Pure Circle takes hit as it runs down investories

PureCircle, the plant-based sweetener producer, left a sour taste in investors' mouths as an exceptional charge saw interim post-tax losses almost double.

Sales in the six months to the end of December advanced to $15.2m from $13.6m in the second half of 2010, but that made little difference to losses; losses before interest, tax, depreciation, amortisation and exceptional costs narrowed to $6.8m from $7.0m the year before.

The group took a $6.3m charge to reflect excess stocks of its Reb A stevia plant extract. That pushed post-tax losses up to $13.1m from $7.0m a year earlier. Inventories reduced by $9m from 30th June 2011 and now standing at $87m are $26m (23%) lower than their peak at 31st December 2010. Management expects them to reduce further across the next twelve months.

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The group reached the halfway point of its fiscal year with gross cash of $27m and net debt of $71m. Net debt is the same as at 30th June 2011 and $6m lower than at 31st December 2010, despite the exceptional costs. At 31st December 2011 the group had $60m of cash and facility headroom, up from $50m a year earlier, and is adequately funded to meet all its current plans.

Pire Circle says it is not expecting rapid sales growth until calendar year 2013, when the combination of EU approval, the launches of major stevia sweetened fizzy drinks and the unwinding of inventories at what it calls its Beverage Global Key Accounts (BKGAs) take fuller effect.

Until then, PureCircle's margins will remain substantially below the level called for by the group's long term business model.

Having said that, the group expects the second half of the current financial year (FY) to see much stronger revenues. "However with BGKA demand tracking later than expected this is likely to [have an] impact on FY 13 and FY 14 revenues not FY 12. Accordingly our sales guidance for H2 FY12 is in the range of $30m to $50m," the company disclosed.

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