Shares in ingredients supplier Treatt (TET) ripened up 3.1% to 608p on Friday as the company guided towards a modest rise in annual profit and confirmed its intention to pay a final dividend.
Despite the uncertainties engendered by the pandemic, Treatt said it is ‘cautiously optimistic’ about its growth trajectory for the new financial year too.
A steady performer throughout the pandemic, Treatt expects pre-tax profit before exceptional items for the year to September 2020 to increase to around £14 million, up from the £13.3 million generated in fiscal 2019 and in-line with pre-Covid-19 expectations.
TASTY MOMENTUM
For the uninitiated, Treatt makes and supplies a diverse portfolio of natural extracts and ingredients for the flavour, fragrance and multinational consumer product industries, particularly in the beverage sector.
Building on the momentum seen in the first half, Treatt performed well during the second half thanks to its focus on added-value products.
‘Our strategy has built resilience into our business model and we are strongly positioned to benefit from key consumer trends including the preference for natural products, a growing interest in health and wellness, and premiumisation,’ said chief executive Daemmon Reeve, whose charge remained cash positive despite hefty investment in its new UK factory.
SALES SOUR (SLIGHTLY)
Annual revenue is expected to be roughly £109 million, representing a year-on-year fall of 3% with sales impacted by a substantial fall in orange oil raw material input costs, although revenue grew by 4% with orange oil related products stripped out.
The impact of Covid-19 with regards to on-trade demand was ‘particularly felt in Q3’, explained Treatt, although fourth quarter sales showed ‘some recovery as the hospitality sectors in Europe and the US began to reopen’.
During the pandemic, Treatt has profited from buoyant demand for drinks consumed at home and rising demand for citrus co-products used in industrial and household cleaning products too.
While the tea category was impacted by the loss of demand from hospitality, bars, restaurants and cruise lines, Treatt enjoyed strong growth in its higher margin health and wellness category and continues to grow revenue from the alcoholic seltzer market, which has increased significantly in the US over the last year and is now beginning to make inroads into Europe.
‘Despite the significant disruption to consumer demand across our markets, we continue to diversify our revenues and position the group as an added-value natural extracts and ingredients provider across a range of growth categories. As such, we are cautiously optimistic about our growth trajectory into full year 2021,’ assured Treatt.
