A strong year for Tate & Lyle was underpinned by bumper profits from so-called co-products; the by-products of corn refining that can be sold to farmers as livestock feed. A huge increase in the corn price meant £40m of additional profits but, with the price now falling back, that becomes a headwind this year and analysts are expecting only moderate profit growth. However, we're sticking to our buy recommendation, because we think Tate is still only at the early stages of its journey to switch its focus from commodity bulk ingredients to high value food technology.
Sales from speciality food ingredients such as sweetener Sucralose and starch-based dietary fibre Promitor climbed 10 per cent year-on-year, of which 4 per cent was volume growth with the rest comprising price increases as higher input costs were passed on to customers. But high sugar prices meant that demand for alternative corn-based sweeteners was once again very strong and, in fact, meant bulk ingredients grew sales and profits at an even faster rate. However, that belies much behind the scenes progress in achieving its strategic shift, including the opening of its new innovation centre in Chicago which will develop new products and deliver bespoke solutions to customers
Broker Investec Securities expects full-year pre-tax profit of £332m, giving EPS of 58.4p (2011: £323m/56.4p).
TATE & LYLE (TATE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 679p | MARKET VALUE: | £3.16bn | |
| TOUCH: | 679-680p | 12-MONTH HIGH: | 730p | LOW: 499p |
| DIVIDEND YIELD: | 3.7% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 222p* | NET DEBT: | 45% | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 2.87 | 182 | 23.8 | 22.6 |
| 2009 | 3.55 | 113 | 19.5 | 22.9 |
| 2010 | 2.53 | -116 | -4.70 | 22.9 |
| 2011 | 2.72 | 245 | 42.6 | 23.7 |
| 2012 | 3.09 | 379 | 65.9 | 24.9 |
| % change | +14 | +55 | +55 | +5 |
Ex-div: 27 Jun Payment: 3 Aug *Includes intangible assets of £325m, or 70p a share | ||||
