Yesterday (6 February) Tate & Lyle issued their forth profits warning this financial year. The sugar giant blamed the increasing price of fuel for pushing extra energy costs at its US operations beyond £40m for the financial year to the end of March, and the patience of investors is wearing thin.

In Britain over the last twelve months, Tate & Lyle’s stock has under-performed peers by 30% and yesterday it fell by a further 2% to 266-1/2p.

The problem, it seems, is that the company is too exposed to market factors beyond its control. A spokesman revealed that soaring energy costs meant that “in the US, the sugar regime remains unworkable, and the margins have been squeezed for an unprecedented period.”

The company, the world’s largest sugar manufacturer, also blamed the government for not helping the industry.

Margins has evaporated since an excellent harvest meant the difference between the prices of raw and white sugar started to deteriorate, leading to poor trading at the company’s US operations and some necessary decisions concerning the US sugar beet processing subsidiary Western Sugar and Domino, the US cane refining unit.

Tate & Lyle is anxious to divest the companies, stressing that the sale of Western Sugar to the Farmer’s Cooperative is on track and that it is still “pursu[ing] alternatives” for Domino. With combined losses of £20m however, they are not necessarily attractive opportunities for acquisition.

A vestige of hope has been provided by price increases at its starch and sweetener operations, as a statement revealed: “improvements at Staley and Amylum provide grounds for expecting a materially improved performance [during 2002].”

With things continuing as they are at present however, uncertainty will no doubt dominate investor’s relations with Tate & Lyle, and the shares are likely to under perform for some time to come. Recovery for the group may not arrive until 2003.