Broker snap: Bumpy road for PureCircle

Westhouse Securities has lowered its profit projections for PureCircle after the sugar-substitute producer's disappointing full-year results but remains a buyer of the shares."We have lowered our numbers and our price target reflecting the somewhat unpredictable growth trajectory but remain convinced about the medium-term viability and prospects for PureCircle," said Westhouse analyst Bruce Davidson.The broker is now predicting earnings before interest, tax, depreciation and amortization of $15.7m and profit before tax of $9.5m for the year to 30 June 2011, on revenue expected to be in the region of $70m.Unfortunately EU approval of stevia compounds in food and drink products seems unlikely to come in time to have a major effect on this year's profits, Davidson predicts."The 'joker in the pack' that is not factored into these numbers is Coca Cola, which is a major contract that could still be won after the apparent fracturing of its relationship with Cargill," Davidson said.PureCircle used to use Cargill as an agent to handles its deals. The new price target is 250p. The recommendation remains "buy".The broker said the company's fiscal 2010 numbers may have been disappointing when compared to expectations before the July interim management statement but should be accepted as part and parcel of a company with a pioneering product. "However, the progress towards widespread consumer acceptance of stevia in food and drink products, together with its adoption by major food and drink companies, seems substantial," opines Davidson."In terms of the bigger picture, all the infrastructure and investment is in place. It is now all about driving sales growth. This will increasingly come from consumer pull linked to food and beverage product launches across all categories," he added.