UPDATE 3-Tate & Lyle warns of lower sweetener margins

* U.S. sweetener margins to be around 10 pct lower

* Sees marginally lower operating profit

* Sweetener/starch 2010 prices below 2009

* Shares down 4.1 percent

(Rewrites with finance director comment, analysts, shares)

By David Jones

LONDON, Jan 28 (BestGrowthStock) – Britain’s Tate & Lyle (TATE.L: )
said margins at its U.S. corn sweetener business would fall 10
percent in 2010 and lead to marginally lower profit due to the
fall in prices agreed for its sweetener and starches.

Thursday’s update from the London-based sugar refiner and
sweetener group sent its shares lower and prompted analysts to
downgrade profit forecasts for the year to March 2011 as the
group blamed a prolonged economic downturn.

U.S. corn millers such as Tate, privately-owned Cargill and
Archer Daniels Midland (ADM.N: ) agree pricing for sweeteners at
the start of the year with buyers like drinks makers Coca-Cola
Co (KO.N: ), PepsiCo (PEP.N: ) and Dr Pepper Snapple (DPS.N: ).

Tate’s business, supplying sweeteners, starches and ethanol,
produce over two thirds of group profits with the rest coming
largely from its sugar and sucralose super sweetener units.

“We expect sweetener margins to be somewhat down, and we
will see an average fall in margins of around 10 percent for
U.S. sweeteners,” group Finance Director Tim Lodge told Reuters
in an interview after a trading update.

The group also warned its current operating profits for the
year to March 2010 would be “marginally lower” than the previous
year with consensus forecasts at 299 million pounds ($486.4
million) against last year’s 298 million according to a
company-conducted survey.

Tate shares fell 4.3 percent to a day’s low of 389.6 pence
and were off 4.1 percent at 390.3p by 1140 GMT. The stock has
now fallen nearly 15 percent since early January when the first
concern about the sweetener pricing round emerged.

Analysts are hoping new chief executive Javed Ahmed who took
over last October after moving from Reckitt Benckiser will be
able to squeeze better returns from the investments the group
has made over previous years and improve cash flows.

One glimmer of better news for Tate was that its corn costs
were lower helping it to buy cheaper raw materials.

“The sweetener pricing settlement is a disappointment as we
expected, but there looks to be some unanticipated relief on the
input cost side,” said analyst Martin Deboo at Investec.

Tate’s Lodge said he expected current pretax profits for the
year to March 2010 to be towards the lower end of a current
forecast range of 220-235 million pounds.

Analyst Julian Hardwick at house brokers RBS held his pretax
profit forecast at 225.5 million pounds but cut his forecast for
the year to March 2011 to 243 million from 258 million. His
forecast for operating profit for the current year to March 2010
was unchanged at 294 million pounds.
($1=.6195 pounds)

Investment Basics

(Reporting by David Jones; Editing by Rupert Winchester and
Mike Nesbit)

UPDATE 3-Tate & Lyle warns of lower sweetener margins