Treatt defies Forex headwinds to hit targets
Treatt Plc says it will hit full-year profit targets in line with board expectations despite having had to battle against foreign exchange headwinds in the second half.
The Bury St Edmunds company makes and supplies ingredients for the flavour, fragrance, beverage and consumer product industries.
It is expanding on both sides of the Atlantic: on the UK site, at Suffolk Park, Treatt says it is “at an exciting place in the project and is presently weighing up all options to deliver the right facilities for the business and ensuring value for shareholders.” The company is also extending its existing facility in Lakeland, Florida.
In a trading update for the year to end-September, Treatt – this newspaper’s reigning Business of the Year – said it did well in the second half and despite the foreign currency difficulties expects to report profit before tax and exceptional items for the year in line with the board’s earlier expectations.
In the 2018 financial year the group made significant strategic progress in securing funding for its capital investment programmes in the UK and US through an equity fundraising and the disposal of its non-core business Earthoil Plantations.
The $14 million US expansion is progressing well, on time and on budget with building work at an advanced stage and is expected to be fully operational during H1 2019.
This will provide much-needed additional manufacturing capacity as well as enhancing the group’s scientific capabilities in the US.
In the UK, Treatt is at the advanced stages of assessing the design options for the facilities it needs at the new headquarters to deliver the best possible value for shareholders.
Following the exceptionally strong year in 2017, the group has continued to grow over the last year with revenue on a like-for-like basis (excluding Earthoil) expected to be up by approximately nine per cent.
All product categories have grown over the past 12 months, with the key growth drivers of citrus, tea and sugar reduction continuing to deliver.
The combined impact of foreign exchange movements, fluctuations in raw material prices and some pricing pressure on new business wins has resulted in gross margins falling a little compared with the prior year.
Following the cash inflows from the equity fund raise and disposal of Earthoil, the group is expected to end the year with a net cash balance of £9m-£10m and an increase in working capital of more than £10m compared to the prior year, most of which relates to an increase in accounts receivable, inventory and some amounts receivable in relation to the disposal of Earthoil.
The increase in accounts receivable was partly as a consequence of timing issues and partly related to longer payment terms with a number of larger multi-national customers.
CEO Daemonn Reeve said: “Looking ahead, last year the board approved a strategic plan to drive the business through to 2022. As we enter a key investment phase for the group, both in terms of our operating capabilities and our people, the board looks forward to the year ahead and beyond with confidence.”
The full year results will be announced on November 27.