By Mark Potter
LONDON (Reuters UK) - Tate & Lyle (TATE) has lost a U.S. patent case against manufacturers and importers of Chinese sucralose, its super sweetener sold under the name Splenda, sending its shares plunging 17 percent to a 4-year low.
The sugar, sweetener and industrial starches group said on Tuesday that it intended to appeal against the preliminary ruling by a judge at the U.S. International Trade Commission.
"We believe this case just illustrates the risks involved with Tate's portfolio," Numis analysts said in a research note, arguing the ruling could lead to overcapacity in the sucralose market as new entrants join, and so hit Tate & Lyle's margins.
Sucralose, a zero-calorie sweetener used in over 4,000 foods and drinks, accounted for almost a quarter of Tate & Lyle's adjusted operating profit in the year ended March 31.
At 8:40 a.m., Tate & Lyle shares were down 9.9 percent at 374.75 pence, valuing the 87-year-old company at about 1.7 billion pounds. The stock earlier touched 344.75 pence, its lowest since September 2004.
APPEAL
"We would not have proceeded with an ITC case unless we believed we had adequate evidence to demonstrate that our patents are being infringed," Tate & Lyle's General Counsel, Robert Gibber, said in a statement.
"We intend to petition for an appeal of the decision by the full Commission."
A binding, final ruling by the full six-person Commission is expected by January 2009.
"At best, we view this decision as poor for sentiment," Citi analysts said in a research note. "While we see no immediate risk, we suspect that questions will inevitably be raised on the robustness of sucralose profits over coming years."
Tate & Lyle said that, irrespective of the final ruling, its sucralose business benefited from the efficiency and quality of its manufacturing plants in the United States and Singapore, the strength of the Splenda brand and its long-standing relationship with the world's biggest food, drink and pharmaceuticals makers.
Sucralose generated 148 million pounds of sales for Tate & Lyle in the year ended March 31 and an operating profit of 66 million.
This compares with group sales of 3.4 billion pounds and adjusted operating profit of 286 million.
Shares in Tate & Lyle, which makes Lyle's Golden Syrup in Britain, have underperformed the DJ Stoxx European food and drinks index by about 30 percent over the past year.
(Editing by Sue Thomas and John Stonestreet)
