Tate & Lyle said pre-tax profits before goodwill and exceptional items for the year ending March 31, 2001 fell to 113 million pounds ($158.6 million) from 209 million a year ago, as higher energy costs and a poor performance in America hit earnings.

But the group, which has issued four profit warnings during the last year, gave some encouragement to investors by announcing the sale of its U.S.-based Western Sugar Company unit to the Rocky Mountain Sugar Growers Co-operative for $96 million.

Chief Executive Larry Pillard added the group was in advanced talks about selling its struggling U.S.-based Domino Sugar unit.

BID TARGET?

Shares rose 15 pence, or 5.8 percent, to 274p in mid-morning trade -- its highest price since early March -- as investors gave a cautious welcome to its American disposal programme. The stock has a current market capitalisation of around 1.3 billion pounds.

Chairman David Lees added that despite continuing tough market conditions and a 45 million pound rise in energy costs, higher prices in its European and north American cereal sweetener and starch markets would boost the group.

Commerzbank analyst Savvas Savouri said that while a stronger starch market would help the company, some investors recommended holding the stock on the prospect of a venture capital firm making a bid for Tate & Lyle.

``There are two ways to promote this stock. One way is that the starch market is improving, the other is on speculation of a takeover bid or management buyout,'' said Savouri, who rates Tate & Lyle a speculative buy.

The company's low stock market rating would make it an attractive bid target. Its shares remain well below peaks of around 330 pence set in June 2000.

A succession of profit warnings have hit its shares over the last twelve months, and the stock has an estimated price to earnings (PE) ratio of about 12 for the next financial year -- below a corresponding average PE of 17 for the FTSE All Share Index.

HIGH DEBT LEVELS

A London-based fund manager at one of the company's main institutional investors said the company's restructuring plans were long overdue.

``The fact that it's come is producing relief rather than gratitude,'' the fund manager told Reuters, declining to be identified.

Tate & Lyle plans to cut costs by 50 million pounds annually by 2003-2004 to help revive its financial performance.

But investors also expressed concern over Tate & Lyle's high debt levels, which peaked at 982 million pounds in January. The company plans to use proceeds from its disposal programme to cut debt, which saw gearing stand at 83 percent by the end of the financial year just completed.

``It's not a stock people have much faith in,'' said the fund manager.