Tate steers a steady course

Higher corn prices helped sales in bulk ingredients to rise 6 per cent to £2.3bn, but volumes fell 2 per cent as Tate diverted corn grind to speciality foods. Strong performance from bulk sweeteners in the US and Europe was partially offset by weaker trading in industrial starches, acidulants and particularly challenging market conditions for US ethanol. Aflatoxin, a by-product of a grain fungus that affects the quality of corn, cost the group £8m, although one-off royalties totalling £4.5m flattered numbers. This resulted in a 7 per cent rise in adjusted operating profit to £182m for the entire bulk ingredients division.

In speciality foods, on which Tate is pinning a lot of hope for future growth, sales rose 8 per cent to £947m. Good trading in starches offset weaker performance in high-intensity sweeteners, such as Splenda, and food systems. Volumes grew particularly strongly in Asia, where demand for convenience foods - which use ingredients such as starches to extend shelf life - is rising. There was also significant volume growth in speciality corn sweeteners from emerging markets, while a strike at a facility in Turkey resulted in lower European volumes. However, operating margins fell 170 basis points to 22.5 per cent, due to restarting the Splenda factory in Alabama and higher corn prices, leaving the divisional operating profit flat at £213m.

In a bid to drive its speciality foods business, Tate opened a £33m global Commercial and Food Innovation Centre in Chicago 12 months ago, which has already supported the launch of six products, including a natural sweetener and a salt alternative.

Broker Panmure Gordon has cut EPS forecasts for 2014 to 59.1p, from 60.8p (57p in 2013).