Flavourings ingredients supplier Treatt (LON: TET) says that profit will be below expectations in the year to September 2022. Restrictions in China have not helped, while costs have increased, and sales of iced and leaf tea in the US have been lower than expected. Currency movements have made things worse. On the bright side, the order book is one-quarter higher.
Peel Hunt has reduced its 2021-22 pre-tax profit forecast from £23.6m to £16.3m, which is down from £22.6m last year. Raw material prices have risen by one-fifth and there is a delay in passing this on to customers. Revenues from tea will be £3m lower than previously forecast and that knocks £2.5m off profit.
There are likely to be £2.5m of currency losses this year, compared with a £1.5m gain last time.
Management believes that there is potential in the coffee market and this category will be reported separately in the full year figures. Generally, the longer-term outlook for the company’s markets is positive.
The share price has slumped by one-third to 537p. This is the lowest level for two years. The prospective multiple is 26.
Directors have immediately bought shares. Chairman Timothy Jones acquired 8,944 shares at 555p each and chief executive Daemmon Reeve purchased 3,556 shares at 559p each.