PURE.L Regulatory News (PURE)

5th January 2017

PureCircle Limited

Trading Update

PureCircle (LSE: PURE), the world's leading producer and marketer of high purity stevia ingredients, today provides a trading update for the six-month period ended 31 December 2016 (H1 FY17).

PureCircle's mission is to lead the global expansion of stevia as the next mass volume, natural sweetener and thus to encourage healthier diets around the world.

Financial Performance

Sales

The Group has achieved very strong growth in Europe and Latin America, which together represent over half of its sales. Globally, in the last six months, there have been over 100 launches that contain PureCircle products, an increase on the prior year. This is a clear indication that the demand for stevia based products is increasing and that, on an underlying basis, our business is in growth.

Group sales in H1 FY17 are expected to be $47m, a decrease of 14% against H1 FY16 (US$54m). This decrease is a direct consequence of the previously announced detainment of shipments by US Customs Border Protection ('CBP') partially offset by strong growth in the rest of the world.

Margins, EBITDA and Net Profit

The Group expects gross margin, EBITDA and net profit to be lower compared to H1 FY16 due to the aforementioned US CBP detainment order. The cost of this weighed on our margins in H1, though we expect margins to be restored to previous levels once the issue has been resolved.

Group gross profit for the first half is expected to be US$18m, a decline of 19% against H1 FY16 (US$22m) and EBITDA is expected to be US$8m, a decrease of $5m, reflecting the lower sales and adverse margins.

The Group's net loss is expected to be US$2m (1H FY16 profit: US$5m).

Cash, Net Debt and Funding Headroom

Following the planned capital expenditure for the capacity expansion of the company's refinery facility in Kuala Lumpur, the Group ended H1 FY17 with net debt of US$80m (H1 FY16 US$46m). The Group has cash and facility headroom of US$75m (H1 FY16 US$73m).

The company's interim results will be announced on Tuesday 7 March 2017.

US Customs Border Protection ("US CBP") Update

The company has worked extensively with the US CBP, providing tracking documents and related data in response to their detailed requests. We are now awaiting a decision from the CBP.

The impoundment of our shipments and the inclusion of PureCircle's name on the Withhold Release Order ("WRO") has inevitably had a significant negative impact on our market in the US, hence adversely impacting our H1 results. The US market constitutes one third of our sales.

We anticipate a further communication to the market in the near term.

Commenting on the H1 FY17 trading update, the Group CEO Magomet Malsagov said: 

"H1 FY17 has seen continued positive market sentiment for stevia with an ever increasing array of products being launched in the food and beverage categories. These launches are not just confined to the traditional mature markets of North America and Western Europe. I am particularly excited to see our expansion in Latin America and South Asia with a new office being opened in India.

The macro market trends continue to develop in our favour with increasing global obesity and diabetes trends well documented. The implementation of sugar taxes in various countries has also added to the momentum of our industry.

Whilst the US CBP process has been a major distraction for our business in H1 FY17 and has adversely impacted our sales growth in the United States, I am delighted by the continued growth in sales in the rest of the world, which has further diversified our sales footprint, and by the strong customer support that we continue to receive. We have progressed our R&D and leaf development programmes by conducting large scale field trials of new leaf varieties with high content of better tasting novel natural sweeteners Reb M and Reb D. These new leaf plantations are planned to be scaled to thousands of hectares beginning in 2017. Our new state of the art, fully automated refinery, encapsulating all the latest technology developments is complete and will be commissioned in the first quarter of CY2017. With these positive dynamics, and an anticipated resolution to the US CBP issue in the near future, I am confident in our mid to long term prospects and look forward to returning to our growth trajectory."