Tate & Lyle CEO plots new path as commodities boost profits

Tate & Lyle has reported a 13% increase in annual profit driven mainly by the rising price of commodities.

Adjusted pre-tax profit for the year to the end of March rose to £301m from £271m a year earlier. Sales fell 2% to £2.71bn.

Reported pre-tax profit, including currency movements and exceptional items, rose 23% to £286m.

Growth was fuelled by a 28% increase to £166m in adjusting operating at Tate & Lyle’s primary products business. Profit from sweeteners and starches rose £13m to £134m and profit at the commodities business jumped by £24m to £32m due to gains from higher prices for corn and corn gluten feed.

Tate & Lyle no longer produces the sugar that made it a famous name and instead supplies sweeteners and other ingredients to the food industry.

Anton Brink, an analyst at broker Kepler Cheuvreux, said the results met expectations but that earnings quality was disappointing because they were boosted by favourable commodity prices that might not be repeated.

But investors were impressed with a strategic review from new chief executive Nick Hampton, who took over in April, sending Tate & Lyle’s shares up more than 8% to 660p by Thursday afternoon, levels last seen at the start of the year.

Hampton said: “Tate & Lyle delivered another year of progress, with good profit and cash delivery. Profit increased in all businesses. The group remains in a strong financial position, increasingly well positioned to address growing consumer demand for healthier diets with less sugar, calories and fat and more fibre.”

Hampton, the former finance chief who joined four years ago from PepsiCo, announced three initiatives designed to improve performance. Tate & Lyle will concentrate its efforts on beverages, dairy, and soups, sauces and dressings, develop new products and target $100m of productivity gains over the next four years, he said.

Analysts at Societe Generale said the group's guidance for 4-5% constant currency growth for adjusted EPS in the new financial year, "could trigger circa 10% upgrades to current consensus".

Investec on the other hand expected consensus EPS forecasts to rise by around 3-5%, assuming the pound-dollar rate will act as a low single-digit drag on earnings, based on current rates.