Broker snap: Tate & Lyle rises after Berenberg rejects sucralose fears

13th Sep 2013 13:36

Tate & Lyle shares rose Friday after analysts at Berenberg said fears about falling sucralose prices were overdone.The shares were up 1.5% at 794.50p at 14:55 in London, making Tate & Lyle the third-strongest gainer in the FTSE 100 index.The analysts said they had spoken to a former chief procurement officer (CPO) for a large drinks company who supported Berenberg's view that there was no big price fall on the horizon."Our CPO expert commented that there was no 'cliff' in sight for sucralose. Only a breakthrough in a natural sweetener might cause this, but there is nothing even close to regulatory approval which could compete with aspartame [another sweetener] and sucralose on price and taste," the analysts wrote.UBS cut Tate & Lyle to 'sell' on September 9th and said the company's valuation was too high when it faced the risk of falling sucralose prices that would leave it as a corn processor with volatile margins. Sucralose is a sugar-based low-calorie sweetener used in soft beverages and other food and drink products.Berenberg said Tate & Lyle had limited exposure to price falls from a stock overhang caused by weak first-quarter soft drink sales because most of its sucralose contracts are annual rather than based on spot prices."Typically large customers like Pepsi and Coke enjoy a 15-20% discount over the smaller players, so these reported price decreases, if true, reflect a pricing adjustment in the market between smaller manufacturers and suppliers," the analysts said.SF