REG - Treatt PLC - Trading Update

TreattAnnouncement

15/08/2022 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220815:nRSO9405Va&default-theme=true

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 £15.0m and £15.3m.

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
(http://www.treatt.com) .

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTFFFVLTEISLIF