Treatt (LON:TET) has delivered yet another strong set of results. The business continues to perform very well and the constant stream of upgrades demonstrates the strength of momentum as the company moves further up the value chain.
The pipeline is looking increasingly strong and recent growth means capacity expansion costing $11-14m is required at Treatt USA and is independent of the UK site relocation. We upgrade our FY18 and FY19 earnings estimates by c 2% and c 4%, respectively.
Strategy delivering excellent results
Treatt’s long-term strategy is to deliver consistent, sustainable growth in profit through developing value-added ingredient solutions, coupled with effective cost control. Improved customer focus and closer relationships are a key part of this strategy, with the ultimate goal of delivering greater profitability by concentrating on the more value-added segments. This has been delivered consistently, with results often beating expectations, and momentum is now accelerating, with more frequent and more significant upgrades coming through. As a result of the H1 results, we upgrade our forecasts for 2018-19 to reflect the improved outlook and pipeline. Our sales forecasts move up c 2-3%, while PBT and EPS increase by c 2-5%, as Treatt’s move up the value chain should deliver a strong improvement in margins.
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