SocGen cuts Tate & Lyle price target after full-year results

29th May 2015 14:49

Societe Generale cut its price target on Tate & Lyle to 600p from 660p to reflect downgrades to its earnings estimates following the company's full-year results.The bank cut its full-year 2016 adjusted pre-tax profit forecast by 3% to £205m to reflect a weaker outlook for the bulk ingredients division given deterioration in ethanol profitability.Meanwhile, a slower forecast profit recovery in sucralose, combined with higher tax and interest assumptions resulted in an 8% cut to the bank's FY 2017 EPS estimate, to 35.8p.SocGen said that lower earnings before interest, tax, depreciation and amortisation, stepped up capex and cash restructuring meant full-year 2015 free cash flow (FCF) of £66m did not cover the £130m dividend cost.In full-year 2016, capex will step up further to £200m as Tate addresses supply chain inefficiencies at its speciality food ingredients, resulting in another year with the dividend uncovered by FCF, noted SocGen."Tate's 10% share price drop over the past twelve months was driven by sharper deterioration in earning per shares, which does not leave the valuation overly compelling in our view given residual risks inherent in the high fructose corn syrup profit stream," said SocGen, which rates the stock at 'hold'.