The Investment Column: Outlook sours for Tate & Lyle

JAM tomorrow has been a regular promise to hungry shareholders of one of the household names of yesteryear, Tate & Lyle. But weary investors may have to wait some time to satisfy their appetites.

Turnover, earnings and margins all fell in the six months to February. Profits dropped one-third to pounds 77m and retiring chairman Sir Neil Shaw warned full-year earnings will be "substantially down" on last year's pounds 241m.

Tate and Lyle has proved more accident prone than most over the last few years. The latest lean period is blamed on a bewildering array of new dilemmas. A strong pound, which has reduced overseas profits by pounds 6m. Disease in the Nebraska beet crop, at a time when the rest of the US was enjoying large crops and low sugar prices, and continuing problems at the state of the art starch plant in northern France added to the group's woes. To top it all, it has been left to count the cost of a pounds 10m order of grain in Greece which the group paid for but never received.

Tate & Lyle is taking steps to drive down costs, dispose of under-performing bits and appoint new directors, including an acting chairman to replace Sir Neil. It has paid $219m (pounds 312m) for the food ingredients division of Haarman & Reimer, which will make Tate & Lyle the only global producer of citric acid. But, inevitably, this will not enhance earnings until next year.

The group has won US approval for sucralose, a promising new sweetener. But that will not impact on the bottom line for at least two years as it awaits EU approval. Meanwhile, prices for its fructose products are at last recovering. But profits will fall before they start to recover.

Analysts yesterday slashed full-year forecasts from pounds 230m to pounds 170m, and profits the following year from pounds 300m to pounds 250m, putting the shares on a prospective p/e ratio of 17 then 13. The shares, which fell 24p to 460p yesterday, remain a hold on hopes that, if the group cannot sort out the disastrous performance, a rival may be tempted to come in and sort out the mess.

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