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
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
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

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk