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Supply chain woes at Tate

Tate & Lyle has reported a bleak first half, after the group's global supply chain failed to withstand a number of hurdles
November 7, 2014

Tate & Lyle's first-half results came hot on the heels of a profit warning in September, so the figures, though bleak, were at least anticipated. They reflect serious operational and supply chain disruption caused by the polar vortex in the US and the temporary shutdown of Tate's Singapore sucralose factory. Tate's logistics cracked under the pressure and it was forced to shell out £31m to get orders to customers, including sending goods by costly air freight.

IC TIP: Hold at 600p

And it didn't help that sucralose prices fell faster, and for longer, than anticipated, slicing £18m off profit. Finally, the hit to earnings was compounded by currency headwinds.

Finance director Nick Hampton, who recently joined the group, said Tate had been caught out by the supply chain issues and that the challenging first half had exposed cracks in the system. These are now being addressed, but Mr Hampton said Tate needed to build a more integrated and better-run global network to deal with the increasing complexity of the business, which included greater visibility over supply and demand. He said £100m is now being spent, both to boost capacity and make it more flexible, putting inventories closer to customers.

Citi Research expects pre-tax profit of £232m for the full year, giving EPS of 39p, down from £322m and 56p, respectively.

TATE & LYLE (TATE)
ORD PRICE:600pMARKET VALUE:£2.8bn
TOUCH:599-691p12-MONTH HIGH:826pLOW: 572p
DIVIDEND YIELD:4.7%PE RATIO:15
NET ASSET VALUE:223p*NET DEBT:37%

Half-year to 30 SepTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20131.5215028.07.8
20141.207914.78.2
% change-21-47-48+5

Ex-div: 20 Nov

Payment: 2 Jan

*Includes intangible assets of £318m, or 68p a share