Brokers raise Purecircle to 'buy'5 Jan 2015 12:41
Purecircle said its earnings in the July-to-December period, the first half of its financial year, would come in at least 50% higher than those a year before.
And it signalled further improvement ahead, saying that the "full net profit benefit" of its "geared business model" – PureCircle has been operating at a relatively low level of capacity and high level of fixed costs, meaning that any rise in revenues achieves a large rise in margins and profits – will only become evident in the current, January-to-June half.
"With accelerating roll-outs of food and beverage products using PureCircle's stevia solutions," particularly in soft drinks, "the company is confident of continued sales growth and with it improvements in profitability," said Magomet Malsagov, the group's chief executive.
"We are generating revenues from a wide range of natural sweetener and flavour products and from a wide range of customers."
"There was growth in sales across all our global sales regions and in all of our ingredients," the group said, highlighting the launch of Coca-Cola Life in the US, Mexico, UK, France and Sweden, and Pepsi True in the US.
The statement was well-received by broker Mirabaud, which raised to "buy" from "neutral" its rating on PureCircle shares, albeit keeping its price target for the stock unchanged at 630p.
"The market for high purity stevia is evolving rapidly, with main brand cola line extensions in the US and other important markets from Coca-Cola, though Coca-Cola Life, and Pepsico, through Pepsi Next, Pepsi True - and the reformulation of carbonated soft drinks such as Sprite and Fanta in selected geographies," Mirabaud said.
"And that is just in carbonated soft drinks. Stevia has already penetrated the non-carbonated beverage and food sectors, and customer product innovation is very active across all categories."
Numis raised to "buy" from "add" its rating on the shares, with analyst Charles Pick terming PureCircle's statement "solid" and highlighting that the benefit of Coca-Cola Life roll-outs "have yet to be reflected" in profits.