Sugar is one of those everyday products that is all pervasive in terms of daily consumption patterns. Sugar and/or sweeteners appear as an item on the small print section of the labels on virtually all packaged foods. While sugar itself tends to have a recognisable national brand, for example, Siucra in Ireland, companies involved in the production and refining of sugar and related products are producing commodities rather than branded products.

The two companies which will be most familiar to Irish investors are Tate and Lyle in Britain and of course Greencore in Ireland. Tate and Lyle produced final results recently which were much better than forecasts with full-year profits of £241 million sterling. Of course sugar is not the company's only product, but it and related products such as low-calorie sweeteners and starches account for 80 per cent of turnover.

Despite its British base Tate and Lyle is geographically well spread with Britain accounting for only 16 per cent of turnover. The US accounts for 36 per cent of turnover and the balance is split equally between Continental Europe and other countries.

The company has been engaged in extensive cost cutting and rationalisation which incurred large exceptional costs. Current results are also being adversely affected by the strength of sterling. However, the fruits of this rationalisation exercise are expected to come through strongly by 1999.

Greencore's profits have also been under pressure from a series of one-off unrelated adverse events. The company has been hit by a strike, a grower boycott, bad weather conditions, Green Pound revaluations and, to cap it all, an EU fine. Not surprisingly, the bad news has been reflected in a very weak share price performance with an actual decline in the share price of 18 per cent so far this year.

Compared to Tate and Lyle, Greencore is a much more narrowly focused business and it is still the sole supplier of sugar to the Irish market. Consequently, Ireland accounts for 85 per cent of turnover although this does include a flour milling business which accounts for 50 per cent of the domestic market.

The company has tried to diversify internationally but with limited success. The purchase of a 30 per cent stake in the US company, Imperial Holly, was seen as a very positive move by analysts. However, this stake was subsequently diluted as Imperial Holly issued more shares to fund an acquisition of its own. By the time this article appears, Greencore will have produced full-year results. The consensus expectation is for pre-tax profits of around £48 million after exceptional charges. However, for investors the actual profit level achieved will be less important than the accompanying statement as to the future direction of the group.

The company has virtually no debt on its balance sheet whereas a debt/equity ratio of 50 per cent would be more appropriate for a cash generative business such as Greencore. Stock market analysts have speculated about the likelihood of a share buy back which would certainly be viewed positively by the market.

However, share buy backs do not automatically lead to a stronger share price. For example Smurfit's share price declined when it bought back some of its own shares and Allied Irish Banks share price suffered a similar fate after it purchased its own shares. In these cases the shares of both companies did eventually rise above the respective buy-in price.

However, in Greencore's case a buy back could well signal a turning point given that the company's shares have underperformed sharply over the past year and it is likely that 1998 will be a much better year than 1997. Alternatively, the company may clarify its strategy towards future acquisitions. Currently, it is believed to be interested in two potential acquisitions one of which is the Spillers flour milling business owned by Dalgety Plc.

Greencore is currently rated on a 1998 forecast price earnings ratio of 11.5 which compares with a P/E of 13.3 for Tate and Lyle and an average P/E for the overall Irish market of about 14. Therefore, a reasonable set of results combined with a favourable statement should be viewed as a buying signal by investors.