Year ended 30 September 2004
“The new ERP system has significantly improved efficiencies”
During 2004 the Group’s operations performed satisfactorily, with the implementation of the Enterprise Resource Planning (ERP) system having a significant impact in the UK. As a result of the implementation, R. C. Treatt now has a fully integrated manufacturing system combining sales order processing, production, shipping, QC and finance.
The Group’s investment in ERP totalled £1.2 million, with little additional expenditure still required in order to implement the full system in America. There was further investment in specialised equipment in both the UK and USA totalling £475,000 in order to increase capacity for value added products on both sides of the Atlantic.
The extent of Treatt’s global reach is best demonstrated by the fact that last year Treatt sold to over 80 countries whilst sourcing supplies from many others. The ability of Treatt to comply with the different legislative requirements needed to send shipments all around the world is particularly important for major customers who may wish to move their operations from one part of the world to another.
Similarly, Treatt’s state of the art QC laboratories place Treatt at the forefront of the industry’s analytical systems and techniques, and, therefore able to provide the added value service which customers now require.
Trading
The last 12 months saw a significant fall in the price of orange oil, an orange juice by-product, from almost $3/kg to around $1-$1.50/kg. This reduced Group profits by more than £500,000. There were no other significant commodity price movements which had a material effect on the financial results for the year.
R. C. Treatt
Sales value decreased by 6% despite volumes increasing by 14%, 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 the customer mix, both in terms of size and location, provides the company with a well-balanced risk profile. Gross margins for the year remained stable although this masks a sharp fall in margins on orange products and a corresponding increase in margins on other manufactured products. The recent rise in petroleum prices is having an important impact on chemical prices with a wide range of chemical Dollar prices now on the way back up.
Treatt USA
US Dollar sales were up by 41% during the year with the TreattaromeTM products performing exceptionally well assisted by the strong demand for low carbohydrate products. This result was all the more commendable bearing in mind the impact of the fall in the price of orange oil which reduced Treatt USA’s profit by approximately $500,000 (£275,000).
Investment for the future
R. C. Treatt
Following the substantial investment in computer systems and processes at R. C. Treatt, the level of capital expenditure is now expected to return to more normal levels. The Company will continue to invest in Information Technology where this provides clear added value benefits either in terms of increased efficiencies or improved customer service. Further investment in new facilities will occur where it is necessary to increase capacity or as a result of product innovation or market opportunities.
Treatt USA
Following the substantial growth of the last year, and the expected growth for the next twelve months, it is important that Treatt USA continues to invest in developing facilities at its modern premises in Lakeland, Florida in order to maximise its potential. The Board will keep under review the need to develop the additional five acres adjacent to the existing plant.
Research and Development
The Group has continued to invest in skilled personnel to enhance its research and development and product innovation capabilities both in the UK and USA. In particular, Treatt USA is currently in the process of developing further its R&D function in order to maximise the growth opportunities which are expected to arise. Treatt also believes in continuing to work in partnership with suppliers in producing countries in order to develop new sources of raw materials on a financially viable basis.
Markets
During the year, the overall geographical spread of the Group’s turnover remained largely unaltered, with a small reduction in the proportion of sales to the Rest of Europe which fell by 8%, whilst sales to the Americas rose by 15% largely due to the growing ability of Treatt USA to tap into the North American market.
Products
The Group’s sales of sweet orange oil based products increased by 5% year on year as efforts were made to minimise stock holdings as orange oil prices fell sharply. Despite these efforts it was inevitable that the Group would suffer significant losses on orange oil products given that the price fell to about a third of its previous level and is used as part of the Group’s manufacturing processes on a continual basis. Following investment in new plant and equipment at R. C. Treatt, there was a significant increase in the production and sale of speciality products, with a 61% growth by volume.
With over 90% of Treatt USA’s sales being manufactured from natural ingredients, there was significant growth across the entire product range, with particularly strong growth in sales of the TreattaromeTM range of natural distillates.
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, personal development and communication. With the introduction of the new ERP system this has necessitated the re-training of the vast majority of R. C. Treatt’s staff as part of the implementation process. 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.