PureCircle Limited FY16 Full Year...
Transcript of PureCircle Limited FY16 Full Year...
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PureCircle Limited
FY16 Full Year Results
September 20th 2016London
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Opening Remarks Paul Selway-Swift Chairman
Overview Magomet Malsagov CEO
Financial Review Rakesh Sinha CFO
Operational Review Magomet Malsagov
Q&A
Agenda
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CEO Overview (1)
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Our FY16 results demonstrated Strategy delivery.
High Sales Growth driving Margin Expansion that delivers strong financial metrics
FY16 Sales increased by 9% to $138.6m
Price / Mix driven growth, due to Value Added products
Strong year-on year Gross Margin improvement of +10% to 41%
$10.5m improvement in Net Earnings to $14.6m
Earnings per Share 8.37 cents per share, improved by 6 cents per share (fully diluted)
Positive Operating Cash Flow
H2 Sales lower than anticipated due to delayed customer launches
Performance
CBP US Customs and Border Protection (CBP) actions impacted H2
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CEO Overview (2)
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Growth prospects for the market has grown considerably versus 12-months ago
Global obesity and diabetes continue to increase: > 600 million people predicted to be obese by 2035 (up 50% from 2013) Consumers seeking natural sustainable sources for their sweeteners
Potential of stevia market materially enhanced:- Stevia approved in Brazil and India. Now 5 billion consumers have access to stevia
- Sugar taxes being imposed in major markets
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 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
The Stevia Market
Innovation PCL continues to lead industry innovation and unlock market Launch Sigma D, Sigma T and Zeta suite of ingredients
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CEO Overview (3)
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Production capacity expansion is in progress to meet future demand. Fully funded investment will support $450-500m sales when completed in FY17
Production Capacity
Expansion
Management & Corporate
Board strengthened with new NEDs Main Market admission in October 2015
Leaf
Leaf Innovation
Stevia is highly efficient source of sweetness:Much smaller land, carbon and water footprint than sugarUntil improved visibility of end Customer demand and large scale diversified supply, leaf pricing volatility may continue
Leadership programme continues at pace: 20* higher yield strains of rare glycosides already developed and being scaled up
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FY16 Financial Headlines
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• Highly leveraged business model being demonstrated
• Revenue growth driven by- Price & Innovations- Europe & LatAm Region- Key Partners
• Exceptional margin delivery driven by ASP, Mix and moderating Leaf costs.
• Operating Margin improvement reinforces the business model
• Group generated positive operating cash flow $19m (before financing and investing activities)
Revenue
$138.6m+9%
Gross Margin
41.1%+949 bps
Operating Margin
23.4%+1,000 bps
Adjusted EBITDA
$37.7m+70%
Operating Cash Flow
$19.0m+$5.2m
EPS (Diluted) Cents/Share
8.4c+6c
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Profit & Loss – FY 2016
• ASP increased due to mix –Value Added products
• Moderating Leaf cost
• Margin growth despite an impacted H2
• SG&A: improved efficiency
• Other expenses increased due to bonus provision in FY16.
• Lower finance costs due to renewed terms on our financing facilities
• FX +ve; weakening Ringgit vs $ on PCSB $ receivables
• Net Profit $14.6m (FY15: $4.1m)
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US$ (millions) 2016 2015 Variance
Revenue 138.6 127.3 11.3
Gross Profit 57.0 40.3 16.7 Gross Margin % 41.1% 31.6%
SG&A (24.9) (24.0) (0.9) SG&A % -18.0% -18.9%
Operating Profit 32.4 17.0 15.4 Operating Margin % 23.4% 13.4%
Other Expenses (10.2) (7.1) (3.1) Finance Costs (5.3) (7.3) 2.0 Taxation (3.3) 3.0 (6.3)
Net Profit 14.6 4.1 10.5 Net Profit % 10.5% 3.2%
EPS - Diluted (US Cents / Share) 8.4 2.4 6.0 Adjusted EBITDA 37.7 22.2 15.5
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Revenue: Diversified Revenue Streams
Basic Ingredients
46%
Breakthrough2%
Custom Blends
0%
Flavors33%
Low Purity1%
Value Added18%
Total Revenue Mix by Product Category
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North America
33%
EMEA30%
Latin America
23%
Asia13%
South Asia1%
Total Revenue Mix by Geographic Region
Revenue generated from a more equitable geographical split & less dependency on a single product category
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Cash Flow
• Operating: $31.9m operating cash flow before working capital: $8.1m improvement on FY16
• $22.4m increase in inventories ahead of anticipated sales growth
• Investing: $8.8m increase in purchase of property, plant and equipment (Capex) and $5.0 increase in intangible assets
• Financing: FY15: $43m share issue for production capacity expansion; $14.8m represents the drawdown from banking facilities
• Headroom lower due to utilisation of banking facilities
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US$ (millions)FY16 FY15 Variance
Operating cash flow before working capital changes 31.9 23.8 8.1
(Increase)/Decrease in inventories -22.4 23.8 -46.2(Increase) in trade and other receivables -2.5 -30.4 27.8Increase/(Decrease) in trade and other payables 12.1 -3.4 15.5
Net cash from operations before interest and tax 19.0 13.8 5.2
Net cash from operations after interest and tax 13.1 6.4 6.7
Investing activities -24.4 -10.9 -13.5Financing Activities 14.8 26.7 -11.9
Net cash flow 3.5 22.3 -18.8
Gross cash 61.0 64.3
Headroom 76.3 87.9
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$44.4
$70.2
$101.0
$127.3 $138.4
FY12 FY13 FY14 FY15 FY16
Revenue ($MM)
GROWTH: Revenue +9% over FY16; CAGR +33%
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+44%
+9%
+58%
+26%
Revenue By Region (FY12-FY16)
LTAM
EMEA
NTAM
APAC
Number of Products Sold
+33%
5 5
12
1720+
FY12 FY13 FY14 FY15 FY16
14
FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
477
990
1314
22322406
2788
368
70%+ of launches occurred in the past
3 years
By end of FY2016 more than 10,000 F&B products had been launched using stevia with more than 70% of these occurring within the last 3 years.
GLOBAL MARKET: New Product Launches Continue to Roll
Source: Mintel GNDP, 2016
5-year CAGR41%
+62%
+66%
+31%
+29%
+146%
APAC
Europe
NTAM
LTAM
MEA
FY2016 Top-10 Global Category by Number of Product LaunchesGlobal New Product Launches with Stevia, June 2016
Growth in number of launches driven by Europe (66% 5-year CAGR) and Latin America (62% 5-year CAGR), while beverages represent the fastest growing categories
2 Year CAGR
106
111
156
196
199
207
237
240
298
393
Sugar & Gum…
Hot Beverages
Sweeteners & Sugar
Bakery
Carbonated Soft Drinks
RTDs
Dairy
Juice Drinks
Other Beverages
Snacks 0%
+34%
+7%
+19%
+26%
+23%
+23%
-2%
+1%
-2%
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INNOVATION: New Introductions Enabling Adoption of Stevia Across F&B Industry
Developed specifically for dairy applications.
Launched at Food Ingredients Europe.
Improves taste profile in tea application while enhancing tea flavours.
Launched at Institute Food Technologists Expo Chicago.
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.
v
v
v
v
v
v
JulDec
Sigma-Dairy Sigma-Tea Zeta
Dec
FY2015 FY2016
Category-specific stevia solutions that allow deeper sugar reductions without compromising taste – preserving true flavour and superior mouthfeel.
JulJul
End customers have now successfully commercialized products across both lines
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Expansion of technical capabilities
FLAVOR MODIFICATION(FMP)
SWEETNESS QUALITYIMPROVEMENT
Expanded FMP Sensory Capabilities
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SKUs & Product Categories
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Basic Ingredients
46%
Breakthrough2%
Custom Blends
0%
Flavors33%
Low Purity1%
Value Added18%
Total Revenue Mix by Product CategoryBasic Ingredients
Gamma A1Gamma A2Reb A 80Reb A 97SG95
BreakthroughDeltaReb D 80Reb MZeta M
FlavorsNSF-01NSF-02NSF-03NSF-04NSF-05PSB 1001SwetaSweta-S
Value AddedAlphaAlpha 2Monk FruitPSB 1036Reb A 99SG95-20SG95-30Sigma DSigma SSigma T1Sigma T4Sigma T5Zeta LE
Custom BlendsPCB 1034 Customer X BlendPSB 1098Customer Y Blend
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STEVIA ADOPTION: Penetration of big brands, more diverse categories
BIG BRAND EXAMPLES CATEGORY INNOVATION
Coca-Cola Life (CSD)TCCCBrazil
France, UK, Germany, Italy, Argentina
40%, 45%, 50%, ,36% , and 55%reduction, respectively
7UP(CSD)India
New Product
Oikos Triple Zero(Yogurt)Danone
USA
LaLa(Yogurt)Borden
USA25% Sugar Reduction
SpriteJapan
Mirinda(CSD)India
New Product
Levite Doble Sabor(Juice Drink)
DanoneArgentina
Nature Sweet (Stevia + Monk Fruit
Tabletop)Whole Earth
USA
Karamalz (Beer)Bell (for Privatbrauerei
Eichbaum)Germany
40% Sugar Reduction
Heinz LightKRAFT HEINZ
Russia20% Sugar Reduction
Herdez (Ice Cream)NestleMexico
25% Sugar Reduction
RTE Hartley Jelly Pots
(Snack)Premier FoodsUK & Ireland
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FY16 experience major progress in clearing remaining regulatory barriers
prop
Reb M approved in Canada, Australia and EU
All 40+ Steviol Glycosides from stevia leaf are found safe for food and beverage applications according to JECFA (Joint FAO & WHO Expert Committee on Food Additive) and FDA
Steviol Glycosides Approved in India, Gulf countries and Egypt
Blends of nutritive sweetener with high intensity sweeteners approved in Brazil
PureCircle NSF-02 approved in Indonesia and China
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LEAF CHINA: Prices have declined, but still above historical levels
100
150
200
250
300
350
400
FY2012 FY2013 FY2014 FY2015 FY2016
Stevia Leaf Price Index- CHINA
Price Index
Long term stevia is highly efficient source of sweetnessUntil 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.
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LEAF DIVERSIFICATION: Accelerated Development
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), and which use more efficient farming techniques increasing yield significantly.
Before NowAverage Farm Size <0.5 hectares >20 hectares
Farming Practice Rain fed Drip Irrigation
Mechanization None Harvester, dryer
Average Yield/Hectare <3 MT/hectare >8 MT/hectare
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22 Source: PureCircle lifecycle assessment FY2011
SUSTAINABILITY: Impact of PureCircle Stevia vs. Sugar
LOWEST CARBON FOOTPRINT
30-80%Less carbon than the next stevia sweetener or other natural sweeteners
At least
92%Less water than other natural sweeteners
LOWEST WATER FOOTPRINT LOWEST LAND FOOTPRINT
1/5 the land of cane sugar
uses
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
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PRODUCTION CAPACITY: Expansion on track for completion in FY17
PureCircle is expanding its production capacity to meet anticipated future increased volume demand, further sustain market share and its first mover advantage.
When fully commissioned (early 2017) we anticipate that the production capacity will be able to support revenue of approximately $450 to $500m.
New state of the art, fully automated plant will incorporate improved more advanced technology that will drive higher efficiency and lower manufacturing costs
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Having implemented the Sales & Distribution module of Oracle JD Edwards ERP system, in FY16 we are implemented the Manufacturing module plus and the Grower Management System for better control and traceability to the Farm.
We have engaged the services of BUREAU VERITAS for the implementation of Sustainable Agriculture Initiatives (SAI) common for F&B Industry to achieve sustainable agriculture raw material sourcing.
In FY16, corporate management appointments included the new CFO & Group Head of Human Resources.
Amber DosseyVice President Group HR
• Joined PureCircle in 2015• West Point Graduate, MBA Texas A&M• Over 17 years’ professional experience, including more
than 13 years in leadership roles and Human Resource Management positions
MANAGEMENT & SYSTEMS: Investment to Support Growth
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Rakesh SinhaChief Financial Officer
• Joined PureCircle in April 2016; Elected to the Board in July 2016
• Chartered Accountant, MBA RSM (Erasmus University)• Over 25 years’ broad international experience, including
17 years at Unilever. Roles included FD Ice Cream, Australasia, CFO Food Solutions, LatAm, S&E Europe
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FY16 SUMMARY: PureCircle Business Model Reinforced
GROWTH: Sales Revenue increased 9% over FY15 with balanced regional growth, category and product portfolio diversification
INNOVATION: Launch of new specific solutions to broadened adoption across wider number of applications and increased levels of sugar reductions
NEW PRODUCT LAUNCHES: Continuous increase in the number of product launches across multiple markets and categories globally with strongest growth in beverages
REGULATORY:Scope for usage of Stevia in the Global Food & Beverage Industry has significantly increased with the recent approval of India and regulation changes in Brazil
LEAF SOURCING: Moderation of China leaf prices and accelerating global diversification of leaf sourcing with a new more effective propagation model
PRODUCTION CAPACITY: PureCircle capacity expansion on track, expect new plant commissioned in early 2017
MANAGEMENT AND SYSTEMS: PureCircle continues to upgrade its systems to become a “second to none” World Class Operation including areas of Sustainability, Leaf Traceability and HR Practices
PROFITABILITY AND CASH FLOW: FY16 is milestone with positive net profit and positive operating cash flow
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Outlook
Market Conditions continue to be favourable
Business is growing
Pipeline strength
CBP issue has impacted Q1; Resolution??
Long – Term prospects for this business is healthy; there will be volatility on the way.
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