LONDON -- The shares of Tate & Lyle (LSE: TATE ) dropped 1% in London trade today despite the company's statement that it expects to make "modest progress" during the current financial year. The company, which produces a vast range of food ingredients such as acidulants, corrugating corn starches, locust bean gum, and polydextrose, based its claim after having made a "solid start" to its fourth quarter.
Tate & Lyle's prediction was accompanied by a mixed third-quarter update revealing that adjusted profit before tax had, "as expected," fallen during October, November, and December. The FTSE 100 member revealed good sales growth from its starch-based ingredients and solid demand for its liquid sweeteners.
However, today's statement revealed that sucralose volumes were not as strong as expected and, for the current year, would now be below the level achieved last year. Tate & Lyle also admitted that aflatoxin, a fungus that can contaminate corn harvest, had affected the firm's crops in the quarter and would reduce profits by 7 million pounds for the full year.
Prior to today, City experts studying Tate & Lyle had expected current-year earnings to remain flat at 56 pence and the dividend to advance 4% to 26 pence per share. Such projections place the shares on a P/E multiple of 14 and dividend yield of 3.3%.
Meanwhile, the FTSE 100 trades at about 12 times earnings and boasts a 3.5% income. As such, Tate & Lyle's higher P/E rating and lower yield may not offer as much short-term value as the wider market, especially given the mixed statement issued today.
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