Treatt (TET) has released an AGM trading update covering its fiscal Q1, namely the three months to 31 December. This is TET’s smallest quarter in what is a seasonal business. Q123 sales were up 9%, with 3% from constant currency growth and 6% from FX. This was in line with management expectations and consistent with our FY23E revenue growth forecast of 7.5%. Although we expect the full year FX benefit to moderate, and volume growth to be modest, we expect price increases to have a more significant impact in Q2-Q4. TET’s contracts typically cover a calendar year, with price increases therefore applying from 1 January. We believe that TET has been successful in achieving price increases in Q123, reflecting the input cost pressures that it is facing. These will therefore start to benefit the top line in fiscal Q2. TET has cited Citrus as a category where it has achieved margin improvement on several key value-added products through its “procurement and pricing strategies”. With TET’s products being an important component of its customers’ products, but accounting for a relatively small proportion of their costs, it enjoys some pricing power which it is using judiciously to help protect its margins. This is being supported by strong control of its own costs. The “vast majority” of TET’s UK production has now transitioned to its new UK facility, with this process expected to be fully completed by this autumn (i.e. around the end of FY23). This will at least double TET’s UK production capacity, opening the possibility of significant positive operational leverage over time as it looks to capitalise on “a good pipeline of opportunities in new and existing customer partnerships”.