Treatt PLC (LON:TET) has reported yet another set of strong results in FY18. The company remains in the sweet spot of current consumer trends, with ingredients that help to deliver better-for-you products with clean labels and without compromising on taste. The US expansion is on track and on budget, and will be fully operational in H119. The UK relocation is progressing well, although it is more complex and the timetable has slipped by about six months. FY19 has started well, and at this stage we leave our estimates broadly unchanged. Our DCF-derived fair value remains 510p.
Expansion continues
The strong growth over the last few years caused a need for an expansion of capacity at Treatt’s US facility. The increase will be substantial, adding over 80% of prior capacity, and the project has so far been delivered on time and on budget, which is testament to management’s disciplined approach. The UK relocation is more significant and more complex. The design phase has taken longer than expected, hence the slippage in the timetable. We note the overall cost has crept up over time, but this is in part due to management’s decision rightly to hold back capital investment at the old facility, hence there is a degree of catch-up on the new facility.
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