By Martinne Geller
LONDON Feb 13 British food ingredients firm
Tate & Lyle cut its profit outlook on Thursday, citing
a dramatic drop in prices of its sucralose artificial sweetener
and weak sales volumes in developed markets.
Shares of Tate & Lyle, which sells sucralose under the
Splenda brand and other ingredients to packaged food and drink
makers, tumbled 17 percent in their biggest intraday drop since
The price of Tate's sucralose, a mainstay of its specialty
food ingredients business, is falling because of competition
from cheaper rivals in China and a glut of unsold inventory
The specialty food ingredients business accounts for roughly
29 percent of annual sales and about 65 percent of adjusted
Tate said it expects sucralose prices to decline by about 15
percent in the current quarter and its next year financial year
that starts in April, versus an earlier forecast for a
The company said it has renewed several multi-year supply
contracts for sucralose at lower prices, as it seeks to defend
its market share.
For the full year to 31 March, Tate said profit should be in
line with the prior year, when its adjusted profit was 329
million pounds ($545.65 million). That is below analysts'
average estimate of 340 million pounds, based on the company's
earlier forecast for growth.
In the third quarter to Dec. 31, the company said group
adjusted profit before tax was lower than expected as a result
of weak sales of its customers' products, which include soft
drinks, in Europe and North America.
Chief Executive Javed Ahmed said on a conference call that
he still liked the sucralose business, despite the pricing
pressure. In the longer term, he said lower sucralose prices
could prompt some food and drink makers to reformulate their
products to use sucralose instead of other sweeteners.
Jefferies analyst Alex Howson attributed the stock price
drop to likely downgrades to earnings forecasts and renewed weak
sentiment on sucralose.
"The specialty food ingredients story remains intact, but
near-term earnings progression is likely to be subdued," Howson