- Sales and earnings guidance lowered
- Softening US consumer confidence
- £5 million buyback launched
Treatt (TET) shares tumbled almost 25% to a five-year low of 252.2p after the extracts-to-ingredients supplier served up disappointing first half results and downgraded its full year sales and profit guidance.
The Suffolk-headquartered supplier of natural ingredients for the beverage, flavour and fragrance industries now expects pre-tax profits for the year to September 2025 will be between £16 million and £18 million, well below the £20.9 million consensus.
Treat blamed the downgrade on a continued softening of consumer confidence in North America, not helped by recent geopolitical uncertainty, as well as on the sustained high citrus prices which have weighed on customer demand.
On topic du jour tariffs, the company is monitoring developments closely to ‘better understand the extent to which Treatt will be affected, both directly and indirectly’.
The group also stressed that its diverse supply chain gives Treatt the flexibility ‘to support our customers in diverse ways in different markets’.
OUTLOOK REDUCED
Treat now expects annual revenue of between £146 million and £153 million, significantly south of the £162 million the market was calling for, and taxable profits in the £16 million to £18 million range.
The firm attributed the reduced outlook to a decline in value-added citrus volumes and softening consumer confidence in the US, which has impacted demand for carbonated soft drinks and the overall North American beverage market.
Revenue for the half ended 31 March dropped by 11% to £64.2 million amid lower Heritage and Premium volumes, more than halving Treatt’s pre-tax profits to roughly £3.6 million.
The good news is Treatt expects these short-tern trading challenges to moderate and CEO David Shannon remains ‘encouraged’ by the company’s robust order book and sales pipeline.
Treatt, which offers investors a long-term play on consumer trends including a preference for natural products and the growing interest in health and wellness, has also secured a large new customer in North America and is encouraged by growth in new markets including China.
PULLING SELF-HELP LEVERS
In order to mitigate inflationary cost pressures and invest in growth areas, the company has also kick-started several self-help measures with a focus on simplification and efficiency gains.
Treatt also announced a £5 million share buyback, reflecting its net cash balance sheet, strong cash performance and the board’s confidence in the company’s strategy and medium term outlook.
Peel Hunt (PEEL:AIM) slashed its full year pre-tax profit forecast by 22% to £16 million on the news and reduced its price target from 800p to 485p, although the broker retained its ‘buy’ rating on Treatt, calling out the company’s ‘strong strategic progress’ in the face of tough macro conditions.
