Flavour and fragrance ingredients company Treatt has again lifted expectations for its annual results after continued strong trading at the end of its first half.
In a final trading update ahead of its results for the six months to March 31, Bury St Edmunds-based Treatt said that, besides maintaining momentum since its previous statement in February, it had also benefited from a strengthening in the US dollar.
As a result, revenue for the first half was now expected to show an increase of more than 25% compared with a year earlier, with around 10% attributable to currency movements.
“New business wins and a strong performance across all our categories, particularly in sugar reduction, tea and citrus, which are areas of strategic focus, together with the impact of current foreign exchange rates have combined in an order book which has increased materially compared with the same time last year,” Treatt said.
Treatt supplies ingredients to food, beverage and consumer products manufacturers and has achieved strong growth in recent years through a strategy of working closely with clients on the development of bespoke added-value products, particularly in the drinks sector.
The company, a member of the Top 100 list of the 100 largest companies based in Suffolk and Norfolk, had already said in February’s update that its results for the six months to March 31 were expected to show “substantial progress” on last year’s first half and that profit before tax for the full year to September 30 would “substantially exceed its previous expectations”.
In its latest update today, the company added that, in view of the strong performance across the group in March and “clear signs” that this momentum would continue into the second half the current financial year, “the board now expects to exceed its revised expectations for the full financial year ending September 30, 2017.”
Treatt’s profits are benefiting from the strength of the US dollar as around half of its business is based in the United States, the profits from which are therefore worth more when translated into sterling.
In addition, a significant proportion of UK sales are also denominated in US dollars along with the raw materials, such as orange oil, from which they are produced.
The company also has a foreign exchange hedging policy in place to iron out volatility in exchange rates from one year the next.
However, although the overall effect of currency movements has been positive, they have contributed to an increase in net debt which is expected to be around £12m at the half-year stage, £3.6m up on a year ago.
“Historically, the group reports a net trading cash outflow in the first six months of the year and a net trading cash inflow in the second half of the year, and the board would expect a similar pattern in the current financial year, Treatt added today.
The company is due to announce its results for the first half on May 9.
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