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Investing.com -- Shares of Tate & Lyle PLC (OTC:TATYY) (LSE:TATE) fell by 11% as the company reported a lack of acceleration in Food & Beverage Solutions (FBS) volumes in the second half of the year, leading to revised EBITDA expectations for the fiscal year 2025. The company now anticipates EBITDA at the lower end of the previously stated 4-7% growth range.
The market’s negative response follows Tate & Lyle (LON:TATE)’s third-quarter update, which showed FBS volumes increased by 4%, consistent with first-half performance, contrary to guidance suggesting an acceleration. Operating profit growth (OSG) for Sucralose was strong at 19%, maintaining the momentum from the first half of the year, with no signs of an unwind in orders. However, the company still expects a partial unwind in the fourth quarter.
The company’s annual contract renewals are projected to yield volume and revenue growth, yet the statement did not explicitly mention unit margin. This omission, coupled with the weaker-than-expected market demand environment, implies potential ongoing price discounting for FBS into 2025. The 2024 contracting round already experienced a 4% drag due to price discounting.
Barclays (LON:BARC) commented on the situation, stating, "We suspect the business is benefiting from the tariff risk overhang given competition here is almost entirely based in China... Tate’s shares were weak towards the end of 2024 as bid speculation faded and we think weakness was also on fears of a weaker 2025 pricing round. So to an extent we think the lowered EBITDA guidance could be somewhat anticipated.
The read-X from Ingredion (NYSE:INGR) last week to us seemed slightly more constructive on this front though so there still might be some disappointment today in our view."
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