a number of headwinds, and before the impact of exchange rate movements, we expect to make modest progress this financial year."
Aflatoxin: A deadly poison to livestock
Aflatoxin is a naturally occurring carcinogenic byproduct of an olive-green mould that can be fatal to livestock. Caused by the Aspergillus fungus, aflatoxin develops on crops affected by high temperatures. Fears over the fungus have emerged in the US, where corn farmers have been hit by the worst drought in more than 50 years. The toxin can also be found in the milk of animals fed contaminated feed, as well as some spices, nuts, dried fruit and cereals. Level of aflatoxins allowed in foods imported into Europe are limited and products are tested.
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