I thought the results good too and couldn't see anything to worry except that perhaps future share price growth will come about through Sterling weakness more than anything else. Obviously the business is running efficiently on all cylinders. I bought £10000 worth last week as a hedge against a poor result for the Tories. Only a small part of Tate's revenues come from the UK.
"Is LSE:TATE:Tate & Lyle's turnaround intact? Weak commodity prices and supply chain issues triggered a fall in Tate & Lyle shares from 883p in 2013 to 502p in the summer of 2015. Then came a strong recovery to 810p, only for the shares to plunge ..."
It is the FX impact that concerns me at the moment, not as straight forward as weak sterling equals better earnings due to overseas bias. The Mexican Peso in particular, which a lot of the sales to the US drinks manufacturers are in, is at an all time low. The visibility of this effect in the accounts is poor - except for the company stating that hedges to some degree and MXN is 2nd most important currency after USD.
I would also view NAFTA break up as a risk, as could slap on a tariff on those exports into the US. This won't happen overnight when Trump comes in, but he has already put some direct pressure on US car manufactures looking to build their new plants south of the border and had go at BMW recently to the same effect.
Some of the value metrics are attractive but not without political risk. The FT did a couple of good articles on the above during ~Q3 last year which could google if want further info.
All sensible comments of yours, m8. I used to hold TATE for several years and my image of it is as a serial disappointer over the long haul. Things may be different now but I'm disinclined to take a long position in it mesen. Good luck if you feel otherwise; you could well be right.
Buy-back is purely administrative, RNS on 13th. indicated
"The Company intends to hold these shares in Treasury to satisfy awards made under employee performance share plans."
I have been considering a purchase here. The valuation depends a lot on the growth TATE can achieve in their new products. They have built this business from scratch to sales of 86m since 2012. The indicated target sales of 200m by 2020 looks a stretch but they seem confident, there appears to be good progress in the speciality products division.
I think they have made a smart move in shifting out of sugar and focusing on other products, particularly those in the health food area which looks set to continue to grow. T&L are leading suppliers into the energy bar and yoghurt drink markets and splenda is a leading brand in the huge low-cal drinks market. Fx will support earnings which are nearly all overseas, but significant debt in USD/Eur likely to balance that somewhat.
Forecast EPS from Digital Look (normally adjusted) for 2017-19 is 44.8 47.77 49.0
4 traders normally quote unadjusted numbers - 41.3 43.6 46
Either way well up on 2016 EPS of 34.5p, 34.7p or 34.8p depending whether you take it diluted, adjusted or straight.
Div is forecast to rise modestly from 28p in 16 to 29.5p in 2019, a solid 4%+ at current SP with decent potential for capital gain.
Clearly there is some execution risk, food markets, especially health foods can be fickle, but on balance I am inclined to take a modest position here, maybe upto 3%.
Commencement of Share Purchase Programme
The Company announces that it will today commence a share purchase programme over 2,000,000 of its ordinary shares of 25 pence each in the capital of the Company (the ?Share Purchase Programme?).
Any purchase of ordinary shares done in relation to this announcement will be carried out on the London Stock Exchange and executed in accordance with the Listing Rules and the Company's general authority to make market purchases of its ordinary shares. The Company intends to hold these shares in Treasury to satisfy awards made under employee performance share plans.
The maximum pecuniary amount allocated to the Share Purchase Programme is ?15 million and the maximum number of ordinary shares that will be purchased under the Share Purchase Programme is 2,000,000. The Share Purchase Programme will commence on 13 January 2017 and will end no later than the expiry of the authority obtained at the Company?s last AGM on 21 July 2016. This authority expires at the latest on 30 September 2017, or, if earlier, the date of the Company?s 2017 Annual General Meeting.
This should give a boost to the SP as the EPS rises.
"We'll always want sugar even if Beke Off goes to channel 4.'
I really don t know what this has got to do with Tate&Lyle as they don't refine (produce) any sugar. Their refining plant in the UK and the brand name of 'Tate&Lyle sugars' has long since been sold to an American company who also bought the Tate&Lyle brand.
Tate&Lyle currently have two divisions - bulk and speciality. Bulk are sugar based, but have fewer calories than refined sugar. They are currently primarily used in drinks such as Cola. Speciality products are materials that tasle like sugar, but only have 10% of the calory value of sugar. By 2020, the company has the objective of being 70% Speciality and 30% Bulk.
So the company is divesting itself of sugar as fast as it can; sugar lovers should look elsewhere.
I agree that nobody has told Tate&Lyle's marketing department what the strategy is, but this is just one reason why the shares are being held back.
Had these on the watch list since they were recommended in Moneyweek but I didn't like the PE. in yesterday at 657p as I think the fall is overdone based on fundamentals. the market is not going away. T&L have scale, earn in $ (which has not taken much of a hit vs Sterling). Holding from here and will look again in 12 months.
No idea. Maybe it's just the US is a huge market and Trump is protectionist..... only believes in free trade in areas where it benefits the US, his definition of unfair competition being any competition the Americans don't win and he will be 100% biased in favour of US companies, putting artificial barriers in place against any 'foreign' owned companies?
Tate produces lots of stuff, high fructose corn syrup in particular, in Mexico and sells the bulk of it in the US. Trump has not exactly been friendly to the Mexicans (or anyone else for that matter) and has talked about undoing NAFTA.
"Can LSE:TATE:Tate & Lyle build on its recovery? After a downtrend from 883p in 2013 to 502p mid-2015, the chart (below) for this Mid-250 sugar and sweeteners giant is improving as its price tests 640p after prelims for the year to end-March ..."
Update from them today - Target increased to 730p:
"Tate & Lyle has turned a corner
Tate & Lyle (TATE) is turning the corner after a torrid time and is on the path of sustained recovery.
Liberum analyst Robert Waldschmidt reiterated his buy recommendation and target price of 730p on the shares, which rose 0.4% to 628.5p yesterday.
We lift our full year 2017/18 pre-tax profits by 1-2% and expect the shares can rerate as Tate turns the corner on a torrid time, he said.
Tate is on the path of sustained recovery. We forecast an 11% rebound in full year 2017 pre-tax profits as speciality food ingredients margins improve, bulk and sucralose profits stabilise and new plant capacity comes online.
Over 2016-21 we expect an 8% earnings per share compound annual growth rate with upside risk if Tate executes its strategy to shift volumes to speciality food ingredients faster or shifts the portfolio via bolt-on mergers and acquisitions. "
Tate & Lyle (TATE) faced operational challenges in 2015 but is now recovering and creating solid momentum.
Liberum analyst Robert Waldschmidt reiterated his buy recommendation and target price of 700p on the shares, which fell 0.8% to 583.5p yesterday.
Tate & Lyle issued a short two-line trading update stating that its 2016 fourth quarter (to the end of March) trading performance was in line with both the expectations and the outlook included in the third quarter 2016 trading update, he said.
This implied that Tate continues to maintain its guidance of full year profit before tax of £193 million at constant exchange rates. The statement reflects that Tates recovery post the operational challenges faced in full-year 2015 continues to progress well and we believe it carries solid momentum into full year 2017.
He added that Tate has turned the corner and full-year 2016 is an inflection point and there is scope for significant upside."
I'm surprised the SP has been hammered a bit more by the budget announcement of a 'sugar tax'.
Has the company diversified enough into specialty ingredients that its not a concern?
Even so, I expected the SP to get hammered just because of the association with sugar.
"Tate & Lyle was a high riser on Friday following an encouraging capital markets day.
Liberum, which reiterated its 'buy' rating on the stock, said Tate hosted a "confident" CMD focused on the group's Speciality Food Ingredients unit.
The broker said Tate laid out credible plans to deliver its ambition to transform the group into a materially SFI-focused business by 2020.
"Over the past 18 months, Tate has significantly upgraded SFI's capabilities and skills while realigning the group's portfolio to benefit from global demand for healthier and convenient foods. We were impressed by the SFI team and believe they are well positioned to outperform end-market growth of 4-5% growth and expand margins."
Liberum expects Tate's recovery to lead to improving free cash flow generation as margins rebound.
It forecasts a strong pick-up post FY16 with free cash flow that covers progressive dividend payments from FY17.
In addition, it said improving FCF generation puts Tate's balance sheet on a better footing. The broker estimates a 40% drop in net debt by FY18, which in turn will give management the flexibility to accelerate investment in SFI or undertake bolt-on M&A."
I currently have 21 companies in my portfolio, so I'm not looking to add any right now, but I'd like to increase my weightings in some.
I recently made a small purchase in JMAT and would like to double up to bring it in line with my average holding size. I also want to make smaller increases in FEVR, PFD and CNKS.
I just received a chunky dividend from CNKS so I have good feelings about it currently!
I also held Treatt, but have sold that one out after a quick 17% gain was on table in just one month after buying. I thought their cash position in the short term was weak and a Rights issue a possibility as well (due to plant shifting). However I like that company too and may get back in on weakness.
Anyway, I would be interested in knowing the other shares that are on your mind for buying, if you sell Tate or otherwise.
You make a good point, I'm not that keen on selling. However I have other stocks competing for funds, and I already have a chunky holding in another food speciality company (flavourings expert Treatt), so I feel I already have a decent exposure to this area.
I shall think about it over the next two weeks leading up to the dividend.
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