Tate & Lyle slumps 28% after third profit warning this year

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The Independent Online

Tate & Lyle lost almost a third of its value yesterday after a third profit warning this year on the back of plunging sugar profits and the weak US dollar dented confidence in its prospects.

The sugar-refining company has struggled over the past year for a number of reasons, including a collapse in profits at its artificial sweetener division, Sucra-lose, which trades under the Splenda brand. However, this time it was the company's sugar division that forced Tate & Lyle to reduce its guidance again on the back of a "particularly difficult" August. As a result, Tate & Lyle said it was cautious about its prospects over the rest of its financial year. The company's sugar trading division is now expected to make a loss in the six months to the end of September, compared with a £15m profit in the same period last year.

Tate & Lyle, famous for Lyle's Golden Syrup, said that it expected sugar trading to stabilise during the six months to the end of March, but warned that profits would be "modest".

Shares in the company crashed 28 per cent to a three-year low of 402.5p, wiping nearly £800m off the company's valuation. It was the largest single-day fall in the shares in almost 10 years.

Analysts were scathing about the company's performance over the summer, with some slashing already-reduced profit forecasts by a further 10 per cent.

Graham Jones, an analyst with Panmure Gordon, said: "This trading statement has almost no redeeming features ... Tate's reputation will be dented." Mr Jones cut his rating on the stock to "hold" from "buy"as a result of the downturn in trading.

Companies involved in food production have been hit by soaring prices for commodities such as corn and wheat this year. In particular, a surge of more than 50 per cent in the price of corn in Europe due to a poor harvest this summer has hurt Tate & Lyle'sprospects, as it will havean "increasingly severe" effect on its starch business.

Another issue related to corn is the ongoing spat between the US and Europe over genetically modified corn. The EU has banned the import of corn syrup from the US, which has created a build-up of stock in the US and could hit the company's profits.

The company also suffered as a result of the weakness of the US dollar as it derives around 70 per cent of its profits from the US. The currency weakness compounded its trading woes and will wipe £12m off profits this year. It will also book a loss of around £5m related to the closure of its Astaxanthin unit.

A further blow came in the form of its guidance related to corporate tax rates. The company said it would pay a rate of around 34 per cent this year, compared with its previous rate of around 30 per cent before it disposed of a number of European businesses. Analysts said that they had pencilled in a rate of around 27 per cent.

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