TIDMTET
RNS Number : 8743V
Treatt PLC
12 April 2023
12 April 2023
TREATT PLC
("Treatt" or "the Group")
Half Year Trading Update and Notice of Results
Strong revenue and profit growth; trading in line with
expectations for the full year
Treatt, the manufacturer and supplier of a diverse and
sustainable portfolio of natural extracts and ingredients for the
beverage, flavour and fragrance industries, announces the following
trading update for the half year ended 31 March 2023 (the
"Period").
Highlights
-- Record H1 revenue with 15% growth (8.5% in constant currency)
to GBP75.9m (H1 2022: GBP66.3m)
-- Profit before tax and exceptional items growth to at least
GBP7.1m, up by c12% (H1 2022: GBP6.3m)
-- Successful pricing actions to recover raw material inflation
-- Coffee growth ahead of expectations as we continue to embed this new, value-added category
-- Strong cost discipline and other self-help measures continue
-- Inventory reduction of cGBP7.0m since FY22 notwithstanding
record high orange oil prices and continued strategic inventory
holdings for large beverage customers
-- Net debt reduced to GBP17.7m (FY22: GBP22.4m) despite normal
working capital build in first half, with further reduction of debt
anticipated in H2
-- Trading in line with the Board's expectations for the full year
H1 2023 performance
We have made a strong start to FY23, with record H1 sales
expected to be 15% ahead of the prior year and 8.5% ahead at
constant currency.
Despite the uncertain macro environment, our beverage volumes
have shown resilience. We continue to win business with both new
and existing customers through direct sales to FMCG brands, as well
as indirectly through flavour and fragrance houses, demonstrating
the strength of the Group's diverse business model.
China continues to be an important strategic region for the
Group and our China subsidiary is making encouraging progress, with
sales into the region of GBP4.9m in the Period (H1 2022: GBP3.5m).
We continue to invest in the capability of our China business, both
in terms of technical lab equipment and headcount, enabling new
business wins and building our sustained confidence in the
longer-term outlook for the region.
We have seen particularly encouraging progress in Citrus, where
margins have improved across several of our key value-added
products, driven by the continued execution of our procurement and
pricing strategies as well as accelerating our strategic move away
from lower margin, more commoditised products.
Volumes of our value-added solutions in the beverage market were
in line with prior year, with stronger performances in Fruit &
Vegetables and Coffee. Coffee sales were GBP2.0m (H1 2022: GBP0.4m)
focusing on the premium cold brew coffee and ready-to-drink (RTD)
markets, where we continue to see material growth in sales and in
our pipeline. Health & Wellness and Tea sales were broadly in
line with prior year.
Synthetic Aromas, which relates primarily to food ingredients,
has declined in volume due to customer destocking of products used
to flavour savoury snacks and alternative proteins foods . However,
sales volumes were largely offset by sales price increases and
lower cost to serve, maintaining the contribution level from this
product category. Volumes are anticipated to normalise in H2.
After substantial investment in our people and production
facilities in the past 18 months to support the Group's next phase
of expansion, we do not anticipate any significant increase in
administrative expenses in the short to medium term, above the
normal rate of inflation. The group headcount has reduced by 6%
since September 2022 with the benefits of relocating to our new UK
facility beginning to show the expected efficiencies.
Having implemented a revised hedging and currency management
strategy, providing increased visibility and controls over our
currency exposures, foreign exchange impacts during the Period were
successfully managed with a net adverse impact of GBP0.2m
anticipated (H1 2022: GBP0.6m loss).
Balance sheet
The Group ended the half year with net debt of GBP17.7m (FY22:
GBP22.4m). We are nearing the end of our capital investment cycle
and have reduced inventory levels during H1 by cGBP7.0m, despite
record high orange oil prices and strategic inventory holdings for
large beverage customers. The Group has decades of experience
managing raw material price movements which are impacted, not only
by general inflation, but also by specific supply and demand
factors such as climatic conditions. We anticipate a further
reduction in net debt in H2 in line with market expectations.
Outlook
The Group has started FY23 strongly and we have good confidence
in Treatt's proposition and its ability to deliver top line growth,
supported by positive market dynamics. Q2 momentum was particularly
encouraging and we enter H2 with a strong order book and conversion
of sales pipeline. At this stage, we expect to report full year
profit before tax and exceptional items in line with the Board's
expectations.
Daemmon Reeve, CEO of Treatt, commented:
"We've had a strong half with record sales performance,
particularly driven by our largest category, citrus, where we have
both strengthened our longstanding relationships with some of the
biggest beverage companies whilst also winning some new
customers.
Despite the wider macro uncertainties, we remain well positioned
given the prevailing consumer trends and the resilience in both
alcoholic and non-alcoholic beverages. Our pipeline continues to
remain promising in both new and existing customer partnerships and
we are seeing good opportunities across a number of categories,
giving us confidence for the second half and beyond."
Notice of Results
Treatt's half year results for the six months ended 31 March
2023 will be announced on 9 May 2023. To register interest please
contact MHP on the details below.
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
Mike Burke
Financial PR
MHP +44 (0) 20 3128 8789
Tim Rowntree
Simon Hockridge
Catherine Chapman
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 approximately 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
.
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
This announcement contains forward-looking statements that are
subject to risk factors associated with, among other things, the
economic and business circumstances occurring from time to time in
the countries, sectors and markets in which the Group operates. It
is believed that the expectations reflected in these statements are
reasonable, but they may be affected by a wide range of variables
which could cause actual results to differ materially from those
currently anticipated. No assurances can be given that the
forward-looking statements in this announcement will be realised.
The forward-looking statements reflect the knowledge and
information available at the date of preparation of this
announcement and the Group undertakes no obligation to update these
forward-looking statements. Nothing in this announcement should be
construed as a profit forecast.
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