Canaccord cuts Tate & Lyle's full year earnings forecast

Tate & Lyle was under the cosh on Friday after Canaccord Genuity cut its earnings forecasts ahead of the company’s full year trading update.

Canaccord said recovery in Mexican and Brazilian currencies, reduced interest costs and an increased contribution from joint ventures has been offset by higher than anticipated central costs.

Central costs were driven by a rise in depreciation and amortisation costs, particularly in Tate’s Specialty Foods Ingredients (SFI) business.

Canaccord now expects earnings per share of 33.8p in 2016, compared to a previous estimate of 34.7p and the prior year’s 37.7p. However, the broker said new estimates have been brought in line with current consensus expectations.

“Ultimately, however, we think Tate's share price will be driven by further evidence of stability in sucralose following the transition to a single production plant, improving profitability in HFCS (high fructose corn syrup) and greater focus on SFI, while essentially running Bulk for cash,” said analyst Eddy Hargreaves.

“We remain positive on management's ability to deliver this and note the recent better-than-expected performance from sucralose following the restructuring actions.”

Canaccord reiterated its ‘buy’ rating and target price of 685p, saying the shares have recovered modestly since the third quarter update on 11 February and “remain attractive in our view”.

Tate reports its full year trading update on 5 April.