Treatt confident at year-end despite citrus price collapse

Flavour, fragrance, beverage and consumer products ingredient supplier Treatt updated the market on its year ended 30 September on Friday, reporting that, notwithstanding a “very significant” fall in certain key citrus raw material prices, and some foreign exchange headwinds, it performed well in the second half of the financial year.

The London-listed firm said that as a result, it expected to report profit before tax and exceptional items for the year in line with its expectations.

Revenue for the year was expected to be approximately £112.7m, an increase of 1%, or a decrease of 2% at constant currencies, when compared to the prior year.

As it reported in May, revenue for the year was impacted by a “substantial fall” in citrus raw material input prices, with orange oil prices - which represents around 33% of group revenue - falling by more than 50% over the year. and lemon oil prices also seeing substantial price weakness.

Treatt said that, although reported revenue from its citrus category - representing 54% of group revenue - fell by 10%, its strategy to diversify its portfolio of natural ingredient solutions delivered a “very encouraging” 16% growth in non-citrus revenues, with tea up 42%, health and wellness - including sugar reduction - growing by 23%, and fruit and vegetables ahead 35% as the group's “clean label innovations” continued to perform well in the marketplace.

While “natural” now represents around 81% of the company’s portfolio, it also saw healthy growth of 16% in the synthetic flavour and fragrance market.

“During the 2019 financial year the group made significant progress with its two principal strategic investment projects being the expansion of our US facility and the relocation of our UK facility,” the Treatt board explained in its statement.

“We successfully completed the further development of our US facility, doubling the capacity in our non-citrus natural tea, health and wellness and fruit and vegetable categories, as well as quadrupling the size of our US technical and innovation centre as we invest more in research and development to drive further product innovation.

“In addition, and as we reported last month, the main contractors have begun work on our new UK facility which we expect to transition across to in the latter half of 2020.”

There was a net improvement in working capital, the board added, with lower inventories and a reduction in trade debtors contributing to a strong cash performance during the financial year.

The group ended the year with a net cash balance of £15.8m, being a net inflow for the year of £5.8m.

“As we begin our new financial year, the impact of lower citrus raw material prices is likely to continue to affect our citrus business, whilst we expect the momentum in our non-citrus categories to continue and innovations in cold brew coffee, a new market for Treatt, to gain traction.

“As new capacity at our US facility comes on stream the business will begin to see the benefits from this investment and, as we look forward to moving into our new UK facility later next year, the board enters the year ahead with confidence.”

Treatt said its results for the year ended 30 September would be announced on 26 November.