Friday preview: Tate and Lyle, Electrocomponents

26th May 2011 17:57

We have become used to companies grumbling about rising raw material prices, but those grumbles are often music to the ears of food ingredients firm Tate & Lyle. In a trading update at the end of March the company said that operating performance over the company's full year had been in line with market expectations, save for the company receiving a late boost to co-product income from the rise in corn prices. That sent investment analysts scurrying to revise their earnings estimates, and market consensus is now for profit before tax of £247.7m on sales of £2.6bn.Credit Suisse thinks those estimates might still undervalue the corn price boost; the Swiss bank is forecasting profit before tax of £255m."With another 2 months trading behind us [since the March update], we believe the outlook for 2011/12 is probably a bit better now as well. US starch volumes are robust, by-product credits remain strong, exports to Mexico continue to offset US HFCS declines and European sweetener prices are rising with the EU sugar price," Credit Suisse said.Broker Charles Stanley is expecting Tate & Lyle's Bulk Ingredients business, which accounts for around 70% of group sales, to have had a strong year but thinks the market might be more interested in what new boss Javed Ahmed has to say regarding the outlook for the Speciality Food Ingredients business; the division only accounts for 30% or so of group sales but 555 of EBIT."We look for robust volume growth across divisional product categories and will be interested in what Tate has to say regarding prospects for operating margins both on fixed and multi-year contracts. These results should provide investors with an update on the 'Focus, Fix, Grow' strategy and perhaps greater clarity regarding the way forward in Speciality Foods," the broker said.Electronics and maintenance products supplier Electrocomponents upped full-year profits guidance at the beginning of April, but Singer Capital Markets thinks profits might still come in ahead of expectations. Market consensus is for pre-tax profit of £113.5m on sales of £1.17bn."For the full year to March 2011, we are anticipating revenue of £1,151m, up 18.4% on 2010, gross profit of £539m up 15%, with operating profit of £120.4m, up 52%, highlighting the operational gearing implicit in distributors. We are anticipating a gross margin of 46.8% for the year, in line with the first half, as it appears that the company has finally arrested the constantly declining margin that was a feature of the company for a number of years," Singer said.As for profit before tax, "we are forecasting growth of 54% to £114.4m, vs a consensus of £113.5m and a narrow range of £110.6m to £115.4m. We expect EPS [earnings per share] to grow 53% to 17.9p, with a maintained DPS [dividend per share] of 11p. Full year net debt should be around £147.9m, down from £172.1m a year ago," the broker added.Charles Stanley, however, thinks market consensus is a little on the optimistic side and predicts profit before tax of £113m, EPS of 18p and a full-year divi of 11p.Singer suggests Electrocomponents "may point to product shortages in certain esoteric areas due to power outages in Japan, but these are likely to be small and insignificant on the grand scheme."Charles Stanley also downplays the effect of the Japanese earthquake. "The business in Japan (3% of group sales) was not directly affected by the earthquake and current sales are running at similar levels to last year," the broker said. "Products sourced from Japan for sale around the rest of the group account for another 3% of sales. Any disruption should not have any material impact on the group as it sources products from some 2,500 global suppliers," Charles Stanley noted.INTERIMSArmour GroupINTERIM DIVIDEND PAYMENT DATEGartmore Fledgling Trust, Mcbride, SwallowfieldQUARTERLY PAYMENT DATEEquity Partnership Inv Co Income Shares, ING UK Real Estate Income Trust Ltd.QUARTERLY EX-DIVIDEND DATESchlumberger Ltd., Torchmark Corp.INTERNATIONAL ECONOMIC ANNOUNCEMENTSConsumer Prices Index (JPN)Retail Sales (JPN)GFK Consumer Confidence (GER) (07:00)M3 Money Supply (EU) (09:00)M3 (EU) (9:00)Consumer Prices Index (GER) Business Climate Indicator (EU) (10:00)Economic Sentiment Indicator (EU) (10:00)Personal Consumption Expenditures (US) (13:30)Personal Income (US) (13:30)Personal Spending (US) (13:30)U. of Michigan Confidence (US) (Final) (14:55)Pending Homes Sales (US) (15:00)GMSParity GroupFINALSBloomsbury Publishing, Electrocomponents, Severn TrentAGMSDevelopment Securities, Henry Boot, HSBC Holdings, InterContinental Hotels Group, InterQuest Group, Kentz Corporation Ltd., Lewis Php.5%Pf 5% Cum Prf Stk #1, Powerflute Oyj (DI), Straight, Vindon HealthcareUK ECONOMIC ANNOUNCEMENTSGFK Consumer Confidence (09:30)FINAL DIVIDEND PAYMENT DATEBovis Homes Group, CBG Group, Charles Taylor Consulting, Chaucer Holdings, Dragon Oil, Edinburgh US Tracker Trust, F&C Asset Management, Fiberweb, Fidelity European Values, H.R. Owen, Henderson Group, Inmarsat, Invesco Perpetual UK Small Companies Inv Trust, IS Solutions, Keller Group, Matrix Income & Growth VCT, Maven Income & Growth 4 VCT, Maven Income & Growth 4 VCT 'S' Shares, Mithras Inv Trust, Pennant International Group, Public Service Properties Inves (DI)tments Ltd., Randgold Resources Ltd., Regus, SpaceandPeople, Standard LifeFINAL EX-DIVIDEND DATEPowerflute Oyj (DI)