Stevia is all the rage as an alternative sweetener for food and drink companies looking to cut back or eliminate sugar from their products. PureCircle (PURE) management reckons it needs plenty of stock at hand, as customers are reluctant to launch new products without adequate supplies of the sugar-substitute available. This not only locks in capital, but generates additional operational risk. A $24.2m (£18.4m) write-down to inventory wiped out half-year profits, leading to a net loss of £21.1m. Chief executive Magomet Malsagov said the write-down relates to a by-product of its first-generation stevia product, which was primarily used in animal feed, but he does not expect any further write downs during the current financial year.
Starleaf is PureCircle’s key product since it tastes more like sugar than previous varieties that had an aftertaste. Mr Malsagov said the company has already hit its production target of 16,000 metric tonnes for the current fiscal year, but the shift to Starleaf is not without short-term difficulty. The company noted some cannibalisation, with some customers reformulating first generation stevia, before placing new Starleaf orders. The company said that the results "should be seen in this context" but the effect is expected to be felt through the remainder of the year, with sales expected to return to “double-digit growth” next calendar year.
Analysts at Numis expect pre-tax profits of $10.5m during the year to June 2019, giving EPS of 5.2¢, compared with $8.3m and 5.5¢ in FY2018.
| PURECIRCLE (PURE) | ||||
| ORD PRICE: | 244p | MARKET VALUE: | £427m | |
| TOUCH: | 243-246p | 12-MONTH HIGH: | 433p | LOW: 240p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 114¢* | NET DEBT: | 52% | |
| Half-year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2017 | 53.5 | -1.8 | -2.3 | nil |
| 2018 | 50.7 | -25.4 | -12.7 | nil |
| % change | -5 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of $63.1m, or 36¢ a share £1=$1.32 | ||||
