Treatt PLC on Monday said volatile foreign exchange movements and reduced demand in the US have negatively impacted margins in its soon-to-end financial year.

Shares in Treatt were down 32% at 546.00 pence in London on Monday morning.

Treatt is a Suffolk, England-based manufacturer and supplier of extracts and ingredients for the beverage, flavour and fragrance industries.

The company expects profit before tax and exceptional items in the financial year ending September 30 to fall between £15.0 million and £15.3 million, as a result of ‘a number of separate factors’ affecting profitability. This would be down from the £20.9 million achieved in its 2021 financial year.

Treatt said its margins have been hit by the devaluation of the pound against the dollar, with its UK business making a portion of its sales in US dollars and using foreign currency exchange contracts to manage risk.

In addition, tea category sales will be lower than the year before, due to reduced demand and consumer confidence in the US, which has reduced margins.

However, Treatt said it still expects to report strong revenue growth as it retains an ‘excellent’ order book, which continues to be up 25% year-on-year.

The company does not anticipate any significant increase in administrative expenses over the short and medium term, outside the normal rate of inflation.

Chief Executive Officer Daemmon Reeve said: ‘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.’

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