Sales peak oils hopes for two-year growth

By Gary Scattergood

- Last updated on GMT

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Treatt is known for its functional and natural oil and citrus products
Treatt is known for its functional and natural oil and citrus products
Ingredients firm Treatt is forecasting a strong two-year period after announcing sales in May reached an all-time high.

In a trading update, the Bury St Edmunds-based firm added that the order book for the rest of the third quarter and the final quarter of the year to September 30 looked "promising"​.

The company, which produces functional and natural ingredients, oils and citrus products – has put its success down to cost savings and targeting multinational customers – a strategy bosses believe will continue to reap rewards for the next two years.

'Exceed its expectations'

Company chairman Tim Jones said: "This positive commercial environment, coupled with the continuing impact of the board's new strategy, and the lower overheads and improved margins it is delivering, means that the board expects the group to exceed its expectations for the current financial year ending September 30, 2013,"​ he said.

"Looking further ahead, the strategic creation of a global sales structure, which is clearly focused on selling value-added ingredient solutions with its emphasis on multinational consumer goods companies, is already leading to significant new opportunities for growth."

After a flat Q1, the group saw good profit progress in Q2, aided by stronger gross margins because revenues in the first half were down due to lower commodity prices. Tighter cost control also saw overheads dip by 9%.

Investec analyst Nicola Mallard praised the new strategy and upgraded her share recommendation to a 'buy' status in June and reinforced it with a 'hold' advisory last month.

'Profit performance accelerate'

"The group has seen its profit performance accelerate through the half,​" she said.

"The ceo's implementation of a new strategic focus is showing early signs of success. Focusing on value-added products and larger multinational customers, the group is building more sustainable revenues and profits. Margin should continue to build through driving this better sales mix."

Jones added that some of the "significant"​ cost-saving measures adopted had not yet delivered their full-year impact, reinforcing the board's hopes that the business would deliver long-term sustainable growth in earnings.

"Consequently, the board believes the momentum now in the business and the benefits from the initiatives outlined above will extend beyond the current financial year and that the prospects for the business for the years ending September 30 2014 and 2015 are also improved,"​ he added.

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