Delays hit PureCircle's sales

PureCircle, which makes sweeteners based on the stevia herb, left a sour taste in investors' mouths on Monday as it admitted sales in the second half of its financial year had been below expectations.

Sales in the six months to the end of June are expected to be around $30m, which would push full year sales up to not less than $45m. The group said the disappointing sales number is partly due to the delay in a number of projects now slated for launch in the current financial year, and partly due to the end of the legacy "Take or Pay" volumes and lower sales of co-products, which reflects PureCircle's decision to slow down Reb A production in 2011 to prevent stocks building up too quickly.

The fiscal year just ended was the first year since the beginning of the company's sales history that its sales have not included any contractually pre-committed or "Take or Pay" volumes. The group estimates that almost $40m, or around 85% of sales this year, are represented by customer orders and contracts that did not exist three years ago. "This provides a good indication of the diversification of our customer base that has been achieved since FY 2009 [fiscal 2009]," the group statement claimed.

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Margins in the second half of fiscal 2012 are expected to be similar to those seen in the first half. Helped by sales being at least double what they were in the first half of the year, losses in the second half are expected to be lower than in the six months to the end of December 2011.

The doubling of sales volumes has upped the working capital requirements and as a result net debt has increased, though is still below $80m. The group's funding headroom at the end of June was estimated at $44m or more.

"Looking forward, we are comfortable with market consensus for sales levels in FY 2013 [fiscal 2013],2 revealed PureCircle's Chief Executive Officer, Magomet Malsagov. Market consensus is for sales of £52.1m and a profit before tax of £2.77m in fiscal 2013.

"Our guidance for high levels of sales remains mid-to-long term based and until then there will continue to be some volatility in our results," Malsagov admitted.

JH