Treatt Half-year 2008 Results

Treatt plc (Bury St. Edmunds, England) has announced half-year 2008 (ended March 31) revenue of £21.66 million, an increase of 13% over the same period 2007. Profit before tax fell 8% to £1.31 million and EBITDA decreased 5% to £1.96 million. The Group’s first quarter performance was in line with expectations, but the second quarter was strong across the existing Treatt Group (excluding Earthoil) in terms of sales, albeit with slightly lower margins. During the period, orange oil prices remained stable while other flavor and fragrance raw material prices increased as energy costs remain high. Sales of aroma chemicals and Treattarome natural distillates have continued to perform well.

Treatt USA: Compared to the same period last year, sales have increased by 31% with profits having doubled. Treattarome natural distillates are showing 20% growth in various sectors and products.

R.C. Treatt: Sales grew by 9% in the first six months of 2008, despite the weak US dollar. Within the period, the contrast between the first and second quarters was significant, with sales and contribution in quarter two being almost 40% up on quarter one. The increased capacity, following last year’s investment, resulted in a 60% increase in orange product sales with contribution up by 40%. Aroma chemical sales have remained at a similar level as compared to last year, and margins remain firm. Sales to both the Middle and Far East remain strong and are above the levels for last year.

Earthoil: Previously, under the terms of the February 2007 joint venture, Treatt had an option to acquire the remaining 50% of Earthoil in 2012. However, the board decided to review its position following disappointing results since establishment of the joint venture. In the six months of 2008, Treatt’s share of Earthoil losses totaled £232,000 (2007: £23,000). Under the joint venture arrangements, the Treatt Board was only able to exercise ‘non-executive’ and strategic direction over Earthoil with no involvement in the day to day running of the business.

On April 10, 2008, the Group increased its holding in Earthoil Plantations Limited and Earthoil Kenya EPZ Pty Ltd (together known as ‘Earthoil’) from 50% to 100%. The consideration for the acquisition of the remaining 50% of Earthoil is an earn-out equal to 50% of 11 times the average audited pre-tax profits of the Earthoil businesses of the two years ending December 31, 2011, capped at £5 million, and subject, if required, to shareholder consent. An advance on the earn-out of £250,000 was paid on completion which is either recoverable against the earn-out or, if that is not sufficient, against the loan stock payable to the original Earthoil shareholders in 2015.

Of the decision, Treatt chairman Edward Dawnay said, “Having acquired 100% of Earthoil we are now in a strong position to direct and control its growth. Many large FMCG companies continue to look at organic products and we are well placed to gain from this, especially in the field of specialty vegetable and seed oils (primarily for cosmetic use) processed at the Kenyan facility. Since taking full control we are pleased by the positive response and the inquiries we re receiving through Treatt global sales outlets.”

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