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Tate and Lyle turns sour after debt worries, while FTSE edges high on Greek hopes

Third quarter sales growth disappoints as borrowings rise on corn purchases

Tate and Lyle led the FTSE 100 fallers after a disappointing trading update which pointed to higher than expected debt levels.

The maker of Splenda sweetener said operating profit in the third quarter was in line with expectations but the rate of volume growth was lower than in the first half. Rising corn prices meant that net debt at the end of March this year would be higher than the £464m recorded in the previous year. In a sell note Martin Deboo at Investec Securities said:

The moving parts seem to be pretty much as we anticipated and Tate remains on a steady course. But we sense some caution from management relative to our expectation that there was room for 2012/13 consensus upgrades.

Tate have elected to keep their corn silos full in the face of tight supply. Given rising corn prices, this is likely to drive year end net debt up towards the £500m level, relative to consensus of £473m and our £481m. The impact on earnings in 2012 should be de minimis, but we have some concerns that consensus expectations of net debt in 2013, at £325m, are too low (we are on £439m). This is more material.

In the event the market was nervous, and Tate’s shares ended 22.5p lower at 672.5p.

In a big day for company results – and the eurozone debt crisis and economic front – the FTSE 100 was neither shaken nor stirred. The index closed 19.54 points higher at 5895.47, as the Bank of England unveiled £50bn more quantitative easing and Greece declared a deal had been reached on its austerity package. Investors clearly felt we had been here before, but this time the deal could finally have been done. Angus Campbell, head of sales at Capital Spreads, said:

There’s no question that today’s rally was a tentative one and indicates there’s still a degree of caution amongst investors. The FTSE that has been directionless throughout the whole of this week showing just how indecisive investors are at the moment.

On the corporate front BG pleased with forecast beating fourth quarter figures, adding 45.5p to 1491.5p, but Rolls-Royce lost 15p to 770p and Rio Tinto fell 58.5p to £38.15 after their results.

Among the mid-caps reporting SVG Capital climbed 19.9p to 257.9p but Rank lost 4p to 139p.

Enterprise Inns pleased investors, adding 9.25p to 51.5p. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds