Sweetener and starches maker Tate & Lyle Plc
The London-based group posted a first-half pretax profit of 180 million pounds for the six months to end-September on Thursday, ahead of the consensus forecast of 164 million pounds given in a Reuters survey of nine analysts.
Chief Executive Javed Ahmed said he expected a good performance for the full year which helped boost its share, but added a note of caution as European leaders were considering the possibility of Greece leaving the euro zone.
Everybody's concerned in terms of what's happening in the euro zone at the moment -- the biggest challenge for this economy right now, from our point of view, is going to be how to maintain growth, Ahmed said on a conference call.
Ahmed said while sales of its industrial starches -- used in the manufacture of cardboard packaging and paper -- had so far escaped the economic downturn relatively unscathed, they were sensitive to the macroeconomy.
Industrial starches... is something we would watch very closely because the paper and board industry can be cyclical, can mirror the economic downcycle, he said, adding that this part of Tate's business had been hit during the global financial crisis three years ago.
But Ahmed said the defensive nature of the food and beverage industry which Tate supplies had stopped the company feeling the effects of a worsening economic environment as yet.
Our ingredients go into a large number of products, whether they're high end or low end, so we haven't really seen any impact on our business yet, he said.
Share in Tate, which have outperfomed the FTSE 100 <.FTSE> index by more than 35 percent and European food and beverage stocks <.SX3P> by nearly 30 percent this year, were up 4.0 percent to 673 pence making it the FTSE 100's third-biggest riser.
Ahmed said Tate would deliver a good performance for the full-year with the help of lower interest costs after the company reduced its net debt in the first half to 410 million pounds from 540 million pounds a year ago.
I think we see that performance being pretty broad-based -- we expect a continuation of growth in all our product categories, he said.
Tate raised its half-year dividend 4.4 percent from a year ago to 7.1 pence a share.
We see this as a strong half for Tate and expect to upgrade our full-year numbers modestly, Investec Securities analyst Martin Deboo said in a note.
Tate, which makes sucralose zero-calorie sweetener Splenda and makes most of its profits in the United States, has benefited from the spill-over from high sugar and corn prices, good sales for sucralose, and high price for its by-products.
But higher corn prices mean Tate will probably have to impose higher prices on its customers during the annual pricing rounds held in the final quarter of the year, Chief Financial Officer Tim Lodge said on a conference call.
The company has focussed on value added products and away from bulk commodities since Ahmed took on the role of Chief Executive in late 2009, selling its once core sugar refining operations and then its mothballed Fort Dodge ethanol plant in Iowa.
(Editing by David Jones and Mike Nesbit)