* Full-year profit falls 2 pct to 322 mln pounds
* Sees performance for new year "slightly lower"
* Says M&A could accelerate goals, but not needed
* Shares up 4.4 percent; analyst bullish on long-term
(Adds background, CEO comment, share move, byline, bullet
By Martinne Geller
LONDON, May 29 Tate & Lyle posted a
drop in profit and forecast a further weakening in the new year,
as the British food ingredients firm feels the chill from a cold
winter in the United States and stiff competition for its
The company, which sells a range of sweeteners including
sucralose under the Splenda brand, said in February that
sucralose prices would be about 15 percent lower in the new
That was due to an influx of cheaper Chinese rivals and a
glut of unsold inventory there. Tate & Lyle has had to
renegotiate contracts at lower prices in order to maintain
At the same time, the company's corn syrup business has been
dented by an unusually long and bitter winter in the United
States that hurt sales of its customers' soft drinks.
In the fiscal year ended 31 March, Tate & Lyle said adjusted
operating profit before tax was 322 million pounds, down 2
percent from the prior year. Excluding the impact of currency
fluctuations, it was flat.
Sales fell 3 percent to 3.15 billion pounds.
Last month the company said it expected flat full-year
earnings following a disappointing third quarter that led it to
cut its forecast, hitting its share price.
Up until Wednesday's market close, Tate & Lyle's shares had
fallen 17 percent so far this year while the Stoxx Europe 600
Food & Beverage sector index rose 2 percent.
That left it with a market capitalization of 3.1 billion
pounds ($5.18 billion) and led to market speculation it could be
vulnerable to an unsolicited takeover bid from larger rivals
including Bunge and Cargill.
The stock recouped a small part of those losses on Thursday,
surging 4.4 percent by 0915 GMT as Jefferies analysts said the
firm remained fundamentally sound with good long-term prospects.
Citi analysts noted full-year earnings per share were ahead
of some analysts' expectations at 55.7 pence, largely due to a
lower-than-expected tax rate.
"Given the various negative year-to-date surprises, and
consequent stock performance, we think these results are,
overall, encouraging," Citi said in a note.
Tate & Lyle is trying to increase its exposure to
higher-margin products like specialty ingredients and
higher-growth emerging markets of Latin America and Asia.
It is seen as one of the suitors for German drink and food
flavours maker Wild, which is being put up for sale by its
owners, the son of its founder and U.S. investment firm KKR
, at a time that consumers are showing more interest in
products with natural flavours and ingredients.
The company's board approved new capital investment of 100
million over the next two years in specialty food ingredients to
expand capacity for existing and pipeline products
Asked about mergers and acquisitions, Chief Executive Javed
Ahmed told Reuters that the company can meet its goals
organically, but that "the right M&A could supplement and
For the new financial year which started in April Tate &
Lyle said group performance should be "slightly lower" than the
previous year, before the impact of currency movements.
It said its specialty food ingredient business should
deliver volume growth across all major product categories, but
that lower profits from sucralose would offset good performance
elsewhere. It said the bulk ingredients business would be hurt
by a slower start to the selling season in the United States due
to the long winter and lower European sugar prices.
Despite the lower outlook, Jefferies analysts applauded the
company's innovations and tuck-in acquisitions that bring it
closer to increasing its profitability.
"Once the dust settles, investors can re-visit what remains
a well-led, well-invested and well-positioned business
for the long term. But patience is going to be required," the
analysts said in a research note.
(Reporting by Martinne Geller in London; Editing by Greg
Mahlich and John Stonestreet)