Treatt warns on profits, shares tumble

(Sharecast News) - Treatt tumbled on Thursday as it warned on profits, noting a drop in second-quarter sales. In an update for the year to 30 September, the company - which makes natural extracts and ingredients for the beverage, flavour and fragrance industries - said it has continued to face trading headwinds since the interim results in May.

As a result, it now expects revenue of between £130m and £135m and profit before tax and exceptionals of between £9m and £11m. This is down from previous guidance of £146m to £153m and £16m to £18m, respectively.

Treatt said the revised outlook has been driven by a reduction in second-half sales, with revenue now expected to be £66m, compared with previous guidance of £82m.

"While we have successfully converted several pipeline opportunities, including encouraging wins with new customers in Premium, this conversion has been slower than anticipated," it said.

It also pointed to lower repeat customer volumes, driven by competitive pressures and North American consumer confidence.

In addition, Treatt said the weaker US dollar exchange rate has resulted in a circa £0.5m profit headwind as a result of translation of USD profits.

Treatt said that lower demand in the Heritage segment and softening demand in the US have persisted.

"Lower demand in Heritage from sustained high citrus oil prices affecting buying patterns, and leading to reformulation," it said.

"Although citrus oil prices have started to reduce more recently, this has continued to impact both short-term buying patterns in value added citrus products and citrus margins. We expect a reduction of this adverse impact as citrus oil pricing normalises."

It added: "Consumer confidence in the US, combined with geopolitical and tariff uncertainty in the US was impacting the overall beverage market in North America. This has persisted, reflected in extended softening of demand."

At 0855 BST, the shares were down 13% at 219.50p.