TIDMTET
RNS Number : 9405V
Treatt PLC
15 August 2022
15 August 2022
TREATT PLC
("Treatt" or "the Group")
Trading Update
Treatt, the manufacturer and supplier of a diverse and
sustainable portfolio of natural extracts and ingredients for the
beverage, flavour and fragrance industries, today announces a
trading update for the year ending 30 September 2022.
In the Group's half year results announcement, we referenced the
anticipated return to Treatt's traditional H2 profit weighting
supported by a very strong order book. Although the Group is still
expecting to report strong revenue growth for the full year and
retains an excellent order book, it has been affected by a number
of separate factors which will impact profitability for the full
year. We now expect profit before tax and exceptional items to be
between GBP15.0m and GBP15.3m.
The revised guidance is given for the following reasons:
-- As stated in the half year results, we anticipated a much
stronger performance from our higher margin Tea category in H2
driven by iced and hard tea consumption in North America. As has
been well-documented, consumer confidence in the US has
deteriorated in recent months causing lower demand in this category
which has materially reduced our margins. Whilst Tea sales will be
lower year-on-year, after an exceptional FY21 performance, our
anticipated two year growth of over 60% in this category highlights
the significant opportunity in the future.
-- The Group's margins have been adversely affected by
increasing volatility in FX movements during H2. The UK business
makes a portion of its sales in US Dollars and uses foreign
currency exchange contracts to manage risk. The rapid devaluation
of Sterling against the US Dollar during the period has had a
significant impact on margins.
-- The Group is experiencing significant input cost inflation
and whilst, in a number of cases, the business has been able to
pass this onto its customers, some longer term contracts have not
yet allowed this to be achieved across the full portfolio.
-- Our China subsidiary has experienced well documented extended
Covid-19 related restrictions in large parts of the region
resulting in the loss of some higher margin revenue in the
year.
Notwithstanding these negative, predominantly short-term,
challenges to profitability, we are encouraged by other trends seen
through H2, including the ongoing strength of the order book which,
as announced in the half year results, continues to be up c.25%
year-on-year, giving us confidence as we head towards the new
financial year. Aside from the Tea category, we are seeing strong
growth in all other Treatt categories and the opportunity for
efficiencies in our new UK manufacturing site is increasingly
clear.
After substantial investment in our people over the past 12-18
months, we believe we now have the right people infrastructure in
place to seize the multiple growth opportunities available; we do
not anticipate any significant increase in administrative expenses
in the short to medium term, outside of the normal rate of
inflation. The Company is also reviewing how it can better limit FX
exposure in light of increasing volatility.
Daemmon Reeve, CEO of Treatt, commented:
"Whilst clearly disappointed by the short term impact on
profitability, we remain encouraged by the underlying trading
performance of the business and are confident in the long term
growth drivers for Treatt.
We have significant opportunities across our categories and
geographies and, notwithstanding the short-term impacts in Tea, we
see strong momentum in all of our categories given the alignment
with prevailing consumer trends. For example, there continues to be
sustained growth in demand for our natural and authentic extracts
and bespoke solutions for a wide range of beverages.
We also remain excited about the potential in Coffee over the
next few years and expect this category to be reported separately
at the full year given we are now seeing growth in orders and
multiple opportunities for the future."
Financial calendar
The Group expects to issue a trading update in October 2022,
after the completion of the financial year to 30 September
2022.
Treatt plc +44 (0)1284 702500
Daemmon Reeve Chief Executive Officer
Ryan Govender Chief Financial Officer
Joint Brokers
Investec Bank Plc +44 (0)20 7597 5970
Patrick Robb
David Anderson
Peel Hunt LLP +44 (0) 20 7418 8900
George Sellar
Andrew Clark
Lalit Bose
Financial PR
MHP Communications +44 (0) 20 3128 8789
Tim Rowntree
Simon Hockridge
Catherine Chapman
This announcement contains inside information within the meaning
of the Market Abuse Regulation. The person responsible for
arranging release of this announcement on behalf of Treatt is Ryan
Govender, Chief Financial Officer.
About the Group
Treatt is a global, independent manufacturer and supplier of a
diverse and sustainable portfolio of natural extracts and
ingredients for the flavour, fragrance and multinational consumer
product industries, particularly in the beverage sector. Renowned
for its technical expertise and knowledge of ingredients, their
origins and market conditions, Treatt is recognised as a leader in
its field.
The Group employs over 400 staff in Europe, North America and
Asia and has manufacturing facilities in the UK and US. Its
international footprint enables the Group to deliver powerful and
integrated solutions for the food, beverage and fragrance
industries across the globe.
For further information about the Group, visit www.treatt.com
.
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