Year ended 30 September 2003
“Treatt USA’s dollar sales increased by 9%”
The Group’s Operations performed satisfactorily during the year in spite of the strong pressure on margins and the level of internal resource focussed on the transfer of Treatt USA to the new facility in Lakeland, Florida and preparing for the UK implementation of our Enterprise Resource Planning (ERP) system.
The Group’s investment in ERP is now 95% complete with a total of £450k being incurred during the year, bringing the total investment so far to £986k. There was further significant investment at Treatt USA in plant and machinery totalling £400k ($660k).
Again, there was a continuation of the trend for the industry to consolidate during the year, thus leaving few independent businesses able to service the flavour and fragrance industries on a global basis. Indeed, Treatt directly supplied a total of 83 countries throughout the world. This demonstrates that, through Treatt’s expertise, experience and systems, we continue to manage successfully the highly complex shipping and legal requirements inherent in shipping food ingredients and hazardous goods around the globe, whilst maintaining high levels of customer service. This is particularly beneficial when major customers transfer some or all of their operations from one part of the world to another.
Trading
Last year the Group’s gross profit was enhanced by significant stock profits. The last 12 months has not produced any stock profits as orange oil prices have stabilised. There were no other significant commodity price movements which had a material effect on the financial results for the year.
R. C. Treatt
Sales increased 3.9% with volumes up by just over 1%, and sales to the top ten customers represented just over one third of turnover, which is similar to previous years. Considering the level of concentration within the industry, we believe this provides the company with a well-balanced risk profile. Gross margins for the year fell by 1%, principally due to a slight change in the product mix for the year. Sales across the full range during the year, especially in the UK, were also hit by a number of factory closures which curtailed the purchasing patterns of some customers. Aroma chemical sales for the year remained stable despite increased competition from the Far East.
Treatt USA
US Dollar sales were up by 9% during the year although, as a consequence of movements in average exchange rates, when translated into sterling sales showed no growth. However, as both new and existing customers have visited the new facilities in Lakeland, the order book has shown encouraging signs. The TreattaromeTM products continued to perform well as the range of potential uses becomes more widely known and understood.
Investment for the future
R. C. Treatt
Capital expenditure for the year was principally focused on the new ERP system as we believe this will provide the systems infrastructure from which we can maximize the company’s performance over the coming years. Over time, the new system will deliver significant efficiency savings, including the ability to process greater levels of orders and expand production without the need to increase administrative overheads. We have also continued to invest in new equipment on both sides of the Atlantic in order to provide as versatile a product range as possible, especially in naturally derived food and fragrance ingredients.
Treatt USA
Operationally, Treatt USA’s new site is a major improvement over its former property, and we have received very positive feedback from staff, customers and suppliers when visiting. The new site has enabled Treatt USA to enhance significantly its operational performance and provides a working environment from which it will be a great deal easier to retain and recruit the best staff. At the new site, there is an additional five acres of undeveloped land which will help to ensure that there is room for further expansion in the future. With the investment in the new facility, the Group is now able to expand significantly in the North American market.
Research and Development
During the year, we have strengthened our commitment to Research and Development in both the UK and USA by hiring additional, experienced technical staff. We have continued to invest in new equipment for our laboratories so that we remain at the forefront of new technology in the flavour and fragrance ingredients sector. Treatt has also continued to support R&D in producing countries in order to develop new sources of raw materials on a financially viable basis.
Markets
During the year there was a significant geographical redistribution of sales. Following the major transfer of business from certain customers in The Americas (excluding USA) to Western Europe, sales to The Americas fell by 9% and the Rest of Europe saw a 17% increase. UK sales also fell as a result of plant closures referred to earlier.
Products
The Group’s sales of sweet orange oil based products increased by 15% year on year, as this year saw a full year of sales based on orange oil trading at around the $3 per kilo level. The Group also saw a significant increase in sales of other citrus oil products to a broad range of customers.
Although sales of the TreattaromeTM range of natural distillates, which are manufactured by Treatt USA in Florida, were not maintained at last year’s level, they remained strong and are expected to perform well over the next twelve months. Indeed, during the first few weeks of the new financial year we have been delivering a TreattaromeTM to a customer for a significant national product launch expected in the New Year.
Personnel
The Group recognises the importance of maximising employee potential and has continued to invest in human resources, with a strong emphasis on staff training and communication. Appropriate training and development needs are identified as part of a two way Personal Development Review undertaken by Department Managers in conjunction with the Human Resources Department. Standard terms and conditions of employment operate for all staff, which do not discriminate against any individual or group of people. Employee involvement in the Group’s performance is encouraged and Group results are regularly communicated to staff.