Berenberg lowers target price on Tate & Lyle

Analysts at Berenberg lowered their target price on food ingredients manufacturer Tate & Lyle from 890.0p to 860.0p on Monday due to FX headwinds.

Berenberg noted that Tate & Lyle had reported its third-quarter trading update on 21 February, with sales guidance for the year being reduced to "slightly below" FY23 levels due to lower pricing as a result of lower raw material costs and its pass-through pricing policy.

Meanwhile, adjusted underlying earnings guidance for 7-9% growth in constant currency remained unchanged. However, Berenberg said it had still opted to downgrade its FY24 earnings per share estimates by 3% as a result of currency exchange headwinds.

"In FY 2023, Tate implemented supplementary pricing in FBS to cover sharp input cost inflation, driven by the conflict in Ukraine. The bulk of the impact from this began in Q3 FY 2023, leading to a drop off in reported pricing in Q3 FY 2024. Price/mix moderated to 8% in Q3 FY 2024, following 16.6% in H1," said Berenberg. "This 8% growth was split equally between inflation-driven pricing and the more standard price/mix reported during less-volatile periods for input costs."

Looking ahead, the German bank noted that the balance of Tate's organic growth between volume and mix will depend on how the consumer environment improves throughout the year, stating that so far in Q4, volume momentum had been positive, and that management expects this to continue throughout FY25.

Reporting by Iain Gilbert at Sharecast.com