Supported by a bumper order book, natural extracts-to-ingredients supplier Treat (TET) insisted it is on track to serve up full year pre-tax profits in line with the £21.7 million consensus of analysts’ estimates on revenue growth now set to exceed 15%.
The shares weakened 7% to 933p as first half results revealed a dip in profits, although this reverse reflected the anticipated return to a normal second half profit weighting.
Treatt is now counting on a tastier second half earnings performance to hit its annual numbers, hopefully driven by increased beverage consumption in the Northern hemisphere as consumers return to festivals and other outdoor summer events.
For the uninitiated, Treatt makes and supplies a diverse portfolio of natural extracts and ingredients for customers across the flavour, fragrance and multinational consumer product industries including the beverage sector.
The company is primed to profit from consumer trends including a preference for natural products, the growing interest in health and wellness and premiumisation.
Results for the half to March 2022 revealed a 9% uptick in sales to £66.3 million, a first half record, reflecting growth across the product portfolio.
Pre-tax profits before exceptional items softened almost 40% to £6.3 million year-on-year, though taxable profits were above the £6.1 million generated in the comparable half in pre-pandemic 2020.
Gross margin weakened from 35% to 27.5% year-on-year due to the more traditional representation of lower margin categories during the half.
In the comparable half last year, the group benefited from a stronger performance from faster-growing, higher-margin value-added categories as retail channels reopened and Treatt saw some ‘very significant’ new product launches.
Treatt insisted positive momentum had continued into the second half, with its order book up by more than 25% against the equivalent prior-year period.
The firm is expecting ‘a strong performance from our healthier living categories of tea, fruit & vegetables and health & wellness to deliver both revenue and margin growth in the second half’.
Chief executive Daemmon Reeve commented: ‘We continue to grow our revenue and have a very strong order book going into the second half of the financial year.
‘The momentum we have in the business underlines the importance of the significant benefits we expect to gain from both investment in our people and the increased capabilities and capacity we will unlock from our new UK facility at Skyliner Way.’
Reeve also stressed Treatt’s established business model and ‘track record of managing the input costs of our natural products’ means it continues to deliver ‘outstanding service for our customers and healthy returns for our shareholders, despite supply chain and other macro headwinds.
‘Branded beverages are seen as affordable luxuries, and so we are well insulated against rising inflationary pressures and our strong order book gives us confidence that we are on track to perform in line with expectations for the full year.’