Market Report: Tate & Lyle tumbles on competition concerns

Tate & Lyle missed out on yesterday's rally by blue chips, after a warning from Goldman Sachs that the food group's revolutionary sweetener is likely to face competition much sooner than most expect.

Tate & Lyle missed out on yesterday's rally by blue chips, after a warning from Goldman Sachs that the food group's revolutionary sweetener is likely to face competition much sooner than most expect.

The comments from the US broker left T&L down 5.5p to 490p while the FTSE 100 rose 28 points to 4,855.6.

T&L's innovative sweetener, Splenda, has been a massive success for the company because it contains zero calories. Such has been the demand for the product that the group has had to increase output to keep up with demand, and it is thanks to Splenda that T&L shares have been such a strong performer of late. They have soared by more than 60 per cent within the past 12 months.

But Goldman Sachs is convinced the artificial sweetener will face competition from alternatives soon. The broker said: "Generics could circumvent Splenda patents by 2009. Our in-depth patent study reveals important expiry dates in 2006 and 2009 that could motivate generic manufacturers." Goldman believes that China could prove to be the biggest threat to Splenda. It notes that two Chinese suppliers already claim to be able to supply commercial quantities of the sweetener, which highlights the threat to T&L.

The broker downgraded its rating on the stock to "underperform" from "in line" and set a fair value target of 422p.

Corus ticked 1p higher to 50.75p after Ekkehard Schulz, the chief executive of its rival ThyssenKrupp, was heard assuring the market that steel prices will remain at present highs throughout 2005. But ABN Amro was not convinced by such comments. It argued that things are going to get worse for the steel industry before they get better.

In the FTSE 250, which rose 67 points to 6,999.1, CSR gained 18p to 329p after forecast-beating results from its US rival Texas Instruments. The American chip-making giant attempted to alleviate fears of a slowdown in demand for consumer electronics after recent negative news from Apple, IBM and Sony Ericsson.

Colt Telecom gave up 1.25p to 49.25p amid nervousness before tomorrow's first-quarter results from the alternative telecoms carrier. Colt has been up against intense competition in recent years, and the figures are unlikely to show much evidence of a fundamental improvement in market conditions.

This month, takeover speculation boosted Colt shares but Investec Securities believes it has left them looking overvalued. At present, the group's stock trades at a 30 per cent premium to the wider sector.

AstraZeneca added 5p to 2,277p as an upgrade from Morgan Stanley offset negative news about the pharma giant's Iressa drug. AZ shares were under pressure at the start of the day after research from the US National Cancer Institute found that Iressa failed to improve survival rates. But Morgan Stanley boosted sentiment towards AZ stock by upgrading its recommendation to "overweight" from "equal-weight".

Elsewhere in the sector, SkyePharma announced a marketing deal for its DupoBupivacine anaesthetic, but shares in the group dropped 0.5p to 53p as investors had hoped it would announce a licensing agreement for its asthma drug, which is much more important for the company.

Xansa lost 0.5p to 95.5p as rumours that the IT-services group had lost important contracts with Boots and Royal Mail surrounded the company. A spokesperson for Xansa denied the talk. "There is no truth in these rumours," he insisted.

Stanley Leisure leapt 7p to 599p as Genting upped its stake in the gaming group to 19.1 per cent. Speculation grew that the Malaysian conglomerate will buy the whole of Stanley Leisure once the company completes the disposal of its chain of betting shops.

CI Traders, the Jersey retail and brewing group, was steady at 72p before results today. Recent rumours surrounding the company suggest that corporate action could soon be on the cards.

Canterbury Foods jumped 3p to 28.5p as the group's annual results revealed a return to the black. Share-buying by Ken Manley, a non-executive director at the food producer, also supported the stock. He bought 1.9 million shares at 28p. Likewise, Yoomedia gained 1.5p to 14.75p after the purchase of 400,000 shares at 13p by one of its directors, Leo Noe.

Finally, Libra Natural Resources rose 1.12p to 7.62p on whispers the group will soon announce an acquisition in the US and a fund raising to pay for it. Word has it Libra is eyeing the purchase of coal assets in North America.

Main movers

↑ Scottish & Newcastle 480.75p (up 11.25p, 2.4 per cent). Bid speculation again surrounds the brewing group.

↑ Capita 382.5p (up 6.5p, 1.7 per cent). ING upgrades the stock to "buy" from "hold".

↑ Hanson 496p (up 7.5p, 1.5 per cent). Morgan Stanley raises its price target on the building materials group.

↑ Stagecoach 108p (up 6p, 5.9 per cent). Boasts that its full-year results will exceed City expectations, prompting a slew of broker upgrades.

↑ Dana Petroleum 564p (up 26.5p, 4.9 per cent). Announces that oil production has started at its Gadwell field in the North Sea.

↑ Parity Group 7.25p (up 1.5p, 26.1 per cent). Says it plans to sell its mainland Europe business, and names John Hughes as chairman.

↑ Tribal Group 161.5p (up 19p, 13.3 per cent). Indicates that its full-year profits will surpass expectations.

↑ Telspec 17.5p (up 2p, 12.9 per cent). Brokers note that the company has a £7m cash pile.

↑ Oil Quest Resources 21p (up 2.25p, 12.0 per cent). UBS and Gartmore take stakes in the company.

↓ AB Foods 758p (down 8.5p, 1.1 per cent). Profit-taking after the group reports a 16 per cent jump in first-half profits.

↓ Somerfield 196.75p (down 5.25p, 2.6 per cent). Brokers fear that a bidding war may not break out for the company after all.

↓ ARM Holdings 94.5p (down 2.25p, 2.3 per cent). First-quarter results from the group fail to excite the City.

↓ ContentFilm 2.75p (down 2.75p, 50 per cent). Investors worry about the company's future.

↓ 4Less Group 27p (down 2p, 6.9 per cent). Complains of tough trading in the first three months of the year.