February 7, 2019 / 7:39 AM / 7 months ago

Energy, freight costs continue to weigh on Tate & Lyle guidance

The logo of Tate & Lyle compagny is seen on their European Innovation Centre in Villeneuve d'Ascq, France, September 26, 2018. REUTERS/Pascal Rossignol

(Reuters) - British food ingredients maker Tate & Lyle on Thursday reiterated that full-year earnings growth was likely to be at the lower end of its forecast, hurt by higher energy and transportation costs in its key North American market.

The company, which sells corn syrup and other ingredients to food and drink makers, has had to raise prices for some of its products to offset higher costs of materials and transportation.

That has seen it predict since the middle of last year that earnings would be at the lower end of its forecast for “mid-single digit” percentage growth. It repeated that guidance on Thursday for the financial year ending in March.

Chief Financial Officer Imran Nawaz told a call with analysts that freight costs would continue to rise next year, but not to the same degree, helping shares in the company trade marginally higher after initial losses.

“What I feel good about is the progress in the pricing round (with customers) to recover those freight costs,” Nawaz said. “We’ve made good progress ... to make sure we can recover those inflationary pressures.”

Tate & Lyle shares were around 1 percent higher by 1059 GMT.

The FTSE-250 company, which has been looking to simplify its business and speed up development of new products, said quarterly pretax profit in constant currency was ahead of last year, boosted by volume growth in its food & beverage solutions division and sales of low-calorie sweetener sucralose.

Volume in sucralose was higher due to an optimisation programme at its facility in Alabama with adjusted operating profit slightly ahead of the comparative period, Tate & Lyle said.

Tate & Lyle, known in its home UK market for its green golden syrup tins, has been focusing more on speciality food ingredients such as artificial sweeteners and other products like starch, which carry higher margins than its much larger and more commoditised business of bulk ingredients.

Reporting by Tanishaa Nadkar in Bengaluru; editing by Patrick Graham/ Gopakumar Warrier/Jane Merriman

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