The market always reacts with anger when a company lowers its guidance about the future. But the brouhaha surrounding Tate & Lyle’s results today is something else.
Fingers are pointing at Citigroup, the company’s house broker, for scaring investors by suggesting it might cut its profit forecasts in the wake of Tate & Lyle’s downbeat annual results statement. Other analysts who had been upbeat on the company in recent weeks are also busily re-doing their numbers.
Fair enough that analysts get it wrong sometimes. But it would be embarrassing for Citi if the house broker had called it wrong in the run-up to the results. Citi should perhaps have been better informed as to Tate & Lyle’s prospects. The situation is awkward for Citi given that it is trying to bolster its corporate broking franchise.
For the bearish brokers – notably Credit Suisse – today’s downbeat guidance from Tate & Lyle vindicates their longstanding caution on Tate & Lyle.
But it would be wrong to suggest that the results contain nothing new to anyone who had been closely reading the company’s recent announcements. The company’s comments that this year will be one of “transition” are a genuine change of tone – and sound like code for weak or zero profits growth.