Broker snap: Future cloudy at Tate & Lyle

28th May 2009 13:21

The outlook for sugar and sweeteners group Tate & Lyle remains uncertain and the shares should be sold, according to Panmure Gordon.Industrial starch demand remains very weak, as does demand for high-fructose corn syrup (HFCS), which 'makes for a potentially very tough HFCS pricing round this Autumn after years of margin expansion,' the broker said.Furthermore, ethanol margins are taking their time to recover and until they do, the $260m Fort Dodge corn wet mill will remain mothballed. On the subject of mothballing, Tate & Lyle is taking a £97m (£60m cash) hit to mothball its US sucralose plant, though this will help protect adjusted profits in 2010E. However, 'with a difficult HFCS pricing round ahead, ethanol margins being non-existent and the dollar now weakening, we expect forecasts for March 2010E to continue to drift off,' Panmure Gordon analyst Graham Jones said.Panmure Gordon has a price target of 250p for the stock.