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Summary
- Treatt shares soared over 24 per cent on Friday after the company showed better profit guidance for FY21.
- The profit for the first four months of the present fiscal year is likely to surpass the previous expectations of the board.
Shares of Treatt Plc (LON:TET), the Suffolk-headquartered chemicals manufacturer, jumped over 24 per cent on Friday, 22 January, hitting a fresh high after the company provided better profit guidance for FY2021. The stock of Treatt extended the gains in the late trades after opening 8 per cent higher in the morning.
Shares soar
According to the data available with the London Stock Exchange, the stock of Treatt rallied as much as 24.42 per cent to a fresh all-time high of GBX 958 from the previous closing price of GBX 770 apiece.
Treatt shares (22 January)
(Source: EODHD/Others, Thomson Reuters)
With the stellar performance in the past months, Treatt shares have registered a cumulative gain of nearly 150 per cent in the 10-month period till 21 January from the bottom during the coronavirus-steered market collapse. The stock of Treatt touched a yearly closing trough of GBX 310 on 23 March 2020.
Strong momentum
- With the product portfolio ranging from natural extracts, ingredients for the beverage, flavour and fragrance industries, Treatt has witnessed a strong start to FY21 with a better-than-expected trading performance in the year-to-date (YTD).
- The technical expertise of Treat adds significant value to customers that enables in enlarging the margin along with the revenue growth, Treatt declared.
- The revenue and margin growth has been further fuelled by new products in the swiftly evolving beverages market.
- Increased demand from off-trade channels has perfectly balanced the product portfolio that was impacted by subdued demand largely due to the closure of venues across many parts of the world.
- Products in categories including tea, citrus, health & wellness, and fruit & vegetables have performed particularly well in the last four months, Treatt declared.
- Global alcoholic seltzer is one of the categories that has been growing strongly among some material new business wins achieved in the corresponding stretch.
(Image source: ©Kalkine Group 2020)
Guidance
- As per Treatt, the profit for the first four months of the present fiscal year is likely to surpass the previous expectations of the board following the strong operating performance with new organic revenue growth.
- Treatt is expecting a strong performance in multiple categories and customers with enhanced margins from the improving product mix despite the headwinds on the back of commodity/currency risks, the persisting geopolitical landscape, and the Covid-19 pandemic.
- Treatt is well positioned in the market as a supplier of natural extracts, including the offering pertaining to sugar reduction, the company said further.
- The board expects the strong trading momentum observed in the first four months of the present fiscal is likely to extend in the second half of FY21.
- However, the company is mindful of the long-range uncertainties prevailing in the market due to Covid-19 pandemic, the impact in key markets due to further lockdowns, persisting geopolitical volatility and impact on demand due to fluctuation in commodity and foreign exchange prices.
Conclusively, the board of Treatt expects a profit before tax and exceptional items for FY21 “materially exceeding” the present consensus of £15.1 million following the continuing strong momentum.
