Treatt cautious despite sales growth

FLAVOURS and fragrances firm Treatt plc is enjoying the sweet smell of success with a 30% increase in revenue compared with last year.

A FLAVOURS and fragrances firm is enjoying the sweet smell of success with a 30% increase in revenue compared with last year.

Treatt plc, which has a large base at Bury St Edmunds and specialises in creating essential oils and natural extracts, posted an 8% increase in pre-tax profits at £3.06million, and revenues of £49.64million for the year ended September 30, 2008.

But company chairman Edward Dawnay said that in the last two months of the financial year, the world financial crisis had “a significant effect” with the sharp strengthening of the US dollar resulting in adverse foreign exchange rates.

“Although the group continues to trade in line with management expectations, clearly the coming months are going to see a period of significant economic uncertainty and it is unclear how this will affect demand for Treatt's products,” he said.

The Treatt USA operation had recovered from a poor 2007 to achieve record sales and profits, and R C Treatt continued to meet expectations, he said.

“Overall, the group has had a good year, with the core businesses of R C Treatt and Treatt USA performing well,” he said.

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The results of Earthoil have improved, and reached break-even for the final quarter of the year,” he said.

“Following losses within the Earthoil joint venture, the group acquired the remaining 50% of Earthoil and then took immediate steps to reduce costs and begin to increase sales. In total, the combined joint venture and subsidiary losses of Earthoil for the year were £0.6m,” he said.

“The board continue to believe that the strategic benefits of Earthoil to the Treatt Group will materialise over time. Earthoil now comprises organic (and ethical trade) farming and production projects in India, Kenya and South Africa and through the ethical trade projects, the Earthoil Organic Foundations in Kenya and India will be able to support community projects from the ethical trade premiums,.”

Sales of orange oil products, which represent 19% of group revenue, increased by 54% during the year.

There was a sharp increase in the price of lemon oil following a worldwide shortage of lemons, but the group took immediate steps which enabled it to win new business as well as generating some stock profits by using lower cost lemon oil against higher priced sales.

“However, the group will also suffer some significant losses over the coming year on fixed price contracts, which were agreed before these increases arose, which has therefore resulted in an onerous contract provision of £0.4m for this year,” said Mr Dawnay.

They were expecting to see raw material price falls, but these in part, would be offset by the strength of the dollar, he said.

“The underlying businesses continue to perform well with sales for October and November being significantly up on the same period last year,” he said.