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Tate & Lyle H1 results
Tate & Lyle’s H1 results have largely been driven by commodities prices (sugar prices have been very high, while corn prices have been low), low demand of ethanol, and low corn prices.
Tate & Lyle’s big hope for the future, artificial sweetner sucralose, performed very well with sales up 9% at CER, but at the cost of margins, so operating profit rose only 3%.
The margin deterioration in the suralose business, has been the result of giving better deals to major customers. This may not be a problem, but it does need to be watched: if Tate & Lyle needs to keep accepting lower margins in order to get sales, then we should expect much lower rates of profit growth.
The company expects the core sugar business to have a better environment next year, now that changes in the regulation of sugar in the EU have been complete.
At 461p, Tate and Lyle is on a PE of almost 13× (with earnings expected to be flat, it hardly matters whether one uses historical or forecast EPS). The half year dividend has been unchanged, so we can also assume flat dividends, so the yield is a nice 5%.
So, we have an income share with a possible growth driver, and a reasonable short term outlook.
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