Interim Results - Purecircle...This presentation is for information purposes only and is directed...
Transcript of Interim Results - Purecircle...This presentation is for information purposes only and is directed...
Presented byPaul Selway-SwiftMagomet MalsagovRakesh Sinha
7 March 2017
Interim ResultsH1 FY17
1
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OverviewPresented byMagomet Malsagov, Chief Executive Officer
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CEO OverviewHighlights CBP
• Sales were $47m, down 13%, as a direct consequence of CBP action.
• Sales outside US grew +10% led by EMEA & LatAm
• Strategic drive to higher value Value Added products progressed well
• Gross Margins remain strong at 40%+
• Positive Operating Cash Flow.(+$8.5m)
• $42m Refinery Capacity Expansion completed on time and on budget
• New Shanghai Office & Laboratory completed
• PureCircle continues to lead industry innovation and unlock market.
• Exciting developments in Agronomy and R&D programmes
• US Customs and Border Protection (CBP) actions severely impacted H1.
• Access to one third of FY16 market denied
• Removed from WRO list on 30 January after a thorough investigation
• PureCircle fully committed to CSR & Sustainability
• $15m H1 impact on Revenue
Key Messages on Stevia
• Stevia is highly efficient source of sweetness, and 100% natural alternative to sugar.
• Much smaller land, carbon and water footprint than sugar.
• No calories, tooth friendly.• Low glycemic index, safe for diabetics.• Non GMO.
4
Stevia Adoptions: Penetration of big brands, more diverse categoriesBig Brand Examples Category Innovation
Coca-Cola Life (CSD)TCCCCanada, Columbia,Saudi Arabia, and South Aftrica50%, 56%, 50%, and 37% reduction, respectively
7UP (CSD)India30% Sugar Reduction
ActivaDanoneBrazil20% Sugar Reduction
NescafeNestleCanadaNew Product
Volvic JuicedDanoneUK>30% Sugar Reduction
Nature Sweet (Stevia + Monk Fruit Tabletop)Whole EarthUSA
Spike Table Top Natural Sweetener SpikeMalaysia
Lala Chocolate Low Fat MilkGrupo LalaMexico 25% Sugar Reduction
McKay NutriactiveNestle ChileNew Product
Herdez (Ice Cream)NestleMexico25% Sugar Reduction
The London Essence Co BritvicUKReduced calories (less than 20 calories per 100ml)
Coca-Cola LifeRebranding
Australia50% Sugar Reduction
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Who we sell to
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The following winds
FinancialReviewPresented byRakesh Sinha, Chief Financial Officer
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Profit & Loss H1 FY2017
Revenue
Gross Profit
Gross Margin %
US$ (millions)
Other income
SG&A
Operating Profit
Operating margin %
Other Expenses
Finance Costs
Taxation
Share of Profit/(Loss) in JV
Forex
Net Profit
Net Profit %
EPS – Diluted (US Cents/Share)
Adjusted EBITDA
• Revenue of $47m; challenging CBP impacted environment, resulting in lower volumes and operating profit.
• Revenue growth (excl. US) of more than +10%.
• Gross Margin 40.4% has remained robust• Average Selling price lower due to mix.• Moderating leaf cost and supply chain
efficiencies resulting in lower cost of manufacturing.
• SG&A increase represents investment in Sales and Marketing personnel.
• Lower finance costs due to renewed terms on our financing facilities.
• Weakening of operating currencies in key sales markets, resulted in forex loss.
• Net Loss of $0.7m, driven by lower top line
H1 FY17 H1 FY16 Change
(7.3)
(3.5)
0.1
(1.8)
(5.3)
0.9
0.4
1.9
0.2
(3.9)
(5.7)
(3.3)
(4.5)
54.5
22.6
41.5%
0.2
(12.1)
10.7
19.7%
(6.1)
(2.8)
(0.4)
–
3.5
5.0
9.2%
2.9
13.5
47.2
19.1
40.4%
0.3
(13.9)
5.5
11.6%
(5.1)
(2.3)
1.5
0.2
(0.4)
(0.7)
-1.4%
(0.4)
9.0
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Diversified Revenue StreamsStrong Europe & Latin America Growth. Higher margin Value Added products form greater part of the portfolio.
H1
2017
H1
2016
Basic IngredientsRebA 97RebA 80SG95
FlavoursNSF01NSF02NSF03NSF04NSF05Sweta
Value AddedAlphaAlpha 2RebA 99SG95-20SG95-30Sigma SSigma DSigma T1Sigma T4Sigma T5Sigma-B
BreakthroughDeltaRebM Zeta-M
Custom BlendsPSB-XXXX5 custom ingredients
Low PuritySG90
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NON – CURRENT ASSETS- Property Plant & Equipment- Intangible Assets- Other non-current assets
US$ (millions) H1 FY17 H1 FY16 FY16
TOTAL EQUITY
TOTAL LIABILITIES & EQUITY
• PPE: Capacity expansion
• Intangibles: Leaf development & R&D
• Inventories: Leaf purchase/stock build for H2
• Trade receivables: CBP Impact
• Cash: Capacity expansion
• Trade Payables: longer credit with leaf suppliers
Balance Sheet
NON - CURRENT LIABILITIES- Long-term borrowings- Other payables & accruals- Deferred Income
CURRENT ASSETS- Inventories- Trade Receivables- Cash and bank balances- Other current assets
TOTAL ASSETS
CURRENT LIABILITIES- Trade payables- Short-term borrowings- Other payables & accruals
TOTAL LIABILITIES
141.480.649.611.2
192.4
342.4
201.0102.650.130.318.0
342.4
72.772.20.50.0
77.319.4 38.219.7
150.0
111.958.140.713.1
187.6
300.2
188.384.445.448.510.0
300.2
51.450.50.60.3
61.24.7
44.012.5
112.6
125.565.748.511.3
203.8
345.8
220.384.662.861.011.9
345.8
86.184.91.2
55.95.6
29.021.3
142.0
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Operating cash flow beforeworking capital changes
US$ (millions) H1 FY17 H1 FY16 Variance
4.7 12.9 (8.2)
Increase in inventories
Decrease in trade and otherreceivables
Increase in trade and other payables
(18.0)
11.9
9.9
(21.7)
16.4
3.8
3.7
(4.5)
6.1
Net cash from operationsbefore interest and tax 8.5 11.4 (2.9)
Net cash from operations afterinterest and taxInvesting activities
Financing activities
5.4(28.3)
(6.4)
8.6(9.2)
(9.5)
(3.2)(19.1)
3.1
Net cash flow (29.3) (10.1) (19.2)
Gross cash
Headroom
30.0
74.6
48.2
72.7
• $8.5m operating cash flow
• Inventories increase due to leaf purchase & preparation for H2 (seasonality).
• Investing: Represents the investment of $22m in production capacity expansion plus R&D projects.
• Financing: $6.4m represents the net of $60.8m repayment and $54.4m drawdown on banking facilities.
Cash Flow
Market Drivers
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Considerable Growth in the Stevia Market
Global obesity and diabetes continue to increase Potential of Stevia market materially enhanced
• Worldwide obesity has more than doubled since 1980.
• In 2014, 1.9+ billion adults were overweight. Of these 600+ million were obese.
• Worldwide diabetes is at 415 million, will rise to 642 million by 2040.
• Consumers seeking natural sustainable sources for their sweeteners.
• Stevia approved in Brazil and India. Now 5 billion consumers have access to Stevia.
• Sugar taxes being imposed in major markets.
Growing number of products adopting Stevia F&B industry to reduce added sugar
• Mintel report: > 9,000 products now launched with Stevia: > 70% within the last three years.
• All major F&B categories now adopting across all geographic regions.
• F&B industry now publicly committing to reduce added sugar and artificial sweeteners from their product portfolios.
• Stevia increasingly being used as part of the solution.
• Brands differentiating themselves via ingredients
http://www.who.int/mediacentre/factsheets/fs311/en/http://www.diabetesatlas.org/, 7th Ed.
Growth prospects for the market has grown considerably versus 12-months ago.
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Global new product launches with Stevia Top10 global category by number of product launches
75%+ of launches
occurred in the past 3
years
20132012 2016201520142011
2,279
1,845
2,949
2,601
1,165
637
MEA +87% +3%
LTAM +50% +14%
NTAM +29% +34%
Europe +71% +4%
APAC +23% +11%
5 yr CAGR 1yr
Snacks 449
Carbonated Soft Drinks 200
Dairy 265
Sugar & Gum Confectionery
152Sweeteners & Sugar
Bakery 189
RTDs 197
101
Other Beverages 290
Juice Drinks 327
113Hot Beverages
2 year CAGR
18%
44%
29%
20%
27%
59%
-3%
-7%
19%
9%
18%
Growth in number of launches driven by Europe (71% 5-year CAGR) and Latin America (50% 5-year CAGR), while beverages represent the fastest growing categories.
New product launches continue to roll out globally
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Progress in clearing remaining regulatory barriers
• Reb M approved in US, Canada, Australia & EU.
• More than 40 minor steviol glycosides in Stevia leaf extracts were identified, published in scientific journal and approved by US FDA and JECFA (Joint FAO & WHO Expert Committee on Food Additive) for food applications. Approval by other authorities in progress.
• Steviol Glycosides Approved in India, Gulf countries and Egypt.
• PureCircle enzyme modified Stevia leaf extracts as sweeteners approved in US. Approval by other authorities in progress.
• Blends of nutritive sweetener with high intensity sweeteners approved in Brazil.
• PureCircle NSF-02 approved in Indonesia and China.
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Sustainability: Impact of PureCircleStevia vs Sugar
Lowest Carbon Footprint Lowest Water Footprint Lowest Land Footprint
30-80% 92% 1/5Less carbon than the next stevia sweetener or other natural sweeteners.
Less water than other natural sweeteners. Size of Delaware = Amount of stevia needed to replace 20% of today’s sugar consumption.
KgCo2-e/kg SE*Comparative Carbon Footprints
Liters/Kg SE*Comparative Water Footprints
At least Uses
the land of sugar cane
OperationalOverview
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Gary Juncosa
• Appointment of Gary Juncosa as Chief Operating Officer in November 2016.
• Speciality chemical sector experience, including more than a decade in the Flavors and Fragrances industry.
• Priorities:
• Produce the highest quality, superior tasting Stevia and delivering proprietary systems to our strategic partners.
• Enhance the resources to improve operational efficiency
• Upgrading the supply chain to enhance customer integration
• Expanding our leaf supply partnerships in Latin America, Africa, North America, Southeast Asia and India.
Operations: New COO
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Operations: Supply Chain ReviewDuring the CBP Crisis, we completed a thorough examination of our supply chain.
1. We made a complete assessment of our product life cycle from leaf to production to assess our velocity.
2. Completed detailed analysis of material provenance to assure sources.3. Improved traceability capabilities
FY’17 H2 Actions include:
• Acceleration of Enterprise Resource Planning (ERP) automation to increase our total system throughput.
• Global supply chain integration to improve customer service and reduce non-strategic inventory.
• Enhancing S&OP process targeting forecast accuracy and production prioritizing. • Expanding Global Sustainability, Quality Assurance and Safety capabilities.
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Refinery Capacity Expansion Completed• PureCircle expanded its production capacity to meet anticipated future increased volume demand,
further sustain market share and its first mover advantage.
• New plant is mechanically complete and will be fully commissioned Q1 2017.
• Production capacity will be able to support revenue of approximately $450 to $500m.
• The new state of the art, fully automated plant will incorporate more advanced technology that will drive higher efficiency and lower manufacturing costs.
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Research & Development• Process development team introduced new manufacturing schemes with 300%
improved throughput.
• Developed new product categories and respective production processes for novel high value ingredients derived from Stevia plant.
• New sweetener and flavor ingredients based on proprietary natural enzyme technologies.
• Agriculture R&D team Stevia breeding program resulted in new varieties with increased content better tasting steviol glycosides.
• Continued studies of Stevia plant at molecular level revealed new mechanisms of steviol glycosides biosynthesis.
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Agriculture • We continue to innovate with our proprietary varieties to provide our customer with better
tasting products. This process starts with the leaf.• For our Agricultural development of stevia, we have committed to large scale plantations with
contracted production of high Reb M (close to sugar) tasting leaf.• We work closely with our production base with technical training and development to obtain the
highest standards throughout the value chain.
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Agriculture - Mechanisation to deliver larger leaf volumes
• For us to be able to supply larger volumes of leaf for the future our plantations are mechanising the Agricultural process.
• Machine harvest and the leaf drying capacity are key areas of focus for our plantations future expansion.
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Leaf China Prices• Have moderated, but still above historical levels. • Long term Stevia is highly efficient source of sweetness.• Until there is improved visibility of end Customer demand and large scale diversified supply,
leaf price volatility may continue. PureCircle plans to have a well diversified leaf supply by 2020.
100
150
200
250
300
350
400
FY2012 FY2013 FY2014 FY2015 FY2016 FY2017
Stevia Leaf Price Index – CHINA
25
Leaf Diversification• We continue to lead the diversification
of leaf supply into new geographic regions centered on our leaf development hubs in Africa and Latin America.
• We are accelerating development with large commercial agricultural partners (>20 hectares) who have the potential to scale supply more quickly than traditional smallholders (<0.5 hectares), which use more efficient farming techniques increasing yield significantly.
Average Farm Size <0.5 hectares >20 hectares
Before Now
Farming Practice Rain fed Drip irrigation
Mechanization None Harvester, dryer
Average Yield/Hectare >3 MT/hectare >8 MT/hectare
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July December July December
• Improves taste profile in tea application while enhancing tea flavours.
• Launched at Institute Food Technologists Expo Chicago.
Sigma-Tea Zeta Sigma-Beverage
• Integrates rare glycosides for the most sugar-like taste profile in low-to-no calorie applications.
• Achieves very high level of sweetness, needed for deepest sugar reductions, without the negative attributes.
• Improves taste profile in beverage applications with sugar-like taste.
• Launched at Food Matters Live London.
FY2016 FY2017
Stevia solutions that allow deeper sugar reductions without compromising taste – preserving true flavour and superior mouthfeel.
End customers have now successfully commercialized products across both lines.
Innovation: New introductions enabling adoption of Stevia across F&B industry
Summary & Outlook
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Summary & Outlook
• Underlying business is sound despite CBP disruption
• Strong double-digit growth in EMEA & Latin America
• Product portfolio diversification to Value Added products
• Gross Margins remain strong
• Positive operating cash flow.
• Making major strides in our R&D and Agronomy Programs
• Operationally prepared for growth with refinery capacity expansion completed.
Summary Increased Market Opportunities
Outlook
• Scope for usage of Stevia in the Global Food and Beverage Industry has significantly increased in the past 12-months
• Increasing number of countries implementing Sugar Taxes
• Launch of new specific solutions to broadened adoption across wider number of applications and increased levels of sugar reductions.
• Continuous increase in the number of product launches across multiple markets and categories globally with strongest growth in beverages.
• Our overall business will return to its solid growth trajectory after a period of recovery post the US CBP issue
• Innovation pipeline is strong
• Well positioned to capitalise on consumer trends of wellness, natural ingredients and less sugar.
• Long term prospects for this business is healthy; there will be volatility on the way.