Treatt (TET)   214p

Loss to date: 54%

Shares made Treatt (TET) one of our key selections for 2025 at 465p on the basis the extracts-to-ingredients supplier had a recipe for long-term growth and many of the hallmarks of a high-quality company such as a focus on innovation and strong cash generation.

We also argued Treatt was well-placed to profit as end-markets recovered from a period of customer destocking and noted new chief executive David Shannon’s big growth ambitions for the business.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

Rather than the upgrades and re-rating we’d hoped for, Treatt has suffered a de-rating with the stock plunging to a five-year low following a weak first-half trading update (10 April) and accompanying profit downgrade pinned on ‘ short-term trading challenges’.

The Suffolk-headquartered supplier of natural ingredients for the beverage, flavour and fragrance industries now expects full-year pre-tax profit to weigh in at between £16 million and £18 million, below the £20.9 million consensus, amid a softening of consumer confidence in North America and the impact of sustained high citrus prices on customer demand.

On tariffs, the company is watching developments closely, though its diverse supply chain and significant manufacturing presence in the US and UK gives it the flexibility ‘to support our customers in diverse ways in different markets’.

WHAT SHOULD INVESTORS DO NOW?

We hold our hands up for being too early but volatility and price swings are a part of small-cap stock picking and Treatt remains a long-run beneficiary of the low- and no-sugar trend.

The firm expects a stronger second half to come, during which it should realise the benefit of self-help measures, while Shannon is encouraged by the company’s robust order book and sales pipeline with new wins coming through, including an unnamed large new customer in North America.

A £5 million buyback demonstrates confidence and indicates the board believes the shares are materially undervalued; broker Peel Hunt lowered its price target from 800p to 485p following the news but retained its ‘buy’ rating, while Jefferies’ 650p price target implies the stock could more than treble from here. 

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