Iain Ferguson, the affable chief executive of Tate & Lyle, has been left battered and bruised this year following three successive profit warnings and a plummeting share price. Earlier this week, those warnings crystallised in a 19% slump in half-year profits. Sections of the City are calling time on Ferguson’s tenure at the head of the food and ingredients group. Dean Best reports.
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One analyst has labelled the last 12 months at Tate & Lyle as the UK group’s “annus horribilis”. The food and ingredients firm has seen its shares tumble after a series of profit warnings. This week, Tate & Lyle confirmed those fears with a set of poor half-year results.
Inevitably, shareholders have been turning up the pressure on Tate & Lyle boss Iain Ferguson and questioning whether he should be held to account for the company’s woes. The profit warning in September, for instance, wiped almost a third from the value of the company.
Some argue that, as chief executive, the Scot should accept ultimate responsibility and resign. Others believe Tate & Lyle, which has sold off a raft of assets this year and is focusing on value-added food ingredients, is heading in the right direction. Ferguson, they say, should be given more time.
Investec analyst Martin Deboo says it is “natural” for Ferguson to have come under pressure but insists the company and the chief executive needs to look ahead. “This is Year Zero. Focusing on value-added is still the right strategy for Tate and the company continues to report progress in that. It has a very, nice, core value-added business, which contributes around 50% of profits. But, Tate could have managed expectations better.”
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By GlobalDataThe weak US dollar, losses from its European sugar trading business and rising commodity costs have all hit Tate & Lyle this year. Tate & Lyle’s series of disposals have been an attempt to reduce the effect of the weak dollar on the business but the company’s sugar trading losses were somewhat unexpected. And with commodity costs continuing to rise, Tate & Lyle will face sustained pressure to turn to higher-margin products.
However, one such product, Splenda, continues to disappoint investors after high early expectations from Tate & Lyle. Given the constant stream of better-for-you products hitting the food and beverage sectors, the Splenda order-book should arguably be bulging. Sucralose sales were up – at constant exchange rates – during the last six months but the figures remain something of a disappointment to some in the market.
One further, perhaps more technical, issue that has angered investors has been Tate & Lyle’s communication of changes in the company’s tax bill. Tate & Lyle’s recent restructuring in Europe has altered the amount of tax the company pays on its operations on the continent. However, the company originally mis-communicated just how much tax it would save after the disposal of operations in Europe and has now admitted there could be a “one-off” tax cost for the business. “A change in the tax guidance is a major issue for investors as it hits earnings per share,” Investec’s Deboo says.
For all Tate & Lyle’s problems and mishaps, Ferguson has refused to stand down and insists the company is on the right track. “We have continued to grow the contribution from core value-added food ingredients and have made significant progress in transitioning our portfolio of businesses,” Ferguson says.
Tate & Lyle is in a period of transition. How much longer Ferguson, chief executive since 2003, will be given at the helm is uncertain.
