Sugar group Tate & Lyle’s shares were caned today after its patent battle against Chinese manufacturers was dealt a blow by a US court ruling.
The UK firm claims rivals have breached its manufacturing patents on its sucralose sweetener – which it sells under the Splenda brand – on imports into the US.
But a judge at the US International Trade Commission (ITC) said he did not agree with Tate & Lyle’s claims in an initial ruling.
Tate will appeal the decision at a full six-person hearing of the ITC but shares fell as much as 17% as analysts warned of other potential copycats emerging.
Numis Securities analyst Nicholas Ceron said: “If the judges do not change their mind they will send a signal to potential sucralose manufacturers that Tate manufacturing patents are not as strong as claimed.”
The final decision in the case is due next January. Tate decided to take the Chinese manufacturers to court two years ago.
In the year to March 31, Tate made operating profits of £66m (€83m) on £148m (€187m) of sucralose sales – and spent £6 million on the ITC action, which went to trial in February.
The company’s general counsel Robert Gibber said: “This is a complex case involving a huge amount of in-depth technical analysis and debate between scientific experts.
“We would not have proceeded with an ITC case unless we believed we had adequate evidence to demonstrate that our patents are being infringed.”
But the initial decision is a blow because Tate has built a new sucralose factory in Singapore, which is not yet running at full capacity.
Mr Ceron added: “We think we will see more entrants in the market and hence more volume available from Tate competitors. We think there is a risk of overcapacity in the market.”
Tate & Lyle said in May annual profits had fallen 11% to £244m (€307m) after a “transitional” year.
The company rocked investors with a series of profits warnings after being hit by factors including a weak US dollar, lower sugar prices following EU reforms and higher European corn costs.