Treatt FY2025 Earnings Call - Navigating High Citrus Costs and Market Challenges While Building for Growth

Manpreet Randhawa, Interim Group MD and CFO, Treatt: Good morning, everyone, and thank you for joining us today for Treatt’s results for the year ended 30th of September 2025. I’m Manpreet Randhawa, currently interim Group MD and CFO at Treatt, and I’m delighted to be joined by Kelly Gordon, our Group Finance Director. Over the duration of this presentation, we’ll take you through the results, going through how the year played out, how we managed through some real challenges, the progress we’ve made strategically, and how we’re thinking about FY26. So, by way of a brief introduction, I joined Treatt just under six months ago. My background has been as a CFO and business leader in high-growth businesses across both listed and private equity environments. I’ve spent much of my career working through periods of change and started my career at Deloitte.

Now, before I hand over to Kelly, I’ll go through what attracted me to TREAT, a question I often get asked. Largely, it’s the substance of the business. We have a long and rich heritage here in natural ingredients, with a strong reputation for innovation and, importantly, deep and trusted customer relationships. As I became embedded in the business, what also stood out for me is the culture. TREAT is a company that values expertise and teamwork, and one that genuinely invests in its people and in being close to customers, which matters particularly in challenging markets. It has been an interesting few months since I joined TREAT, but I’ve thoroughly enjoyed being here. Over to you, Kelly.

Kelly Gordon, Group Finance Director, Treatt: Hi, everyone. A lot of you know me already, but for those that don’t, I’m Kelly Gordon, and I’m the Group Finance Director here at Treatt. As part of my role, I also lead IR for the group. I have been with Treatt for two and a half years. Prior to Treatt, I was a finance lead in a division of ABF, having started my career at Grant Thornton. I’m pleased to have the opportunity to present to you today.

Manpreet Randhawa, Interim Group MD and CFO, Treatt: For those of you who are new to the TREAT story, it’s probably worth taking a moment to explain who we are. We’re a purpose-driven ingredients business serving the global food and beverage industries. At our core, we combine science, creativity, and partnership to help our customers create great-tasting products and win in their markets. One of our real strengths is our local-for-local model. We’ve deliberately built teams and capabilities close to customers so we can move quickly, understand local needs, and scale solutions effectively. Customers don’t just work with us for technical expertise. They value how we show up, winning on taste, solving problems, and being reliable when it matters. Many of our customer relationships go back decades, which says a lot about the trust and resilience built into the business.

All of this is supported by around 350 colleagues globally in our locations in the U.K., the U.S., and China. Now, turning to the year itself, 2025 was a tough year in many respects, driven by sustained external headwinds, particularly high citrus raw material costs and softer consumer demand in some markets like the U.S. Against that backdrop, our performance landed in line with the revised expectations we shared in July, which reflects the actions we took as a leadership team through the second half of the year. Revenue was GBP 132.5 million, down around 12% year on year. That decline was largely volume-driven rather than any loss of customer relevance or capability. High citrus prices changed customer behavior. Fewer launches, more reformulation delays, and some short-term substitution particularly affecting our heritage citrus portfolio.

Gross margin came in at 25.9%, down 3.4 percentage points year on year, reflecting raw material inflation and mix. As a result, profit before tax and exceptionals was £10.3 million. While our actions helped, they couldn’t fully offset those pressures in the short term. We declared a dividend of £5.6 per share, balanced carefully against earnings, cash flow, and outlook. This dividend is consistent with the group’s stated dividend policy and reflects confidence in the underlying business. So, 2025 wasn’t just a year of firefighting. We also made good strategic progress. In Asia, we laid a lot of groundwork during the year to support the opening of our Commercial and Innovation Center in Shanghai shortly after year-end. The opening was very well attended, with strong customer engagement, and it’s already strengthening our position in the region.

We also signed a Southeast Asia distribution agreement with IMCD, who are a global leader in the distribution for ingredients, which significantly improves our route to market across APAC. This gives us instant access to six countries within the region. In Europe, we expanded our sales presence in Germany and France, helping us move faster and respond more effectively to customers through the recruitment of industry experts. In heritage, we responded sensibly to market conditions. We launched new, more price-stable citrus products to protect volumes and customer relationships, while continuing to invest in innovation and specialist capabilities. Capital discipline remained important. We completed a GBP 5 million share buyback during the year, reflecting confidence in our cash generation and balance sheet while keeping flexibility to invest for the future. In September, the board recommended a cash offer from Natara Global.

While that offer didn’t receive the level of shareholder support required, the process reinforced the underlying value of Treatt’s assets, capabilities, and market position. Both the board and leadership remained confident in Treatt’s future as a standalone business, with a clear strategy and long-term growth drivers. The search for a permanent CEO and CFO is progressing well, but in the meantime, the business continues to operate with a stable leadership team, which is in place, and I will discuss with you later. This team has clear accountability and a strong execution focus. Finally, we welcomed Döhler as an investor during the year. So, a quick word on Döhler, given their role as a shareholder owning 28% of the business, but also a customer and a supplier. Döhler is a global leader in natural ingredients with nearly 200 years of heritage and a strong focus on food, beverage, and nutrition solutions.

They operate at significant scale with around 10,000 employees and a presence in 160 countries. A formal relationship agreement, which we announced this morning, will not only ensure we get the benefit of the relationship, but also ensures everything we do with Döhler is conducted on a fully arm’s-length basis, protecting our independence and governance. The board also benefits from Döhler’s industry insight, and they are recommending the appointment of a non-independent NED, also announced this morning. Helga brings deep sector experience from global roles at IFF and Givaudan. I’ll now hand over to Kelly to take you through the financials in more detail.

Kelly Gordon, Group Finance Director, Treatt: Thanks, Manpreet. 2025 was a challenging year for Treatt, and the income statement on screen reflects this. As previously explained, there were two key external headwinds that affected the performance of the business in the year. Firstly, the sustained high citrus prices, with changes in buying patterns affecting volumes, increasing competitive pressures and also margin pressures. Secondly, soft North America consumer confidence affected premium sales. As a result, revenue declined by 11.8% to GBP 132.5 million. Gross margin dropped by 340 basis points, mainly due to citrus pressures and premium mix. We implemented self-help measures in the year, reducing our cost base by over GBP 1 million, despite still making relevant investments in sales and innovation through self-funding. Exceptional costs were GBP 3.3 million, significantly higher than the prior year, mainly as a result of the potential transaction in the year.

Profit before tax and exceptional items of GBP 10.3 million was lower than the prior year, a combination of the sales and margin challenges partially offset with self-help measures. It is important to note that the 2024 figures have been restated due to an adjustment in relation to revenue recognition raised by auditors. Further details can be found in the full announcement released this morning. Over to sales performance. In heritage, the impact of the citrus prices and competitiveness is shown in the reduction of heritage sales by 11%. This is volume-led. Volumes also reduced in one of our strategic accounts. Heritage remains at the heart of our business, supported by category teams with specialist skills. In citrus, we are looking to recover volumes as prices start to ease this year. In premium, it was disappointing to see sales drop by 13%.

This was led by the slower U.S. consumer demand driven by macro uncertainty. Despite this, we did have an exciting win in sugar reduction, a global trend that continues to be more and more relevant to the consumer. We remain confident in our product offering across health and wellness, fruit and vegetables, and tea, and continue to innovate and drive sales, despite the U.S. headwinds still being felt across the industry. In new, we also saw a decline, with the same citrus headwinds impacting China. Coffee, which remains a nascent category for TREAT, saw low sales volumes. However, we still have a healthy pipeline in this area. We have an exciting China pipeline, and with the opening of our Shanghai Commercial and Innovation Center, we expect China to return to growth this year.

With the challenging sales backdrop, we initiated self-help measures and pleasingly saved GBP 1.4 million of cost in the year, with enhanced cost controls in place and a reduction in indiscretionary spend. We continued to invest in the front end of the business, and this was self-funded. The balance sheet of the group remains very healthy. While net debt increased in the year, we were pleased to return GBP 10 million back to shareholders through dividend and the share buyback exercise completed in the year. CapEx continued to normalize levels, and we are pleased that despite higher stocks, we maintained strong working capital disciplines to ensure that working capital remained broadly flat. The group was largely cash neutral in the year, excluding the share buyback. I’ll now hand back to Manpreet, who will talk to you about our strategy progress.

Manpreet Randhawa, Interim Group MD and CFO, Treatt: I’d like to take a few minutes now to step back and talk about strategy. Importantly, our strategy has not changed. What has changed over the past year is the environment we’re operating in, and I’m pleased that the team have worked hard on execution. The strategy is built around three pillars. First, building on our heritage to drive sustainable revenue growth, particularly in citrus, herbs, spices, and florals, and aroma ingredients. Second, accelerating premium growth, where we see the opportunity to improve mix and margins through categories like tea, fruit and vegetables, and health and wellness. And third, expanding new capability using innovation and differentiation to grow in areas such as coffee and our China business.

Underpinning all of this is a strong focus on expanding our reach, broadening into higher value categories, and delivering a differentiated service-led experience for our customers, who sit at the center of everything we do. So, starting with heritage, this is the foundation of Treatt, and in 2025, we have had to be pragmatic in how we managed it. We provided more cost-effective citrus solutions to help customers manage price volatility while protecting volumes and long-term relationships. At the same time, we continue to invest in innovation. One example of this is powdered citrus extracts, which are scheduled to launch in the first half of 2026. These products extend our core citrus expertise into new formats. They give customers more price stability, greater formulation flexibility, and improved supply chain resilience, and are particularly relevant in applications like sports nutrition, supplements, and powdered drinks.

Alongside this, we invested in specialist talent to strengthen long-term category leadership. The key point here is balance, managing near-term pressures without compromising the future. Now, moving on to premium. Here, our focus has been on proving how customers engage with TREAT and strengthening our premium innovation engine. We’ve refreshed the TREAT brand and expanded digital access to our portfolio, making it easier for customers to discover and adopt our solutions. That’s helped deepen relationships and improve pipeline quality. From an innovation perspective, we launched new clean label and sugar reduction technologies aligned with premiumization and health and wellness trends. These solutions allow customers to deliver great taste while meeting regulatory and consumer expectations, and they also support better margins for TREAT. We’ve also embedded efficiency and sustainability into our innovation processes, ensuring new products are scalable rather than bespoke.

It is pleasing to see we added 136 new customers during the year, increasing the reach of our products. Finally, growing in new markets. During the year, we made tangible progress in expanding Treatt’s presence in Asia-Pacific and adjacent high-growth categories. A key milestone was the opening of our Commercial and Innovation Center in Shanghai shortly after year-end. This significantly improves customer proximity in China and across the region, allowing earlier involvement in innovation and reformulation projects. The customer response has been very encouraging, and as Kelly outlined, we expect to see a return to growth from China this year. To complement that investment, we appointed IMCD as our distribution partner in APAC. This gives us immediate leverage through an established regional network spanning several countries in the region, allowing us to scale efficiently without adding unnecessary fixed costs.

In parallel, we entered the U.K. sports nutrition market with our powdered citrus range that I touched upon earlier, extending our citrus expertise into a fast-growing, health-focused category. Earlier customer feedback has been very positive indeed. Taken together, these actions show a disciplined approach to growth, combining targeted investment, scalable partnerships, and innovation, while carefully managing risk and capital intensity. I said I would tell you more about our leadership. We’ve taken steps to strengthen the leadership team, including making two very strong hires during the year in Suzanne Glancy-Ross in Europe and Doug South in the U.S., and I’m delighted to note that they’ve made significant contributions already to the business. They joined Steve Fan, who heads our China division, and together they form a formidable team.

All of these leaders have significant industry experience coming from the likes of Symrise and Givaudan, and are supported by strong departmental leaders in their regions. Today, we have a leadership group with deep industry and functional expertise across all areas of the business. And importantly, we now have a stable, cohesive leadership team in place. This stability allows us to stay focused on execution and delivery. Throughout FY25, we stayed focused on what we can control. That meant prioritizing core customers, staying closely aligned to our consumer trends in the market, tightening our operational grip, and maintaining momentum through change. We’ve embedded cost discipline structurally without compromising our ability to invest or serve customers. We’ve also increased pace, better visibility, faster decision-making, and a sharper focus on converting pipeline into results. I will now hand back to Kelly to go through our financial outlook.

Kelly Gordon, Group Finance Director, Treatt: Thanks, Manpreet. For FY26, we are targeting to return to revenue growth. This will be underpinned through citrus volume recovery, China returning to growth, and conversion of our healthy pipeline. Gross margin is expected to be stable as the citrus backdrop changes. We expect to focus on growing volume and cash contribution. We are also expecting normalized CapEx and a return to net cash. This guidance reflects a year of stabilization for Treatt. We are encouraged by Q1 performance being in line with expectation, and we remain confident in Treatt’s medium to long-term outlook.

Manpreet Randhawa, Interim Group MD and CFO, Treatt: So to wrap up, we’re strongly positioned for the future. While industry headwinds are expected to continue into FY26, we’re entering the year as a more resilient business. We are protecting profitability and cash generation, continuing to invest in the areas that matter, and strengthening our leadership and execution. The focus now is on steady, sustainable progress, executing well, converting pipeline, and maintaining discipline. I’m particularly excited about the year ahead. We have a stable leadership team in place, strong customer relationships, and a clear strategic direction, and we remain confident in TREAT’s medium and long-term opportunities. Thank you for listening.