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
Voices
The Sumatran tiger, endemic to the Indonesian island of Sumatra, is an endangered species
voicesJonathon Porritt: The wild tiger population is thought to have dropped by 97 per cent since 1900
Arts and Entertainment
Beast would strip to his underpants and take to the stage with a slogan scrawled on his bare chest whilst fans shouted “you fat bastard” at him
musicIndie music promoter was was a feature at Carter gigs
News
news
Arts and Entertainment
Story line: Susanoo slays the Yamata no Orochi serpent in the Japanese version of a myth dating back 40,000 years
arts + entsApplying the theory of evolution to the world's many mythologies
PROMOTED VIDEO
News
Performers dressed as Tunnocks chocolate teacakes, a renowned Scottish confectionary, perform during the opening ceremony of the 2014 Commonwealth Games at Celtic Park in Glasgow on July 23, 2014.
news
Life and Style
Popular plonk: Lambrusco is selling strong
Food + drinkNaff Seventies corner-shop staple is this year's Aperol Spritz
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
News
Shake down: Michelle and Barack Obama bump knuckles before an election night rally in Minnesota in 2008, the 'Washington Post' called it 'the fist bump heard round the world'
newsThe pound, a.k.a. the dap, greatly improves hygiene
Arts and Entertainment
La Roux
music
Arts and Entertainment
Graham Fellows as John Shuttleworth
comedySean O'Grady joins Graham Fellows down his local Spar
News
people
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
Ross Burden pictured in 2002
people
News
Elisabeth Murdoch: The 44-year-old said she felt a responsibility to 'stand up and be counted’'
media... says Rupert Murdoch
Arts and Entertainment
tv
Extras
indybest
Sport
Arsenal signing Calum Chambers
sportGunners complete £16m transfer of Southampton youngster
Latest stories from i100
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

Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)

£350 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...

Java Developer - Banking - London - Up to £560/day

£500 - £560 per day: Orgtel: Java Developer FX - Banking - London - Up to £560...

HR Business Analyst, Bristol, £350-400pd

£350 - £400 per day + competitive: Orgtel: My client, a leading bank, is curre...

Account Manager - (Product & Account Management, Marketing)

£26000 - £30000 per annum + Benefits: Ashdown Group: Account Manager - (Produc...

Day In a Page

The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
Countries that don’t survey their tigers risk losing them altogether

Countries that don’t survey their tigers risk losing them

Jonathon Porritt sounds the alarm
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz
A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on