Tate & Lyle faces $40m proft hit on ethanol tax The company, which no longer makes sugar, makes 100m gallons of ethanol a year which is mixed with petrol to make it more environmentally-friendly in America. However, generous tax breaks equating to 45c a gallon, were scrapped by the US Government at the end of last year. Tate's main rival Archer Daniels announced earlier this week it would mothball one of its main ethanol plants as a result. Martin Deboo, an analyst at Investec, said: "This is certainly a negative for Tate." Tate & Lyle has indicated that it should be able to reduce its production of ethanol and switch its resources to more profitable areas. It also pointed out it was a very small part of its overall business. But the company also used a third-quarter trading update to warn investors that very strong growth in its sucralose business from the first half, which ran at 17pc, would slow dramatically in the second half of the year. Sucralose is used both for Splenda, a branded sweetener, and sold to fizzy drinks and medicine manufacturers. Lucrative contracts which boosted first half volumes were not repeated in the second half. Tate & Lyle , however, said it was on track to hit full-year profit targets thanks to successfully passing on the full cost of rising corn prices in its US corn sweetener business, its biggest division. Margins should increase here. The shares fell 22.5 to 672.5p.