Tate & Lyle reported better than anticipated annual results yesterday but its shares went sour on warnings that it would be hit by a shake-up in the European Union's sugar trading regime.
Profits before tax, amortisation and exceptionals came in at £255m for the 12 months to March 31, up from £277m last time and above City forecasts of about £240m.
But shares fell 5% to 462p as the group said "[EU] reform will adversely affect the future performance of our European sugar and food and industrial ingredients business".
Tate could not quantify the financial impact at this stage, but one analyst predicted its sugar refining profits - 23% of the group's total - could be reduced by 40%.
The change follows a World Trade Organisation ruling that the EU must cut quotas, which will lead to a fall in the price of both sugar and competing sweeteners made from starch. A set of EU reform proposals is expected on June 22.
"It is our intention to publish our quantification of the range of potential impacts upon our businesses after the EU proposals are formally published," said Tate chairman Sir David Lees.
This should have little impact on its Splenda sucralose product, which has been a driver of Tate's recent profitability but has also been criticised by health campaigners because chlorine is used in its processing. The zero-calorie sweetener "has its own unique ways of being valued", said the chief executive, Iain Ferguson.
Despite the uncertainty, Tate felt positive about the future outlook of its business and raised the total dividend by 3.2% to 19.4p a share.
Vishnu Gopal, an analyst at investment bank Goldman Sachs, warned Tate's sugar-refining profits in the EU "could tumble by over 40% on the back of reforms based on the EU's white paper proposals".
Broker Numis Securities said Tate's 2004-05 performance was due to higher than expected second-half production and faster integration of the Splenda business.
The post-exceptional result was dented by a £55m charge after Tate settled US litigation over allegations of corn syrup price-fixing, although the company never admitted liability.
