Tate & Lyle in line but warns of slow start to new year

29th May 2014 08:06

- Earnings down 2% but ahead of consensus at 55.7p- Final dividend up 5.3% to 19.8p- For 2015, sucralose headwinds expected- For 2015, slow start expected for Bulk Ingredients In the face of tough competition in artificial sweeteners and adverse weather effects, Tate & Lyle produced annual revenues, profits and earnings broadly in line with expectations. With sales down 3% in real and constant currencies to £3.15bn for the year to end-March, adjusted pre-tax profits of £322m were flat at constant currencies but down 2% in real terms and a teaspoonful below forecasts.Adjusted diluted earnings per share were ahead of consensus forecasts as they fell 2%, but remained flat on constant currencies at 55.7p.A 5.3% increase in the final dividend is proposed to 19.8p per share, equates to a full year payment of 27.6p.Chief Executive Javed Ahmed argued the FTSE 250 group continued to make "steady progress" in executing its strategy. "The delivery of solid profit growth in starch-based speciality ingredients and Food Systems, along with another year of strong growth in emerging markets, was offset by the impact of the cold spring in the US last year followed by the recent severe and prolonged winter, and an increasingly competitive market for Splenda sucralose."Cash generating was strong, up 48% year-on-year, thanks to lower corn price on inventories and working capital, with a £145m swing in working capital.Tate's hailed another strong performance in Asia Pacific and Latin America with double-digit volume growth during the period, now representing 19% of Speciality Food Ingredients sales.Looking forward, as well as continued sucralose pricing headwinds that are expected to offset the predicted good performance elsewhere in the division, Bulk Ingredients is now anticipated to deliver a slower start in the US.Tate said Bulk Ingredients would be hit in the first quarter by the prolonged and severe winter, combined with lower European sugar prices in the second half, outweighing a expected better performance across other product categories.Overall, management expect the group's performance for the full year to be "slightly lower" than the comparative period, but said it was well placed to deliver growth in the longer term due to its strong innovation pipeline, robust balance sheet and continued growth in emerging markets.Broker Panmure Gordon said due to the slow start warnings it was are cutting PBT forecast from £316m to £304m and our EPS forecast from 52.8p to 50.5p. "While the rating looks undemanding, in our view the stock lacks an obvious catalyst for outperformance," it said.Analysts at Shore Capital also "again" lowered its forecasts, which already reflect guidance provided in February for a sharp decline in sucralose pricing and margin and lower margins in US Bulk Sweeteners, and currency headwinds. Shore Cap said: "Whilst we recognise the considerable heavy lifting that has taken place in upgrading Tate and Lyle's infrastructure, capability and culture in recent years, we have yet to see such work transfer into more sustained and importantly visible profit growth." It maintained a 'hold' recommendation.With investors seemingly having expected worse, shares in the company were up 2.58% to 691.93p at 09:17 on Thursday.OH