27 Jul 2010 07:00
PureCircle Limited
("PureCircle or the Company")
MANAGEMENT STATEMENT
PureCircle (LSE:PURE), the world's largest producer and marketer of high quality stevia products, today provides a trading update for its financial year ended 30 June 2010 and announces further acceleration in its strategic developments.
FY 2010 Trading Update
The group will announce its preliminary results for the year ended 30 June 2010 ("FY 2010") on Wednesday 22 September 2010. In advance we provide today an unaudited trading update.
We expect to report sales for FY2010 in line with those of the year to 30 June 2009 ("FY 2009"). The FY 2009 Reb A business was based substantially on sales to just two customers. Almost 60 per cent of FY 2009 Group sales were to a trading partner, as opposed to an end user Food and Beverage customer. Although our supply contract with that trading partner ran through to 30 June 2010, no sales were made to them during the FY 2010 year. The Company's sales strategy post 2008 has been to work directly with end user Food and Beverage clients. In line with this strategy, the contract with the trading partner has been discontinued.
During FY 2010 our customer base expanded significantly. We now have more than 100 invoicing customers globally: this is the premium customer base in our industry. Most customers are currently conducting trials and testing launches. But those consumer products already launched are performing well and as their volume needs expand, they provide an excellent platform for strong growth in FY 2011 and future years.
FY 2010 profitability will be below FY 2009 levels. FY 2010 profits have been held back by our significantly increased investment in production overhead, sales and marketing compared to FY 2009 amounts coupled with the fact that the company is running under capacity. PureCircle's strategy is to build a large global business and we have invested heavily to do so. The current company infrastructure is designed to support a business with turnover of $250m or more.
FY 2010 has been another year of rapid progress in the strengthening and expansion of our global supply chain. Our major production capacity investments in FY 2009 have all performed well with actual production doubling in line with investment plans. The yields and steviolglycoside flexibility that our investments allow continue to lead the industry by some margin. We expect further strong gains in FY 2011.
Our leaf expansion and diversification strategy accelerated again in FY 2010. There is now stevia being grown for PureCircle in some 15 countries in four continents. The steviolglycoside content of the leaf is increasing as is the proportion of our leaf supply being sourced from PureCircle proprietary high quality strains.
The Company has a strong balance sheet and is well placed to expand as the stevia market accelerates. In November 2009 we raised new capital to support new expansion. We ended FY 2010 with gross cash of $65m in the balance sheet and are fully funded for existing expansion plans, particularly with the FY2009 investments still not fully utilised.
Strategy developments - major sugar joint ventures established
In February 2010 we announced the creation of Natural Sweet Ventures ("NSV") our joint venture with Imperial Sugar of the USA. NSV is the first company to market a combined sucrose and stevia product range. Customer response in the important NAFTA market has been strongly supportive.
Today we have announced the signing of a Memorandum Of Understanding (MOU) with British Sugar Group Plc for the creation of The Natural Sweetness Company ("TNSC"). TNSC will be a 50:50 Joint Venture and will be the first company to market sucrose stevia product combinations in the UK, Ireland, Spain, Portugal, Africa and China markets.
More details on the TNSC MOU are included in the separate RNS issued today.
The NSV and TNSC joint ventures provide a clear blueprint for how we see our strategy developing and we expect to be able to announce further strategic relationships in the coming months.
Strategy developments - major new global customer account gains
During FY 2010 we have won contracts with major new global account customers. In addition to our multi-year contracts with PepsiCo Inc and Merisant Inc, we have secured supply contracts with more major F&B companies and have secured important initial relationships with a number of major retailers. These contract wins demonstrate that PureCircle continues to secure the leading share of major F&B company relationships in the global stevia market.
A separate announcement on the new contracts will follow.
Strategy developments - industry marketing leadership
We have accelerated our industry marketing leadership during FY 2010 with the successful launch of a series of major initiatives.
In June 2010 we supported the launch of the Global Stevia Institute. This will provide independent industry- wide knowledge and consumer information leadership. Staffed and managed by highly respected medical and nutritional professionals and operating across all continents, the Global Stevia Institute is already seen as the leader in stevia thought leadership.
During FY 2010 we launched the Stevia by PureCircle industry trustmark. This provides robust consumer trust benefits and has been well received by our growing list of F&B clients. We expect to announce strong developments on this initiative in the near future.
Strategic developments - accelerating stevia product launches and approvals
During FY 2010 we widened the range of our high quality stevia product portfolio and we are accelerating the number and pace of product launches and regulatory approvals. The recent FDA GRAS no objection clearance for our new SG95 product is a good example of this. We expect more material product developments and clearances in FY 2011.
On the wider regulatory front, FY 2010 saw important progress in the important European markets. In September France gave clearance for Reb A to be sold as an ingredient. Then in March 2010 the European Food and Safety Authority (EFSA) recommended approval for 95% purity steviolglycosides. The EFSA recommendation is an important milestone towards full EU clearance for stevia.
Strategic developments - leaf research
During FY 2010 we accelerated our research and investment into improved stevia varieties. In April we announced a major research programme with Michigan State University which will complement the extensive leaf improvement work being undertaken in our operating units across the world.
We expect to be able to make announcements about further progress with our leaf strategy in the near future.
Auditors
With strong growth plans ahead and with a more complex international sphere of operations the Group has changed its auditors to PricewaterhouseCoopers from Crowe Horwath. The change is effective for the audit of the FY 2010 financial statements.
Outlook
FY 2010 has seen stevia become recognised as a core part of the global mass volume natural sweetener industry. All major F&B companies are now using stevia and most are now integrating stevia into their long term sweetener strategies along with sugar and corn.
With more than one hundred customers actively working on projects and with a high success rate for consumer product launches using PureCircle stevia, we expect sales to our existing customer base to grow strongly in FY 2011 and future years. In addition the full opening of the European market expected in FY 2011, the wider product portfolio that SG95 clearances allow and our strong sugar partnerships will each provide additional major sources of revenue growth.
We expect accelerated strategic progress in FY 2011, starting with the TNSC MOU announced separately today. In turn this provides the global F&B companies with further confidence that they can design stevia into their larger global brands.
We have a significant new product innovation pipeline. These coupled with a growing range of stevia regulatory clearances will keep PureCircle at the forefront of customer service and application development.
Going forward we expect to see more customers launching more products in more countries and accelerating the growth of the overall market. PureCircle is well placed to secure a major share of this growth. We have the balance sheet and the global infrastructure in place to support this
We look forward to reporting on further progress
Chairman comment
"FY 2010 has seen a real acceleration in the execution of our long term corporate strategy. Our sugar partnerships and our excellent client relationships confirm our leadership position. 2011 and future years will see real market acceleration. PureCircle is well placed to secure share as this happens"
CEO comment
"We have put in place the strategy, the organisation, the capacity, the product portfolio and the partnerships for a major global business. The benefits of these will come through strongly as market demand accelerates"
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Enquiries: |
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| PureCircle Limited (www.purecircle.com) |
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| Magomet Malsagov, CEO | +60 1 2388 8049 |
| William Mitchell, CFO | +44 7974 005 163 |
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| RFC Corporate Finance (NOMAD) | +61 8 9480 2500 |
| Steve Allen |
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| Westport Communications | +44 20 7065 2690 |
| Alan Frame | alan@westportcomms.com |
| Jeanette Bishop | jeanette@westportcomms.com |