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
Arts and Entertainment
books
Voices
Caustic she may be, but Joan Rivers is a feminist hero, whether she likes it or not
voicesShe's an inspiration, whether she likes it or not, says Ellen E Jones
Arts and Entertainment
The Doctor and the Dalek meet
tvReview: Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Sport
Diego Costa
footballEverton 3 Chelsea 6: Diego Costa double has manager purring
PROMOTED VIDEO
Life and Style
3D printed bump keys can access almost any lock
techSoftware needs photo of lock and not much more
Arts and Entertainment
The 'three chords and the truth gal' performing at the Cornbury Music Festival, Oxford, earlier this summer
music... so how did she become country music's hottest new star?
Life and Style
The spy mistress-general: A lecturer in nutritional therapy in her modern life, Heather Rosa favours a Byzantine look topped off with a squid and a schooner
fashionEurope's biggest steampunk convention heads to Lincoln
News
Dr Alice Roberts in front of a
peopleAlice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
News
i100
Arts and Entertainment
Star turns: Montacute House
tv
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Arts and Entertainment
Unsettling perspective: Iraq gave Turner a subject and a voice (stock photo)
booksBrian Turner's new book goes back to the bloody battles he fought in Iraq
News
The Digicub app, for young fans
advertisingNSPCC 'extremely concerned'
News
i100
Arts and Entertainment
Some of the key words and phrases to remember
booksA user's guide to weasel words
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

Law Costs

Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

DevOps Engineer (Systems Administration, Linux, Shell, Bash)

£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

Day In a Page

The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model of a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor
She's dark, sarcastic, and bashes life in Nowheresville ... so how did Kacey Musgraves become country music's hottest new star?

Kacey Musgraves: Nashville's hottest new star

The singer has two Grammys for her first album under her belt and her celebrity fans include Willie Nelson, Ryan Adams and Katy Perry
American soldier-poet Brian Turner reveals the enduring turmoil that inspired his memoir

Soldier-poet Brian Turner on his new memoir

James Kidd meets the prize-winning writer, whose new memoir takes him back to the bloody battles he fought in Iraq
Aston Villa vs Hull match preview: Villa were not surprised that Ron Vlaar was a World Cup star

Villa were not surprised that Vlaar was a World Cup star

Andi Weimann reveals just how good his Dutch teammate really is
Bill Granger recipes: Our chef ekes out his holiday in Italy with divine, simple salads

Bill Granger's simple Italian salads

Our chef presents his own version of Italian dishes, taking in the flavours and produce that inspired him while he was in the country
The Last Word: Tumbleweed through deserted stands and suites at Wembley

The Last Word: Tumbleweed through deserted stands and suites at Wembley

If supporters begin to close bank accounts, switch broadband suppliers or shun satellite sales, their voices will be heard. It’s time for revolution