CREATING BEST-TASTING SOLUTIONS...CREATING BEST-TASTING SOLUTIONS Interim Results 2019 Presented by...
Transcript of CREATING BEST-TASTING SOLUTIONS...CREATING BEST-TASTING SOLUTIONS Interim Results 2019 Presented by...
©PURECIRCLE 2019
CREATING BEST-TASTING SOLUTIONS
Interim Results 2019
Presented byMagomet MalsagovRakesh Sinha
12 March 2019
©PURECIRCLE 2019
DISCLAIMER
• This document, which is personal to the recipient and has been issued by PureCircle Limited (the “Company”), comprises written materials/slides for presentations to be held in September 2017. This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares in the Company, nor shall any part of it nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company.
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(the “Order"); (ii) are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations, etc") of the Order; or (iii) are persons to whom it may otherwise be lawfully communicated (all such persons together being referred to as "Relevant Persons"). By attending the presentation to which this document relates or by accepting this document, you will be take to have represented, warranted and undertaken that you are a Relevant Person.
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©PURECIRCLE 20193
Presented by
Magomet Malsagov, Chief Executive Officer
OVERVIEW
©PURECIRCLE 2019
CHIEF EXECUTIVE’S OVERVIEW
• Implementation of new strategy centred around best tasting products from Starleaf™ continues to gain momentum
• Scaled & Commercialised our new technology to convert RebA to RebM
• Results include sale of meaningful quantities from next generation stevia sweeteners based on Reb M both directly extracted fromleaf and via conversion of first generation stevia
• Customers are switching and reformulating to Reb M due to the superior taste profile
• Reformulations have led to some cannibalisation of base business and the results of the first six months should be seen in this context. The pipeline is healthy.
• Sufficient production capacity of Reb M to sweeten circa 1 billion cases of zero-calorie carbonated soft drinks annually
• Food and Beverage launches containing best tasting products from Starleaf™ including new channels and notable brands
• Restructuring and significant strengthening of the go-to-market organisation initiated and will be completed in H2
$50.7m39.2%
+240bps
$2.9m
+6.9m
Interim Revenue
Adj.EBITDA Gross Margin UnderlyingNet Profit
$11.6m
+49%$8m$25m
Gross Debt Reduction
Exceptional Items
©PURECIRCLE 2019
FOOD AND BEVERAGE INDUSTRY: In need of sweetener innovation
• Global obesity crisis • Sugar tax (passed/proposed)• Activist advocacy groups
• Good for me• Good for others• Good for the planet
proposed new label
highlighting calories and added
sugars
• Sugar• Artificial sweeteners
RISING PUBLICHEALTH CONCERNS
CONSUMERS REDEFINEHEALTH & WELLBEING
SWEETUNDER FIRE
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Evolution of StrategyStarleafTM Stevia
©PURECIRCLE 2019
WHY REB M? From a range of options, we believe that Reb M sweeteners combine the best of consumer needs with customer requirements of price & capacity
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NaturalConsumer
AcceptanceTaste CapacityRegulatory ApprovalPrice
Reb M (extract)
GMO Reb M
Reb A (extract)
Artificial Sweeteners
HFCS
Reb M (bioconversion)
Reb M (extract)
Reb M (GMO/fermentation)
Reb A (extract)
Monk Fruit
Artificial Sweeteners
HCFS
Sugar
©PURECIRCLE 20198
Stevia Leaf Composition Getting to the Best Stevia Sweeteners
STEVIA LEAF – THE SOURCE OF INNOVATION
Steviol Glycosides
ProteinsFibers
Antioxidants REB M, D
Other glycosides
Original Strategy (Reb A) New Strategy
REB MREB M
©PURECIRCLE 20199
WHAT CAN PURECIRCLE’S LATEST INNOVATIONS DELIVER TO OUR CUSTOMERS
Customer + PureCircle
Cost Savings
COST & CAPACITY
Social Responsibility
FARMERS, WATER, LAND
Growth
TASTE
Calorie Reduction
INNOVATION
©PURECIRCLE 2019
…………….………….………….………….…………….…………..…………….…………..................FEEDBACK FROM OUR CUSTOMERS AND THEIR DEVELOPERS IS VERY POSITIVE
10
‘Such a big difference in taste vs. using Reb A’
‘We are finally able to formulate without any aftertaste’
‘You can really taste the difference’
©PURECIRCLE 2019
CONSUMER DEMAND DRIVES STEVIA LAUNCHES WITH REB M EMERGING
11
Global new product launches with stevia Reb M Sweeteners are taking off in a range of categories
75% of launches
occurred in the past 5
years
280478
1,163
2,278
2,963
4,410
'09 '10 '12 '14 '16 '18
MEA +33% -7%
LTAM +40% +33%
NTAM +12% 21%
Europe +13% +26%
APAC +19% +48%
5 yr CAGR 1yr
Total +19% +33%
Years are calendar years
Project gestation period from inception to launch is shorter for RebM than RebA due to superior taste
©PURECIRCLE 201912
Calorie Reduction
INNOVATION
Cost Savings
COST & CAPACITY
Social Responsibility
FARMERS, WATER, LAND
Growth
TASTE
Customer + PureCircle
©PURECIRCLE 2019
GROWING AROUND THE WORLD
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North Carolina Americas Africa India China
China Africa Paraguay
Suppliers 98 30 325*
Regions 11 3 1
Varieties 3 2 1
*Small scale farmers
©PURECIRCLE 201914
VERTICAL INTEGRATION AND SUPPLY CHAIN INNOVATION MEANS THAT WE CAN NOW SCALE UP REB M PRODUCTION
1 BillionSeedlings
Scaling Reb M
Seedlings Dry Leaf
20,000 MTDry Leaf
3,000 MTReb M
Reb M CapacitySeedling to Finished Product
$600M Investment
TODAY: 3,000 MT Reb M
2 Refineries
*Reb M refers to extract and bioconversion process
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3,000 METRIC TONS OF REB M WILL:
20+ BN Cases
7 Trillion Calories by
replacing sugar with stevia across
3,000 MT
2 MillionMT Of Sugar
At 15% sweetness levels
4.5 BN Cases
1 BN Cases
@ 30% Sugar Reduction
Reduce Sugar Across
Remove Eliminate
@ 100% Sugar Reduction @ 15% Sugar Reduction
©PURECIRCLE 2019
PURECIRCLE REB M OFFERING IS COMPETITIVE AND WILL HELP CUSTOMERS SAVE COST GOING FORWARD
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$75
$100
$125
$150
$175
300 MT 1000 MT 3000 MT
Reb M SweetenerPrice / Volume
Reb M Sweetener
©PURECIRCLE 2019
PURECIRCLE’S REB M CAN PROVIDE UNPARALLELED COST SAVINGS TO OUR CUSTOMERS
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Attract New ConsumersReformulation
$600 Million
From switching from sugar to
steviausing 3,000 MT
Save
While Investing For Growth
Innovation
©PURECIRCLE 201918
Calorie Reduction
INNOVATION
Cost Savings
COST & CAPACITY
Social Responsibility
FARMERS, WATER, LAND
Growth
TASTE
Customer + PureCircle
©PURECIRCLE 2019
REDUCE CALORIESCARBONFOOTPRINT
WATERFOOTPRINT
GLOBALFARMERS
LAND USE
Save25,000+ hectaresannually
Support30,000+Farmersannually
Remove7 Trillioncalories as
compared to sugar equivalence
Reduce600,000 MT
Of Green House Gasses
Save1 Trillion
Liters of Water
PURECIRCLE CAN HELP OUR CUSTOMERS WRITE NEW SUSTAINABILITY STORIES
Using 3,000 MT of RebM could:
©PURECIRCLE 201920
Calorie Reduction
INNOVATION
Cost Savings
COST & CAPACITY
Social Responsibility
FARMERS, WATER, LAND
Growth
TASTE
Customer + PureCircle
©PURECIRCLE 2019
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Portfolio of Reb M Products Beyond Sweeteners
+ Improved solubility
+ Wider range of cost options
+ New beverage applications
+ Proteins, antioxidants, & fibers
+ Nutrition and health benefits
+ Support innovation brands
WE ARE ALWAYS INNOVATING ACROSS OUR SUPPLY CHAIN
©PURECIRCLE 201922
FINANCIALREVIEW
Presented by
Rakesh Sinha, Chief Financial Officer
©PURECIRCLE 2019
Revenue
Gross Profit
Gross Margin %
US$ (millions)
Other income
SG&A
Operating Profit
Operating margin %
Other Expenses
Finance Costs
Taxation
Share of Profit/(Loss) in JV
Forex
Net (Loss)/Profit
Net Profit %
PROFIT & LOSS FY2019Margins improve with increased Breakthrough volumes
1H FY19 1H FY18
EPS – Diluted (US Cents/Share)
Adjusted EBITDA
53.5
19.7
36.8%
0.5
(17.1)
3.1
5.7%
(2.5)
(3.2)
(2.2)
(0.4)
1.2
(4.0)
-7.5%
2.3)
7.8
50.7
19.9
39.2%
6.0
(14.7)
11.2
22.1%
(30.0)
(4.7)
3.2
(0.0)
(1.8)
(22.1)
-43.6%
(12.6)
11.6
• FY19 sales decreased by $2.8m (-5.2%) to $50.7m due to sales phasing and adoption of RebMcannibalising base business
• Improved Gross Margin by 240bps driven by category mix i.e. more Breakthrough
• Higher other income due to R&D and IP related payments.
• SG&A savings from restructuring and cost savings initiatives.
• Significant inventory write down of $24.2m primarily relating to by-products generated from early generations of stevia leaf. Classified as an exceptional item.
• Higher finance costs due to higher drawdown on financing facilities.
• Deferred tax assets recognised due to recent change in Malaysian tax regulations – this will reverse by year end
• Forex loss due to weakened Malaysian Ringgit vs USD
• Adjusted EBITDA improved 48.7% to $11.6m,.
• Net Loss of $22.1m due to inventory write down. Underlying Net Profit for the period excluding exceptional items is $2.9m
©PURECIRCLE 2019
Asia, 11%
Europe, 43%
Americas, 46%
Revenue Mix by Geographic Region
Asia, 18%
Europe, 31%
Americas, 51%
Revenue Mix by Geographic Region
DIVERSIFIED REVENUE STREAMSH
1 FY
18H
1 FY
19 Basic Ingredients
40%
Value Added17%
Flavour32%
Breakthrough6%
Custom Blend
5%
Revenue Mix by Product Category
Basic Ingredients
43%
Value Added22%
Flavour31%Breakthrough
3%
Custom Blend1%
Revenue Mix by Product Category
• Growth from next generation, better tasting stevia sweeteners represented in Breakthrough category, driving margins
• Breakthrough grew 1.7x and Custom Blends grew 5x
• Sales growth continues to be achieved in North America and Asia
• Strong growth of 14% in North America
• Asia delivering high double digit growth >75%
©PURECIRCLE 2019
NON – CURRENT ASSETS- Property Plant & Equipment- Intangible Assets- Other non-current assets
TOTAL EQUITY
TOTAL LIABILITIES & EQUITY
BALANCE SHEET
NON - CURRENT LIABILITIES- Long-term borrowings- Other payables & accruals
CURRENT ASSETS- Inventories- Trade Receivables- Cash and bank balances- Other current assets
TOTAL ASSETS
CURRENT LIABILITIES- Trade payables- Short-term borrowings- Other payables & accruals
TOTAL LIABILITIES
200.0
354.5
178.8112.237.714.614.3
354.5
109.0106.5
2.5
45.517.0 11.716.8
154.5
US$ (millions) FY19 FY18• PPE: Depreciation
• Intangibles: Investment in leaf development, IP and R&D
• Other non-current assets improved with the recognition of deferred tax assets
• Inventories: Decrease due to net realisable value write down of $24.2m
• Trade receivables: continued improvement in receivables management.
• Trade Payables: longer credit with suppliers
• Net debt: $103.5m
226.4
389.6
212.3122.557.523.98.4
114.9112.9
2.0
48.320.5 9.2
18.6
163.2
389.6
175.796.063.116.6
177.3100.1
64.113.1
©PURECIRCLE 2019
Operating cash flow beforeworking capital changes
US$ (millions) 1H FY19 1H FY18
10.5
Increase in inventories
Decrease in trade and other
receivables
(Decrease)/Increase in trade and other payables
(13.9)
17.9
(6.7)
Net cash from operationsbefore interest and tax 7.8
Net cash from operations afterinterest and taxInvesting activities
Financing activities
3.2(6.2)
(5.0)
Net cash flow (8.0)
Gross cash
Headroom
14.6
79.7
Operating cash flow before working capital improvement of +$2.8m
NET OPERATING CASH FLOW OF $7.8M
7.7
(22.2)
15.9
1.6
3.0
0.2(14.2)
5.3
(8.7)
28.0
93.0
• Operating cash flow before working capital remains positive
• Inventories increased mainly due to leaf purchases in preparation for H2 (seasonality)
• Strong receivables management
• Investing mainly R&D projects and capex additions
• Financing: Repayment on the banking facilities.
©PURECIRCLE 201927
SUMMARY & OUTLOOKSignificant opportunities for growth
©PURECIRCLE 2019
SUMMARY & OUTLOOK
Our new StarleafTM strategy, which enables us to provide the best tasting solutions for our food and beverage customers looking to reduce sugar naturally is on track
Positive feedback about great taste profile of our next generation stevia Reb M sweeteners.
Pipeline of projects with new products continues to grow in both existing and new channels.
Expect margins to strengthen as both reformulations and new launches will primarily be based on high margin products.
Sales to date in H2 show an improving trend versus the prior year
Everything we do is about helping our customers achieve their goals of reducing sugar/calories/cost of ingredients without compromising taste through high purity stevia solutions
©PURECIRCLE 201929
Q&A
©PURECIRCLE 201930
AppendixGreatest tasting stevia
©PURECIRCLE 2019
OUR GLOBAL FOOTPRINT
©PURECIRCLE 2019
HOW WE CREATE VALUE
We have successfully commercialised a portfolio that includes natural sweeteners, flavours and specialty ingredients based on high purity stevia.
PureCircle has deep expertise across the value chain, from seedling to sweetener.
Research & Development (R&D)Multi-disciplinary approach spanning plant breeding, agronomy, biotechnology, biochemistry,
food technology and sensory analysis
Commercialisation• Scientific and Regulatory Affairs
• Sales & Marketing
©PURECIRCLE 2019
WE TAKE MEASURES TO PROTECT OUR IP
• 32 new patents granted in last 12 months
• 150 granted patents and c.295 pending patent applications worldwide:
–Steviol glycosides production (extraction, new sweetener technology, fermentation etc.)
–Steviol glycosides sweetener and flavor compositions–Steviol glycosides use and applications–Stevia varieties
©PURECIRCLE 2019
OUR COMMITMENT TO STEVIA: Farming communities
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STEVIA LEAF HAS MORE TO OFFER THAN REB A• 40+ Steviol glycosides in the leaf
• Taste synergies
• Each with unique attributes
©PURECIRCLE 201936
Zero-calorie sweetness from nature…now with a more sugar-like taste
©PURECIRCLE 2019
WE ARE SCALING UP STARLEAFTM:Traditional, non-GMO, intelligent plant breeding
Conventional Variety2002
StarleafTM SteviaVariety2017
>20x most sugar-like glycosides
(Reb M, Reb D, others)vs. conventional leaf
PureCircle Reb A Variety2010
7x Reb A vs. conventional leaf
©PURECIRCLE 2019
New Technology
• As stevia matures from seedling to full-grown plant, the sweet parts of the stevia leaf (called glycosides) are formed.
• The leaf naturally produces enzymes which convert Reb A to Reb D and then to Reb M.
• We start with purified stevia leaf extract with low Reb M and, by adding enzymes, the maturation of Reb M is completed, just as the leaf does naturally.
• This produces a non-GMO stevia leaf sweetener with high sweetness quality and no bitterness.
Approvals
• USA
• Canada
• Ecuador
• Peru
• Columbia
• Malaysia
Fema approved as a Flavor (Global)
In Progress:
• Australia (estimate 2019)
• NZ (estimate 2019)
• EU (estimate early 2020)
• JECFA (estimate end of 2020)
• China (estimate 2020)
• Brazil (estimate 2020)
NEW REB M SWEETENER TECHNOLOGY
FY2018Reb M Sweeteners
• Launched StarleafTM Reb M which produces Reb M from other stevia sweeteners in the plant
• Reb M is the variant of stevia sweetener which has the most sugar-like taste.
• PureCircle has enough Reb M to sweeten 500M cases of zero-calorie CSDs
• Targeting to double capacity of Reb M in 3 years
©PURECIRCLE 201939
MARKET DRIVERS
Powerful and dynamic
Presented byMagomet Malsagov, Chief Executive Officer
©PURECIRCLE 2019
• Worldwide obesity has more than doubled since 1980.
• In 2014, 1.9+ billion adults were overweight. Of these 600+ million were obese.
• Estimated that Worldwide diabetes will impact 1 in 10 adults by 2045 – 629 million.
• Consumers seeking natural sustainable sources for their sweeteners.
http://www.who.int/mediacentre/factsheets/fs311/en/http://www.diabetesatlas.org/, 7th Ed.
CONSIDERABLE GROWTH In the stevia market
• Stevia approved in Brazil and India. Now 5 billion consumers have access to stevia.
• Sugar taxes being imposed in major markets.
• As of 2018, 80% of the countries that passed taxes did so in the last two years.
• 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: > 17,000 products now launched with stevia: > 80% within the last four fiscal years.
• All major F&B categories now adopting across all geographic regions.
Global obesity and diabetes continue to
increase
Potential of stevia market materially enhanced
Growing number of products adopting stevia
Growth prospects for the market has grown considerably versus 12 months ago
©PURECIRCLE 2019
Rising Public Health Concerns On Obesity & Diabetes Are Driving Increased Government Engagement Globally
* N.B. Unverified content – for guidance only.
Soft drink taxes in effect
BarbadosBelgiumBruneiCambodiaChileDominicaFijiFranceHungaryIrelandLaosMauritiusMexicoNauruNorwayPeruPhilippines
US Cities• Albany• Berkeley• Boulder• Oakland• Philadelphia• San Francisco• Seattle• Washington
Taxes Proposed/raised for discussion
AustraliaCanadaIndiaIndonesiaMalaysiaSingapore
New ZealandUAEVietnamRussiaSaudi Arabia
• Warning Label/Nutrition Label in Effect
AlgeriaCanadaBruneiEcuadorEgyptMalaysia
PortugalSamoaSt. HelenaThailandUKSouth AfricaSpain Sri LankaTurkey
PeruPortugalSingaporeTaiwanUK
©PURECIRCLE 2019
– Joint (FAO & WHO) Expert Committee on Food Additives (JECFA) approved all Steviol Glycosides (50+) , including minor sugar-like tasting molecules from stevia leaf and published the amended specification (JECFA 20) in December 2017.
– Codex Alimentarius adopted the amended SteviolGlycoside specification in July 2018, which facilitates the approval of sugar-like tasting molecules from stevia leaf in major Latin America, Asia and Africa markets in near future.
– At present, all Steviol Glycosides from Stevia leaf can be used in the food & beverage applications in the US, Canada, Australia, New Zealand, Israel, Brazil;, Thailand, Vietnam, Singapore, Nigeria, etc. other authorities will follow.
– Reb M & Reb D derived from Reb A in Stevia leaf extract is approved in the US, Canada, Mexico and a few other countries. Other authorities and JECFA are evaluating the products for approval.
– New flavors with Reb M, Reb E, and other glycosides are approved by FEMA in 2017-18
REGULATORY PROGRESS In expanding the use of stevia
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NOTES I
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NOTES II