Shares in Tate & Lyle sank to the bottom of the FTSE 100 index today after the sweeteners group admitted that high corn prices would eat into its profits this year.
Part of the blame was laid on a fungus that is hitting corn supplies, one of Tate & Lyle’s key raw ingredients. The firm said the impact of aflatoxin, a fungus caused by the unusually hot and dry conditions on the firm’s corn fields last summer, “was felt particularly in the third quarter”.
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.”
The impact of aflatoxin means that full-year operating profit will be £7 million lower, Tate & Lyle warned.
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, turning ordinary granulated sugar into a product with the sweetness of sugar but containing no calories.
Sucralose sales were “not as strong as anticipated and we now expect volumes for the full year to be slightly lower than last year,” Tate & Lyle admitted.
Analysts say that is mainly because of competition in Europe.
“The issue appears to be market share challenges in European tabletop, where sucralose will be competing with stevia [a rival artificial sweetener used in products made by Coca-Cola and yoghurt group Danone] and others,” said analyst Martin Deboo at Investec.
“We read the third-quarter statement as cautious in tone and a downgrading influence on numbers,” he added.
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.”
The shares today fell 25.6p, or almost 4%, to 786.8p
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