Orange oil price hike is a treat for Treatt

24-May-2011 - Last updated on 25-May-2011 at 10:54 GMT

Sky-high orange oil prices helped flavour ingredient supplier Treatt more than double its half-yearly profits, but the next six months may not be so strong as prices may have peaked at $8/kg.

Orange oil is an essential oil used in the creation of flavours, fragrances and cosmetics. It is a by-product of orange juice processing, and is extracted from the fruit’s rind.

Treatt’s orange oil comes from oranges grown in Florida in the US. Following a big chill in December 2010, the quality and quantity of oranges in the 2010/11 harvest has been impaired.

In its May forecasts the USDA reduced its estimates by 2 million boxes, bringing the crop to 120 million boxes.

Michael Sparks, executive VP/CEO of Florida Citrus Mutual, said there has been a little more fruit drop than usual and sizes are smaller than initially expected. But he added: “This is still a quality crop and I think we came through the cold weather earlier this year better than expected.”

For Treatt, the selling price has risen from $2/kg a year ago to $8/kg more recently. This, together with the effects of new business wins in Americas and Asia, translated into a 29 per cent increase in group revenue to £36m in the six months ended 31 March, and pre-tax profit of £3.7m – up from £1.5m in 2010.

However the company is aware that its fortunes are subject to the vagaries of fruit supply.

It says it has continued to perform well in Q3, with order books remaining strong, but H2 is expected to be slower overall.

“There is always the possibility that some raw material prices may have peaked, in particular orange oil, and that there may therefore be some impact on margins if prices begin to fall,” the company said.