Sweetener producer and sugar refiner,Tate & Lyles(LSE: TATE) shares are collapsing today, down around 17% at time of writing after the company issued yet another profit warning.
The group announced today that profit for the full-year will be in the range of 230m to 245m, down from the previously expected 292m the consensus amongst City analysts.
Tates troubles can be traced to the companys supply chain, wherethe prolonged and severe winter within the US earlier this year, caused operational difficulties at the companyscorn plants. As a result, Tate entered the year with lower inventories of corn than usual. Whats more, the group was hurt by the extended shutdown of its SPLENDA Sucralose facility in Singapore during the first quarter.
Unfortunately, even though these supply chain disruptions occurred during the first quarter, supply chain disruption lasted longer than expected. Due to the continued disruption, the group expects to incur additional non-recurring costs during the second quarter ofaround 20m, bringing the total exceptional costs for the first half to around 40m.
In addition, the group expects to report furthernon-recurring costs of around 10m during the second half of the financial year.
Commenting on todays warningJaved Ahmed, chief executive, said:
The Groups performance in the first half has been extremely disappointing as we have faced significant manufacturing and supply chain challenges, and intense competition in SPLENDA Sucralose. I have instigated an immediate review of our planning and supply chain processesI continue to be encouraged by our robust innovation pipeline, the strength of the Speciality Food Ingredients business excluding SPLENDA Sucralose, and continued growth in emerging markets
A great outlook
Still, even though todays profit warning is disappointing, investors shouldnt jump ship just yet. Indeed, Tate has many attractive qualities, supply chain disruptions due to a severe winter is hardly something the company can control. Whats more, Tates directors have recently been showing their support for the company.
Over the past few months, Tates directors have been buying big chunks of the companys shares. Javed Ahmed brought 20,000 shares a few months ago and chairman Sir Peter Gershon acquired 10,000 shares at a similar price. In total these transactions totalled just under 200,000 not a small bet.
And then theres Tates hefty, well-covered dividend payout. At present, after todays declines the company supports a dividend yield of around 4.5% and City analysts have a 3.3% dividend increase pencilled in for next year. Last year the payout was covered twice by earnings per share.
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The Motley Fool has recommended shares in Tate & Lyle.