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Tate, tariffs and Brexit

Analysing companies' finances and value from their financial statements using ratios and formulae
TheMotorcycleBoy
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Tate, tariffs and Brexit

#259138

Postby TheMotorcycleBoy » October 20th, 2019, 4:57 pm

Toward the tail end of last year, I mentioned that one of my holdings (TATE) was doing quite well, and I asked people why it the face of Brexit uncertainty this was the case. At the time, no suggestions were forthcoming. Now I've noticed that recently (in the past month) Tate's SP has been on a downward trajectory.

So I started googling...

What I didn't realise until this afternoon was that Tate actually likes Brexit:

Keeping Britain’s sweet tooth satisfied is big business. Great dunes of sand-coloured raw cane sugar from the tropics are piled to the rafters at Tate & Lyle’s processing warehouse in east London. The equivalent of eight days’ worth of national sugar consumption occupies a surprisingly large volume of Thames dockside and fills the air with the heady smell of treacle.
....
None of the government visitors can match Brexit secretary David Davis who – in a little-known career footnote – spent 17 years working for Tate & Lyle before becoming a politician, much of it battling against what its current American owners regard as the tyranny of European sugar regulation.

Tate & Lyle was one of the only large employers to campaign openly for Brexit during the referendum and, after Theresa May invokes Article 50 on 29 March, sugar will be on the frontline of the upcoming battle over Britain’s economic future.

The reason lies in the EU protection afforded to Tate & Lyle’s company’s arch-rival British Sugar, which uses a very different technique to make a chemically identical product. Its brand of white crystal, Silver Spoon, is made not from imported sugar cane, but from sugar beet grown on farms in the east of England.

One might think the Brexiteers’ promise of “taking back control” of Britain’s economic destiny would favour domestic producers such as British Sugar over foreign importers, such as Tate & Lyle.

Yet sugar beet production has now become a symbol of protectionist European agricultural policies that many Tory hardliners hope Britain will leave behind....


From https://www.theguardian.com/business/20 ... tish-sugar, but anyway that article is 2.5 years old.

One year later (March 2018)

Iconic British firm reveals SHOCK sums it sends to Brussels and heralds Brexit LIBERATION ICONIC British sugar refiners Tate & Lyle said the European Union forces the company to pay a 35 percent duty on imports before they are allowed to sell their products on the British market.
Tate & Lyle has long complained about the "prohibitively high" import tariffs the European Union imposes on foreign-grown sugar cane – with senior Vice-President Gerald Mason hailing the opportunities Brexit offers the company.

Mr Mason argued that leaving the EU will put an end to the cheques the sugar-refinery business has to pay to Brussels before being allowed to sell its products.

He said: "On some of the ships we buy, we face a tariff of around 35 percent.

"The ship will arrive here at the dock in East London and as we are unloading it, before we are allowed to sell the sugar in the market to consumers, we have to send a cheque of around €3 million to Brussels."


From https://www.express.co.uk/news/uk/93440 ... nion-video

(The irony being from the same rag later in the page Tate & Lyle's London refinery uses imported sugar cane. )

Anyway then I wondered whether it's rumour of a takeover bid that made TATE hit 800p in mid-May. Or whether Trump's Americas (Mexico and Canada) policies may have a part to play? No more likely in the ongoing tit-for-tat(e) between US and China. On Sept 6th 2019. Seems to almost coincide with the recent SP:

Exclusive: China sugar industry to lobby government for extension of hefty tariffs on imports - sources

BEIJING (Reuters) - Chinese sugar mills plan to ask the nation’s Ministry of Commerce to extend hefty tariffs on sugar imports that Beijing imposed in 2017 to protect China’s struggling domestic sector, according to two sources and a draft document viewed by Reuters.

The plan to request an extension of the tariffs was discussed at a meeting organized by the China Sugar Association on Thursday.

Beijing’s trade measures on sugar imports, set to expire on May 21, 2020, “have played an effective role in safeguarding the interest of the domestic industry, and promoting healthy and stable development of the sector,” said the draft document that was dated Sept. 5.

China’s domestic sugar sector has struggled to compete with foreign rivals due to higher production costs. Chinese white sugar prices CSRc1 also plunged in 2018, amid a global supply surplus, pushing many producers into the red.


From https://www.reuters.com/article/us-chin ... SKCN1VR1N4

Any theories (other than noise!) would be of interest,
Matt

PinkDalek
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Re: Tate, tariffs and Brexit

#259144

Postby PinkDalek » October 20th, 2019, 5:14 pm

Haven’t read your entire post nor the links but does it take into account that Tate & Lyle PLC (TATE) are not sugar refiners and are not involved in the sugar trade. That may have been mentioned the last time you discussed TATE.

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Re: Tate, tariffs and Brexit

#259148

Postby TheMotorcycleBoy » October 20th, 2019, 5:33 pm

PinkDalek wrote:Haven’t read your entire post nor the links but does it take into account that Tate & Lyle PLC (TATE) are not sugar refiners and are not involved in the sugar trade. That may have been mentioned the last time you discussed TATE.

I know it's from the Express and 1.5 years but this talks heavily of tate+sugar+tariffs.

https://www.express.co.uk/news/uk/93440 ... nion-video

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Re: Tate, tariffs and Brexit

#259150

Postby PinkDalek » October 20th, 2019, 5:38 pm

They talk of Tate & Lyle sugar refiners.

Part of American Sugar Holdings:

https://www.tateandlylesugars.com/about-us/asr

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Re: Tate, tariffs and Brexit

#259151

Postby swill453 » October 20th, 2019, 5:39 pm

TheMotorcycleBoy wrote:
PinkDalek wrote:Haven’t read your entire post nor the links but does it take into account that Tate & Lyle PLC (TATE) are not sugar refiners and are not involved in the sugar trade. That may have been mentioned the last time you discussed TATE.

I know it's from the Express and 1.5 years but this talks heavily of tate+sugar+tariffs.

https://www.express.co.uk/news/uk/93440 ... nion-video

I think they're just being a bit slapdash with the company name. Gerald Mason is Senior Vice President at Tate & Lyle Sugars, which was hived off from TATE in 2010 https://www.tateandlylesugars.com/about-us/asr

Scott.

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Re: Tate, tariffs and Brexit

#259156

Postby TheMotorcycleBoy » October 20th, 2019, 5:54 pm

To Swill and PD,

Sorry, I think I get it now. TateandlyleSugars is now merely a brand owned by ASR group and is totally separate from TATE.

Ok, was on a wild goose chase, it seems :roll: .

Still, have you folks got any clues as to the slow decline of the SP, 16% since May? I'm not particularly bothered (we bought our's at 631p).....but I'm curious whether considering buying if it gets as low as 640-650p would be good, or whether there's something bad going on with the firm.

Matt

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Re: Tate, tariffs and Brexit

#259157

Postby Alaric » October 20th, 2019, 5:58 pm

The TATE plc doesn't do sugar any more, sugar substitutes perhaps.

According to wikipedia

Tate & Lyle PLC is a British-headquartered, global supplier of food and beverage ingredients to industrial markets. It was originally a sugar refining business, but from the 1970s began to diversify, eventually divesting its sugar business in 2012. It specialises in turning raw materials such as corn and tapioca into ingredients that add taste, texture, and nutrients to food and beverages.[2] It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.

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Re: Tate, tariffs and Brexit

#259159

Postby TheMotorcycleBoy » October 20th, 2019, 6:08 pm

Anyway, now we've done the name and brand's and sugars bit, what about the SP?

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Re: Tate, tariffs and Brexit

#259161

Postby PinkDalek » October 20th, 2019, 6:19 pm

In Company Analysis? ;)

Have you studied the full year results released in May 2019?:

https://www.investegate.co.uk/tate---38--lyle-plc--tate-/rns/final-results/201905230700049109Z/

I haven’t but I recall 50% of the turnover is in the USA (may be wrong). Worries about the economic climate there?

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Re: Tate, tariffs and Brexit

#259166

Postby TheMotorcycleBoy » October 20th, 2019, 6:45 pm

PinkDalek wrote:In Company Analysis? ;)

Yes, just in terms of fundamental reasons as to why.

Have you studied the full year results released in May 2019?:

https://www.investegate.co.uk/tate---38--lyle-plc--tate-/rns/final-results/201905230700049109Z/

I haven’t but I recall 50% of the turnover is in the USA (may be wrong). Worries about the economic climate there?

Will do. A job for tommorrow. Must eat.

Matt

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Re: Tate, tariffs and Brexit

#259167

Postby Alaric » October 20th, 2019, 7:13 pm

TheMotorcycleBoy wrote:Yes, just in terms of fundamental reasons as to why.


The price now is much the same as it was a year ago even though the dividend is up a little. Whatever it was that caused the price to shoot up earlier this year hasn't been sustained.

http://tools.morningstar.co.uk/uk/stock ... E%24%24ALL

Historically the price has wandered all over the place.

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Re: Tate, tariffs and Brexit

#259204

Postby TheMotorcycleBoy » October 21st, 2019, 6:21 am

Alaric wrote:
TheMotorcycleBoy wrote:Yes, just in terms of fundamental reasons as to why.


The price now is much the same as it was a year ago even though the dividend is up a little. Whatever it was that caused the price to shoot up earlier this year hasn't been sustained.

I believe that there was a possible takeover bid in the offing.

With only four full months left in 2019 I’m thinking about which stocks are likely to be worth watching in the coming year. I think Tate & Lyle (LSE: TATE) is a strong contender for growth in 2020. Year-to-date its share price has seen a high of £8 but is now around £7, at a 37% discount to its estimated future cash flow value. Rumours of a takeover bid apparently caused the spike, but these were quickly quashed.

https://www.fool.co.uk/investing/2019/0 ... -for-2020/

?

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Re: Tate, tariffs and Brexit

#259208

Postby TheMotorcycleBoy » October 21st, 2019, 7:05 am

PinkDalek wrote:In Company Analysis? ;)

Have you studied the full year results released in May 2019?:

https://www.investegate.co.uk/tate---38--lyle-plc--tate-/rns/final-results/201905230700049109Z/

I've just read that PD, thank you. It looks fairly upbeat, sales up slightly, and Net income down due to disposals (oats business) and higher tax bill.

I'm also seeing this:

· 11% increase in Sucralose profit3 to £61m, volume 16% higher
· 11% decrease in Primary Products profit3 to £148m, volume in line with prior year

If "primary products" is regular sugar products, rather than non-sugar then I'm guessing the trend is the right one.

These bits are encouraging too:

· Adjusted free cash flow higher at £212m
· 90bps improvement in return on capital employed to 17.1%
· Proposed final dividend of 20.8p per share; full year dividend of 29.4p per share up 2.4%

What are your views?

Matt

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Re: Tate, tariffs and Brexit

#259210

Postby swill453 » October 21st, 2019, 7:28 am

TheMotorcycleBoy wrote:If "primary products" is regular sugar products, rather than non-sugar then I'm guessing the trend is the right one.

"Primary Products are all fairly similar and include products such as high fructose, corn syrup and acidulants. https://www.tateandlyle.com/what-we-do

Scott.

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Re: Tate, tariffs and Brexit

#259212

Postby TheMotorcycleBoy » October 21st, 2019, 7:55 am

swill453 wrote:
TheMotorcycleBoy wrote:If "primary products" is regular sugar products, rather than non-sugar then I'm guessing the trend is the right one.

"Primary Products are all fairly similar and include products such as high fructose, corn syrup and acidulants. https://www.tateandlyle.com/what-we-do

Scott.

Cheers, Scott.

So in eyes of investors wary of sugar-tax fears the 11% increase in sucralose products, and 11% decrease in primary (i.e. naughty sugary type-2 diabetes-causing things) products, this move looks like the correct trend for TATE.

Matt

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Re: Tate, tariffs and Brexit

#259233

Postby vrdiver » October 21st, 2019, 10:35 am

Hi Matt,

I bought Tate in April 2007 (so before the financial crisis) and have, according to my records, a XIRR of 5.4% and dividend CAGR of 2.5%, 1.29% and 2.6% respectively over one, five and ten years.

I remember the move out of sugar refining and into artificial sweeteners (SPLENDA) being hailed as the trigger for a re-rating, but nothing happened; I'd describe TATE as a serial disappointer, with the only redeeming feature the dividend, which has been held or increased every year since I purchased. Yield is around 4.3% as I write, so it seems the market is still underwhelmed by its prospects.

You could buy it and hope for a takeover boost, compensated by the dividend whilst you wait or hope that management will play a blinder on whatever opportunities Brexit and obesity awareness bring, but my observations over the last 12 years are that they have ebbed and flowed (capital value-wise) but generally disappointed (my XIRR figure drops to about 3.2% after adjusting for inflation, which is less than my 4% planned withdrawal, so in reality the dividend is at the expense of (some) capital).

Maybe you've picked the right moment in history to make a bundle from a potential change in fortune, but there are a lot of companies going through the same historic events. If it was me, I'd keep looking...

VRD


(my negativity almost guarantees that they will do really well of course!)

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Re: Tate, tariffs and Brexit

#259236

Postby TheMotorcycleBoy » October 21st, 2019, 10:57 am

vrdiver wrote:Hi Matt,

I bought Tate in April 2007 (so before the financial crisis) and have, according to my records, a XIRR of 5.4% and dividend CAGR of 2.5%, 1.29% and 2.6% respectively over one, five and ten years.

I remember the move out of sugar refining and into artificial sweeteners (SPLENDA) being hailed as the trigger for a re-rating, but nothing happened; I'd describe TATE as a serial disappointer, with the only redeeming feature the dividend, which has been held or increased every year since I purchased. Yield is around 4.3% as I write, so it seems the market is still underwhelmed by its prospects.

You could buy it and hope for a takeover boost, compensated by the dividend whilst you wait or hope that management will play a blinder on whatever opportunities Brexit and obesity awareness bring, but my observations over the last 12 years are that they have ebbed and flowed (capital value-wise) but generally disappointed (my XIRR figure drops to about 3.2% after adjusting for inflation, which is less than my 4% planned withdrawal, so in reality the dividend is at the expense of (some) capital).

Maybe you've picked the right moment in history to make a bundle from a potential change in fortune, but there are a lot of companies going through the same historic events. If it was me, I'd keep looking...

VRD

(my negativity almost guarantees that they will do really well of course!)

Hi mate,

I only bought a small (1K) holding back in 2018 when it was 631p, I've been in credit on them ever since. To be honest it's not a share I find that exciting. I multiplied 631p by 102% since +2% what their overall sales has gone in the past year. Which gave me 644p as a possible buy price.

Basically I only really noticed them again, since I tend to spend a couple of hours per week reviewing our holdings and seeing what I think I should spend my hard earned on month to month. They pricked my interest due to their fall since Sept - which could easily be a £/$ effect a la ULVR and DGE for all I know.

The thing that's recently been in the news re. TATE I believe is:
https://www.tateandlyle.com/news/tate-l ... -expansion

and I think MD features as ingredient in various infant formulas:
https://www.myorganicformula.com/blogs/ ... d-palm-oil

so I guess TATE do have growth in mind......of course whether it works, or gets later binned (like oats) is another issue.

Matt


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