Food ingredients business Tate & Lyle (TATE) fell 3.9% to 668.2p as the closure of restaurants, bars and cinemas led to a significant drop in demand.
Looking back, the company said it expected its results for the financial year just completed to be slightly ahead of its previous guidance. Results for the year through March 2020 are expected on 21 May.
‘The group performed well during the year with each trading division exceeding the prior year’s performance,’ it added.
‘Accordingly, we expect to announce results slightly ahead of our guidance coming into the year.’
Tate & Lyle said that while trading in March showed little impact from the Covid-10 pandemic, lockdowns in April had led to significant changes in demand patterns for its products.
The company said its food and beverage solutions and Sucralose units continued to perform well, with volume for the former in line with the comparative period and Sucralose 18% higher due to phasing of customer orders.
DIVIDEND PRESSURE
‘Earlier in the month, demand was strong for ingredients used in packaged and shelf-stable foods as consumers in North America and Europe filled their pantries for consumption at home,’ Tate & Lyle said.
‘As the month progressed, this was offset by lower demand for products consumed out-of-home, such as in the food service sector in North America’.
Volume in the primary products division, meanwhile, was ‘significantly impacted’ by the first full month of lockdown in the US.
Bulk sweetener volume was 26% lower from reduced out-of-home consumption as bars, cinemas, restaurants and sporting events were either shut or cancelled.
Shore Capital analyst Darren Shirley says: ‘The company also reports significant covenant headroom (net debt/EBITDA not greater than 3.5x), with no debt maturing until 2023.
‘Whilst so, in the current environment where cash conservation is very much the order of the day, we do have to place a significant question mark over Tate & Lyles’ capability/desire to maintain short term dividend payments.’
