Tate & Lyle First-Half Results: Boost From British Pound's Collapse Masks Limp Performance

No moat Tate & Lyle, the U.K.-based starches and sweeteners manufacturer, reported strong sales and earnings growth for the six months to end September, mostly due to the steep depreciation in the British pound bringing about a large translation benefit. This masks a limp performance in the high-margin specialty business whose volumes were again stagnant. These results contrast starkly with peer Ingredion's strong year-to-date performance. Nonetheless, we are significantly revising up our underlying EBIT forecasts for the years ended March 2017 and 2018 by 16% and 20%, respectively, given currency weakness. We now expect fiscal 2017 sales to be boosted 16% due to currencies, carrying over to a 5% boost for the year to March 2018. Our fair value estimate is revised to GBX 680 (+15%).