James Moore: The long-term outlook is looking pretty sweet for Tate & Lyle

Investment View: If you invest in this company you'll have to put up with some volatility

Tate & Lyle

Our view Buy on Weakness

Price 730p (-4p)

The City's reaction to Tate & Lyle's half-year results yesterday was more bitter than sweet. The headlines said profits were hit by the cost of reopening an American factory that makes "Splenda" artificial sweeteners, combined with the tough conditions that face almost any company that does business in Europe.

Although sales role 7 per cent to £1.63bn in the first half of the business' financial year, adjusted earnings came in it £179m, up by just 2 per cent. No wonder the shares were under pressure in the market yesterday, then.

If you invest in this company you'll have to put up with volatility. Since I last looked at the stock on 20 March, the shares have been all over the place.

For most of the intervening months they have been well below that level, hitting a low of 633.5p in June before roaring back in September and October, not without the support of some brokers who felt the shares could go higher still.

At that time I said "hold" at 704p for the longer term, although I advised that people who'd bought in at 524.5p, when The Independent first started going sweet on the operation, might want to take some profits.

There's been some profit taking among City institutions recently, so the shares are now a little way off the 12-month high 738.5p recorded a couple of weeks ago, and the slightly disappointing results might see them drifting for a while longer.

Tate & Lyle no longer owns the iconic European sugar-refining business that bore its name which, along with its London golden syrup factory, were sold to American Sugar Refining in 2010, together with the rights to the historic "Lyle's Golden Syrup" brand name.

Indulging in some corporate verbal diarrhea, the company now calls itself "a global provider of distinctive, high-quality ingredients and solutions to the food, beverage and other industries". In other word's it is a multinational agri-business.

What this means is that its products can be found in any number of different food items which you were probably unaware of – from toast (soluble corn fibre) to yogurt (starches to provide texture) to jam (fructose sweetners). You may even find its industrial starches in your office.

The growth potential in some of its key areas are clear.

For artificial sweetners there's the world's sweet tooth and mounting concern about obesity, while animal feed should do well from rising meat consumption in fast-growing economies like China's.

Then there are bioproducts, which are not uncontroversial but provide an alternative to fossil-based hydrocarbons. And so it goes on.

Margins are also very solid, although they were hit in the recent reporting period by a lengthy strike/lock out in Turkey which doesn't reflect all that well on the company (note to management, if you work with your staff you get more out of them).

So even if the company's results this time around weren't exactly thrilling, the long-term outlook is actually rather positive.

There are still some headwinds: a big part of the business is reliant on corn and the drought in America's mid-west made for a rotten harvest with hot and dry conditions in Europe meaning it wasn't able to pick up the slack. So costs are up and the supply chain has been affected.

What's more, the company isn't all that cheap, based on its earnings multiple of 13 times forecasts for the year ending 31 March 2013. The yield is no better better than average, at a prospective 3.5 per cent, although that's more than two times covered and the company's debt levels are relatively light, and falling.

I'd stick with the advice to hold. But if the shares continue falling, to the extent that they start to dip below the 650p level again, I might be inclined to stash a few more away.

Tate & Lyle is a generally well-run outfit that should continue to provide a quality return. So hold for now, but buy on any weakness.

Suggested Topics
PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Accounts Payable

£12 - £15 per hour: Cameron Kennedy Recruitment: Excellent opportunity to join...

Technical BA - Banking - Bristol - £400pd

£400 per hour: Orgtel: Technical Business Analyst - Banking - Bristol - £400pd...

Account Management Strategy Manager

£38000 - £42000 per annum + competitive: Real Staffing: Required skills:Previo...

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice