Treatt H2 Earnings Call Highlights

• FY25 results: Revenue fell to £132.5m (down 11.8%) with gross margin at 25.9% (‑340bps) and profit before tax (pre-exceptionals) of £10.3m, driven mainly by sustained high citrus raw material costs and weaker premium demand in North America that reduced volumes and delayed product launches.

• Actions and outlook: Treatt delivered cost savings of around £1.4m, returned £10m in dividends plus a £5m buyback, opened a Shanghai Commercial & Innovation Center, signed an APAC distribution deal with IMCD, and is launching powdered citrus extracts in H1 2026 while targeting a return to revenue growth and net cash in FY26 as citrus prices ease and China recovers.

• Governance and ownership: A recommended cash offer from Natara failed, Döhler now owns 28% with a formal relationship agreement to protect arm’s-length dealings, and the board is progressing the search for permanent CEO and CFO while proposing a new non-independent NED.

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Treatt (LON:TET) outlined a challenging financial year as the natural ingredients supplier reported results for the year ended 30 September 2025, citing sustained high citrus raw material costs and softer consumer demand in parts of North America as key external headwinds.

Interim Group Managing Director and CFO Manpreet Randhawa, who joined the company just under six months ago, said the group’s performance landed in line with the revised expectations shared in July, reflecting actions taken through the second half of the year. Group Finance Director Kelly Gordon added that the decline in performance was primarily driven by changes in customer buying patterns amid high citrus prices and weaker premium demand in the U.S., rather than any erosion in customer relevance.

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Treatt reported revenue of GBP 132.5 million, down 11.8% year over year. Management said the drop was largely volume-driven, with high citrus prices leading to fewer product launches, delays in reformulation work, and some short-term substitution that particularly affected its heritage citrus portfolio.

Gross margin was 25.9%, down 340 basis points year over year. Gordon attributed the margin pressure mainly to citrus-related inflation and product mix, including weaker premium mix. Profit before tax and exceptional items was GBP 10.3 million, with the company noting that management actions helped but could not fully offset the external pressures in the short term.

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Treatt declared a dividend of 5.6 pence per share, which management said was balanced against earnings, cash flow, and outlook and consistent with the company’s dividend policy.

Exceptional costs were GBP 3.3 million, higher than the prior year, primarily related to the potential transaction process during the year. Gordon also noted that FY24 figures were restated following an auditor-raised adjustment related to revenue recognition, with details provided in the company’s full announcement.

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Management described two major headwinds: sustained high citrus prices affecting customer purchasing patterns and competitive dynamics, and softer North American consumer confidence pressuring premium sales.

• Heritage: Sales declined 11%, described as volume-led. Gordon also cited volume reductions in one strategic account. Management said heritage remains central to the business, supported by specialist category teams, and the company is looking to recover citrus volumes as prices ease.

• Premium: Sales fell 13%, led by slower U.S. consumer demand amid macro uncertainty. Gordon pointed to a “win in sugar reduction” and said the company remains confident in its offering across health and wellness, fruit and vegetables, and tea, while continuing to innovate despite ongoing U.S. headwinds.

• New: The category declined as citrus headwinds affected China, while coffee remained “nascent” with low volumes. Management said it maintains a healthy pipeline in coffee and expects China to return to growth following the opening of its Shanghai Commercial and Innovation Center.

In response to the tougher trading environment, Treatt implemented “self-help” measures. Gordon said the company reduced its cost base by over GBP 1 million, and later noted total cost savings of GBP 1.4 million for the year, driven by enhanced cost controls and reduced discretionary spending. The company said it continued to invest in sales and innovation, and that these investments were self-funded.

Management described the balance sheet as “very healthy.” While net debt increased, Treatt returned GBP 10 million to shareholders through dividends and a GBP 5 million share buyback completed during the year. Gordon said capital expenditure levels continued to normalize, and despite higher stocks, working capital remained broadly flat due to strong discipline. The group was described as “largely cash neutral” during the year excluding the share buyback.

Randhawa said Treatt’s strategy remains unchanged and is built around three pillars: building on heritage (including citrus, herbs, spices, florals, and aroma ingredients), accelerating premium growth (including tea, fruit and vegetables, and health and wellness), and expanding new capabilities (including coffee and the China business).

During FY25 and shortly after year-end, the company highlighted a set of execution milestones:

• Shanghai Commercial and Innovation Center: Opened shortly after year-end, with management citing strong customer engagement and improved proximity to customers in China and the region.

• APAC distribution partnership: Treatt signed a Southeast Asia distribution agreement with IMCD, which management said improves route to market across APAC and provides access to six countries while limiting additional fixed costs.

• Europe sales expansion: The company expanded sales presence in Germany and France via recruitment of industry experts.

• Heritage product response: Treatt launched more price-stable citrus products to protect volumes and customer relationships amid volatility.

Randhawa also highlighted innovation efforts including powdered citrus extracts scheduled to launch in the first half of 2026, aimed at providing customers with more price stability and formulation flexibility, with relevance in sports nutrition, supplements, and powdered drinks. He said Treatt entered the U.K. sports nutrition market with the powdered citrus range, noting early customer feedback was “very positive indeed.”

In premium, management said it refreshed the Treatt brand, expanded digital access to the portfolio, and launched clean label and sugar reduction technologies. Randhawa said the group added 136 new customers during the year.

Management addressed significant corporate developments during the year. In September, the board recommended a cash offer from Natara Global, but the offer did not receive the level of shareholder support required. Management said the process reinforced the underlying value of Treatt’s assets and market position and expressed confidence in the group’s future as a standalone business. The company said the search for a permanent CEO and CFO is progressing, while noting a stable leadership team is in place.

Treatt also discussed the arrival of Döhler as a shareholder, owning 28% of the business, while also being a customer and supplier. Management said a formal relationship agreement announced alongside the results is intended to ensure dealings are conducted on an arm’s-length basis, protecting independence and governance. The board is recommending the appointment of a non-independent non-executive director, Helga, who management said brings sector experience from roles at IFF and Givaudan.

Looking ahead, Gordon said Treatt is targeting a return to revenue growth in FY26, underpinned by citrus volume recovery, China returning to growth, and conversion of its pipeline. The company expects gross margin to be stable as the citrus backdrop changes, with a focus on growing volume and cash contribution. Management also expects normalized capital expenditure and a return to net cash, adding that first-quarter performance was in line with expectations.

While the company expects industry headwinds to continue into FY26, Randhawa said Treatt is entering the year more resilient, with an emphasis on disciplined execution, pipeline conversion, and protecting profitability and cash generation.

We are a trusted ingredients manufacturer and solutions provider to the global flavour, fragrance and consumer goods markets from our bases in the UK, the US and China. We take pride in developing the ingredient solutions of the future and are supported by a global operational infrastructure that delivers results. Our people are creative, technically excellent and dedicated – allowing us to develop and supply a range of ready-made or bespoke systems to suit even the most adventurous needs.

The article “Treatt H2 Earnings Call Highlights” was originally published by MarketBeat.