LONDON (ShareCast) - Flavour and fragrance ingredients supplier Treatt served up a 42% increase in annual pre-tax profit but warned profit for 2012 will be significantly lower than was previously thought as its customers experience economic weakness.

The manufacturer and supplier of conventional, organic and fair trade ingredients for the flavour, fragrance and cosmetic industries, said pre-tax profit rose to £6.4m for the year ended 30 September 2011 from £4.5m the year before. Revenue increased to £74.5m from £63.3m.

Earnings per share surged 40% to 42.5p and operating profit after FX rose 40% to £6.9m.

"The growth over the last year has largely been driven by a very strong performance by Treatt USA, which principally serves the North American market, together with a marked turn around in the fortunes of Earthoil, the group's cosmetics ingredients business which specialises in organic and fair trade certified products," the company said in a statement.

Growth was also underpinned by its UK operating company RC Treatt. It saw a steady performance but due to a weak final quarter, its profits were down on the previous year.

Commenting on raw material costs, Treatt explained the group's most significant raw material, orange oil rose from the $2/kg level to almost $11/kg, before falling back to the $6-$7/kg range.

"As a result of this, the value of sales of orange oil products, which represented 24% of group revenue, increased by more than 70% during the year although volumes fell by more than 20% as a consequence of the group's conservative risk management policies during this period of exceptionally high prices."

However Treatt noted the final quarter of last year saw a slow-down in activity, which has continued into this financial year. "The impact of de-stocking has led to falling raw material prices, lower levels of sales and reduced margins."

"We do not now anticipate orders picking up much until mid-2012, especially for RC Treatt whose customers operate in many of the territories which are currently experiencing significant economic weakness. Consequently, the Board believe that pre-tax profits for the year ended 30 September 2012 will be significantly lower than was previously thought," the group sadi.

The dividend has been increased 11.5% to 14.5p per share.


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