Credit Suisse downgrades Tate & Lyle to 'underperform'

30th May 2014 11:02

Credit Suisse has lowered its recommendation for Tate & Lyle from 'neutral' to 'underperform' after a "slow start to the year" for the sugar and sweeteners group.The bank said that despite the improvement seen at the business there is "little/no earnings growth".Meanwhile, Tate is also facing a £13m (4%) negative impact from currency movements in the year to March 2015, along with an absence of £21m (7%) of one-off profits included in the prior-year results, it added.Credit Suisse said that underlying trading is "soft" and demand is "generally weak" with EU sweetener and Sucralose prices falling sharply.As for the recent decline in Sucralose pricing, Credit Suisse said it draws into question the re-rating argument at Tate's Specialty Food Ingredients (SFI) division. It said: "Excluding Sucralose the added-value SFI division (the engine of growth) is barely 40% of the group profits. Put another way 60% of profits are flat or declining on our estimates."Meanwhile, an acquisition by Tate "looks increasingly needed rather than a nice extra". "The group is keeping its powder dry, but opportunities seem few and far between. The new projects the company has in place are modest in size and not going to move the needle in group terms."The target price for the shares has been cut from 700p to 650p.The stock was down 1.3% at 692.5p by 11:28.BC