Credit Suisse turns sour on sweeteners group Tate & Lyle

22nd Apr 2015 09:28

Shares in sugar, sweetener and food ingredients group Tate & Lyle were losing their flavour on Wednesday after analysts at Credit Suisse lowered their rating on the stock from 'neutral' to 'underperform'.The bank's downgrade, which included cutting its target price from 615p to 600p, followed the company's decision to exit its bulk ingredients business in Europe and cut back on its Sucralose plants."As ever with Tate any move to improve the quality of earnings comes at a cost to the quantity. The shares have accordingly seen their rerating but not as investors might have wished, earnings today are lower than they were 10 years ago," Credit Suisse said.The bank has cut its profit forecasts for Tate, leaving the shares trading on 17.5 times earnings which is a "significant premium to peers".Tate's €240m sale of Eastern Starch should improve the quality of group earnings, the bank said. However, valued at just five times operating profits it will be dilutive to group earnings.Meanwhile, the "understandable" decision to rebase Sucralose to a single plant - Tate is closing its Singapore facility and consolidating operations in Alabama - will see it forgo substantial volumes to concentrate on a smaller, more profitable, base, the bank reckons."This move though surely says the future profit stream from Sucralose is now modest at best, undermining another part of the bull story," Credit Suisse said.The stock was trading 3.3% lower at 621.17p by 10:44.