Tate & Lyle warns on profits as sugar slumps

Tate & Lyle warned shareholders today that annual profits would be a little below expectations because of a slump in the US paper industry and weaker demand for sweeteners.

The sugars and starches group said underlying profit before tax would now come in "marginally below our previous guidance" — which was for an outcome similar to the £253 million achieved last year.

The alert was the second modest profits warning in nine weeks. In late January, Tate admitted that profits would come in at the bottom end of the expected range of £254-282 million.

However, the company today announced better than expected progress on paying down its debt mountain, cutting it by £300 million to £1.25 billion in the past three months.

It said earnings per share would not be affected because of a lower tax charge caused by a higher proportion of profits coming from outside the US and it was also reassuring on the safety of the dividend.

"We remain very committed to the dividend," said Iain Ferguson, chief executive. The aim remained to maintain the purchasing power of dividend income by lifting it by at least the Retail Prices Index. The interim payout was boosted by 4.6 per cent.

The commitment to the dividend helped underpin the shares, which rose 6.75p to 266p in early trading.

Mr Ferguson suggested the profits drop would be less than £10 million: "I wouldn't expect it to be a double digit profit reduction."

Tim Lodge, finance director, said the main reason for the profits shortfall was the 20-25 per cent downturn in the US paper industry. Tate supplies starches to the industry. Softer than expected demand for sweeteners and in Europe for sugar also dented profits.

Tate also announced that a new ethanol plant being built in Fort Dodge, Iowa, was being mothballed. "Given the continuing short-term pressure on ethanol margins and volumes, we have postponed final completion and start-up of the plant until market conditions improve."

The company, which is setting aside an exceptional £24 million to cover a dispute with an equipment supplier, reports full-year figures on 28 May.

source: business.timesonline