REG - Treatt PLC - Half Year Trading Update and Notice of Results

TreattAnnouncement

12/04/2023 07:00

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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
£75.9m (H1 2022: £66.3m)

·      Profit before tax and exceptional items growth to at least
£7.1m, up by c12% (H1 2022: £6.3m)

·      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 c£7.0m since FY22 notwithstanding record
high orange oil prices and continued strategic inventory holdings for large
beverage customers

·      Net debt reduced to £17.7m (FY22: £22.4m) 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
£4.9m in the Period (H1 2022: £3.5m). 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 £2.0m (H1 2022: £0.4m) 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 £0.2m anticipated (H1 2022: £0.6m loss).

Balance sheet

The Group ended the half year with net debt of £17.7m (FY22: £22.4m). We are
nearing the end of our capital investment cycle and have reduced inventory
levels during H1 by c£7.0m, 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
(http://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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