Brokers get a sweet tooth for Tate & Lyle

2nd December 2013

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Stockbrokers are tipping sugar and sweetener group Tate & Lyle as a share to scoop up as the firm streamlines its business and targets another period of solid growth writes Philip Scott.

The corporation, which produces an estimated 4m tonnes of cereal sweeteners and refines over 2m tonnes of sugar each year sold into around 35 countries has far from shot the lights out in terms of recent share price movement.

The FTSE 100 listed group has edged up just 2% over the past year and fallen by 8% during the last six months to presently trade at circa the 783p per share mark.

But analysts at Societe Generale, Deutsche and Citigroup have all rated the shares a ‘buy’ according to Digital Look while Credit Suisse is ‘neutral’.

However Sheridan Admans, investment research manager at The Share Centre, has named Tate & Lyle as his ‘share of the week’ as he believes the group has turned a corner with a steady trend of return on capital employed over the last three financial years.

He says: “We recommend the company as a ‘buy’ for investors as its programme to become a speciality food ingredients group is progressing. This division of the business has experienced solid sales growth this year, with particularly strong growth from its emerging market operations. Tate and Lyle’s decision to sell off some of its sugar assets to invest in the speciality food ingredients area of the business appears to have been a good move.”

Despite tough trading conditions in Europe and slightly slower sales in its US soft beverage market impacting results this year, the company remains confident of delivering another good year of profitable growth he asserts.

Adman says: “The company has been strengthening its balance sheet by reducing net debt, driven by stronger cash flow. Looking ahead, Tate and Lyle expects lower corn prices in Europe will more than offset the impact of lower sugar prices on isoglucose margins.”

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