Interim Results H1 FY17 Presented by Paul Selway-Swift Magomet - - PowerPoint PPT Presentation

Presented by Paul Selway-Swift Magomet Malsagov Rakesh Sinha

7 March 2017

Interim Results

H1 FY17

1

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 March 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.

• This document has not been verified, does not purport to contain all information that a prospective investor may require and is subject to updating, revision and amending.

The information and opinions contained in this document are provided as at the date of this presentation and are subject to change without notice. In furnishing this document, the Company does not undertake or agree to any obligation to provide the attendees with access to any additional information or to update this document

• r to correct any inaccuracies in, or omissions from, this document that may become apparent.
• No reliance may be placed for any purposes whatsoever on the information or opinions contained in this document or on its completeness. No representation or warranty,

express or implied, is given by or on behalf of the Company its directors, officers or employees or any other person as to the accuracy or completeness of the information

• r opinions contained in this document and no liability whatsoever is accepted by the Company or any of its members, directors, officers or employees nor any other person

for any loss howsoever arising, directly or indirectly, from any use of such information or opinions or otherwise arising in connection therewith.

• This document and its contents are confidential and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or

in part, for any purpose. This presentation is for information purposes only and is directed only at, in the United Kingdom, qualified investors who are persons who (i) have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (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

• therwise 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.

• Certain statements, beliefs and opinions in this document, are forward-looking, which reflect the Company’s or, as appropriate, the Company’s directors’ current

expectations and projections about future events. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this document regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which speak only as of the date of this document.

• By attending the presentation to which this document relates or by accepting this document in any other way you agree to be bound by the foregoing provisions.

Overview

Presented by Magomet Malsagov, Chief Executive Officer

3

CEO Overview

Highlights CBP

• Sales were $47m, down 13%, as a direct

consequence of CBP action.

• Sales outside US grew +10% led by EMEA &

LatAm

• Strategic drive to higher value Value Added

products progressed well

• Gross Margins remain strong at 40%+
• Positive Operating Cash Flow.(+$8.5m)
• $42m Refinery Capacity Expansion completed
• n time and on budget
• New Shanghai Office & Laboratory completed
• PureCircle continues to lead industry innovation

and unlock market.

• Exciting developments in Agronomy and R&D

programmes

• US Customs and Border Protection (CBP)

actions severely impacted H1.

• Access to one third of FY16 market denied
• Removed from WRO list on 30 January after a

thorough investigation

• PureCircle fully committed to CSR &

Sustainability

• $15m H1 impact on Revenue

Key Messages on Stevia

• Stevia is highly efficient source of sweetness, and

100% natural alternative to sugar.

• Much smaller land, carbon and water footprint than

sugar.

• No calories, tooth friendly.
• Low glycemic index, safe for diabetics.
• Non GMO.

4

Stevia Adoptions: Penetration of big brands, more diverse categories

Big Brand Examples Category Innovation

Coca-Cola Life (CSD) TCCC Canada, Columbia, Saudi Arabia, and South Aftrica 50%, 56%, 50%, and 37% reduction, respectively 7UP (CSD) India 30% Sugar Reduction Activa Danone Brazil 20% Sugar Reduction Nescafe Nestle Canada New Product Volvic Juiced Danone UK >30% Sugar Reduction Nature Sweet (Stevia + Monk Fruit Tabletop) Whole Earth USA Spike Table Top Natural Sweetener Spike Malaysia Lala Chocolate Low Fat Milk Grupo Lala Mexico 25% Sugar Reduction McKay Nutriactive Nestle Chile New Product Herdez (Ice Cream) Nestle Mexico 25% Sugar Reduction The London Essence Co Britvic UK Reduced calories (less than 20 calories per 100ml)

Coca-Cola Life Rebranding Australia 50% Sugar Reduction

5

Who we sell to

6

The following winds

Financial Review

Presented by Rakesh Sinha, Chief Financial Officer

8

Profit & Loss H1 FY2017

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 Profit Net Profit % EPS – Diluted (US Cents/Share) Adjusted EBITDA

• Revenue of $47m; challenging CBP

impacted environment, resulting in lower volumes and operating profit.

• Revenue growth (excl. US)
• f more than +10%.
• Gross Margin 40.4% has remained

robust

• Average Selling price lower due to mix.
• Moderating leaf cost and supply chain

efficiencies resulting in lower cost of manufacturing.

• SG&A increase represents investment in

Sales and Marketing personnel.

• Lower finance costs due to renewed

terms on our financing facilities.

• Weakening of operating currencies in key

sales markets, resulted in forex loss.

• Net Loss of $0.7m, driven by lower top

line

H1 FY17 H1 FY16 Change

(7.3) (3.5) 0.1 (1.8) (5.3) 0.9 0.4 1.9 0.2 (3.9) (5.7) (3.3) (4.5) 54.5 22.6 41.5% 0.2 (12.1) 10.7 19.7% (6.1) (2.8) (0.4) – 3.5 5.0 9.2% 2.9 13.5 47.2 19.1 40.4% 0.3 (13.9) 5.5 11.6% (5.1) (2.3) 1.5 0.2 (0.4) (0.7)

• 1.4%

(0.4) 9.0

9

Diversified Revenue Streams

Strong Europe & Latin America Growth. Higher margin Value Added products form greater part of the portfolio.

H1 2017 H1 2016

Basic Ingredients RebA 97 RebA 80 SG95 Flavours NSF01 NSF02 NSF03 NSF04 NSF05 Sweta Value Added Alpha Alpha 2 RebA 99 SG95-20 SG95-30 Sigma S Sigma D Sigma T1 Sigma T4 Sigma T5 Sigma-B Breakthrough Delta RebM Zeta-M Custom Blends PSB-XXXX 5 custom ingredients Low Purity SG90

10

NON – CURRENT ASSETS

• Property Plant & Equipment
• Intangible Assets
• Other non-current assets

US$ (millions) H1 FY17 H1 FY16 FY16

TOTAL EQUITY TOTAL LIABILITIES & EQUITY

• PPE: Capacity expansion
• Intangibles: Leaf

development & R&D

• Inventories: Leaf

purchase/stock build for H2

• Trade receivables: CBP

Impact

• Cash: Capacity expansion
• Trade Payables: longer

credit with leaf suppliers

Balance Sheet

NON - CURRENT LIABILITIES

• Long-term borrowings
• Other payables & accruals
• Deferred Income

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 141.4 80.6 49.6 11.2 192.4 342.4 201.0 102.6 50.1 30.3 18.0 342.4 72.7 72.2 0.5 0.0 77.3 19.4 38.2 19.7 150.0 111.9 58.1 40.7 13.1 187.6 300.2 188.3 84.4 45.4 48.5 10.0 300.2 51.4 50.5 0.6 0.3 61.2 4.7 44.0 12.5 112.6 125.5 65.7 48.5 11.3 203.8 345.8 220.3 84.6 62.8 61.0 11.9 345.8 86.1 84.9 1.2 55.9 5.6 29.0 21.3 142.0

11

Operating cash flow before working capital changes

US$ (millions) H1 FY17 H1 FY16 Variance

4.7 12.9 (8.2) Increase in inventories Decrease in trade and other receivables Increase in trade and other payables (18.0) 11.9 9.9 (21.7) 16.4 3.8 3.7 (4.5) 6.1 Net cash from operations before interest and tax 8.5 11.4 (2.9) Net cash from operations after interest and tax Investing activities Financing activities 5.4 (28.3) (6.4) 8.6 (9.2) (9.5) (3.2) (19.1) 3.1 Net cash flow (29.3) (10.1) (19.2) Gross cash Headroom 30.0 74.6 48.2 72.7

• $8.5m operating cash flow
• Inventories increase due to

leaf purchase & preparation for H2 (seasonality).

• Investing:

Represents the investment

• f $22m in production

capacity expansion plus R&D projects.

• Financing:

$6.4m represents the net of $60.8m repayment and $54.4m drawdown

• n banking facilities.

Cash Flow

Market Drivers

13

Considerable Growth in the Stevia Market

Global obesity and diabetes continue to increase Potential of Stevia market materially enhanced

• Worldwide obesity has more than doubled since 1980.
• In 2014, 1.9+ billion adults were overweight. Of these

600+ million were obese.

• Worldwide diabetes is at 415 million, will rise to 642 million

by 2040.

• Consumers seeking natural sustainable sources for their

sweeteners.

• Stevia approved in Brazil and India. Now 5 billion consumers

have access to Stevia.

• Sugar taxes being imposed in major markets.

Growing number of products adopting Stevia F&B industry to reduce added sugar

• 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.

• 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.
• Brands differentiating themselves via ingredients

http://www.who.int/mediacentre/factsheets/fs311/en/ http://www.diabetesatlas.org/, 7th Ed.

Growth prospects for the market has grown considerably versus 12-months ago.

14

Global new product launches with Stevia Top10 global category by number of product launches

75%+ of launches

• ccurred in

the past 3 years 2013 2012 2016 2015 2014 2011

2,279 1,845 2,949 2,601 1,165 637

MEA +87% +3% LTAM +50% +14% NTAM +29% +34% Europe +71% +4% APAC +23% +11% 5 yr CAGR 1yr

Snacks

449

Carbonated Soft Drinks

200

Dairy

265

Sugar & Gum Confectionery

152

Sweeteners & Sugar Bakery

189

RTDs

197 101

Other Beverages

290

Juice Drinks

327 113

Hot Beverages

2 year CAGR

18% 44% 29% 20% 27% 59%

• 3%
• 7%

19% 9%

18%

Growth in number of launches driven by Europe (71% 5-year CAGR) and Latin America (50% 5-year CAGR), while beverages represent the fastest growing categories.

New product launches continue to roll out globally

15

Progress in clearing remaining regulatory barriers

• Reb M approved in US, Canada, Australia & EU.
• More than 40 minor steviol glycosides in Stevia

leaf extracts were identified, published in scientific journal and approved by US FDA and JECFA (Joint FAO & WHO Expert Committee on Food Additive) for food applications. Approval by

• ther authorities

in progress.

• Steviol Glycosides Approved in India, Gulf

countries and Egypt.

• PureCircle enzyme modified Stevia leaf extracts

as sweeteners approved in US. Approval by

• ther authorities in progress.
• Blends of nutritive sweetener with high intensity

sweeteners approved in Brazil.

• PureCircle NSF-02 approved in Indonesia and

China.

16

Sustainability: Impact of PureCircle Stevia vs Sugar

Lowest Carbon Footprint Lowest Water Footprint Lowest Land Footprint

30-80% 92% 1/5

Less carbon than the next stevia sweetener

• r other natural sweeteners.

Less water than other natural sweeteners. 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

At least Uses the land

• f sugar

cane

Operational Overview

18

Gary Juncosa

• Appointment of Gary Juncosa as Chief Operating Officer in

November 2016.

• Speciality chemical sector experience, including more than a

decade in the Flavors and Fragrances industry.

• Priorities:
• Produce the highest quality, superior tasting Stevia and

delivering proprietary systems to our strategic partners.

• Enhance the resources to improve operational efficiency
• Upgrading the supply chain to enhance customer integration
• Expanding our leaf supply partnerships in Latin America,

Africa, North America, Southeast Asia and India.

Operations: New COO

19

Operations: Supply Chain Review

During the CBP Crisis, we completed a thorough examination of our supply chain.

1. We made a complete assessment of our product life cycle from leaf to production to assess our velocity. 2. Completed detailed analysis of material provenance to assure sources. 3. Improved traceability capabilities

FY’17 H2 Actions include:

• Acceleration of Enterprise Resource Planning (ERP) automation to increase
• ur total system throughput.
• Global supply chain integration to improve customer service and reduce

non-strategic inventory.

• Enhancing S&OP process targeting forecast accuracy and production prioritizing.
• Expanding Global Sustainability, Quality Assurance and Safety capabilities.

20

Refinery Capacity Expansion Completed

• PureCircle expanded its production capacity to meet anticipated future increased volume demand,

further sustain market share and its first mover advantage.

• New plant is mechanically complete and will be fully commissioned Q1 2017.
• Production capacity will be able to support revenue of approximately $450 to $500m.
• The new state of the art, fully automated plant will incorporate more advanced technology

that will drive higher efficiency and lower manufacturing costs.

21

Research & Development

• Process development team introduced new manufacturing schemes with 300%

improved throughput.

• Developed new product categories and respective production processes for novel

high value ingredients derived from Stevia plant.

• New sweetener and flavor ingredients based on proprietary natural enzyme

technologies.

• Agriculture R&D team Stevia breeding program resulted in new varieties with

increased content better tasting steviol glycosides.

• Continued studies of Stevia plant at molecular level revealed new mechanisms of

steviol glycosides biosynthesis.

22

Agriculture

• We continue to innovate with our proprietary varieties to provide our customer with better

tasting products. This process starts with the leaf.

• For our Agricultural development of stevia, we have committed to large scale plantations with

contracted production of high Reb M (close to sugar) tasting leaf.

• We work closely with our production base with technical training and development to obtain the

highest standards throughout the value chain.

23

Agriculture - Mechanisation to deliver larger leaf volumes

• For us to be able to supply larger volumes of leaf for the future our plantations are

mechanising the Agricultural process.

• Machine harvest and the leaf drying capacity are key areas of focus for our

plantations future expansion.

24

Leaf China Prices

• Have moderated, but still above historical levels.
• Long term Stevia is highly efficient source of sweetness.
• Until 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.

100 150 200 250 300 350 400 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017

Stevia Leaf Price Index – CHINA

25

Leaf Diversification

• We continue to lead the diversification
• f 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), which use more efficient farming techniques increasing yield significantly.

Average Farm Size <0.5 hectares >20 hectares

Before Now

Farming Practice Rain fed Drip irrigation Mechanization None Harvester, dryer Average Yield/Hectare >3 MT/hectare >8 MT/hectare

26

July December July December

• Improves taste profile in tea application

while enhancing tea flavours.

• Launched at Institute Food Technologists

Expo Chicago.

Sigma-Tea Zeta Sigma-Beverage

• 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.

• Improves taste profile in beverage

applications with sugar-like taste.

• Launched at Food Matters Live London.

FY2016 FY2017

Stevia solutions that allow deeper sugar reductions without compromising taste – preserving true flavour and superior mouthfeel.

End customers have now successfully commercialized products across both lines.

Innovation: New introductions enabling adoption of Stevia across F&B industry

Summary & Outlook

28

Summary & Outlook

• Underlying business is sound

despite CBP disruption

• Strong double-digit growth in

EMEA & Latin America

• Product portfolio diversification to

Value Added products

• Gross Margins remain strong
• Positive operating cash flow.
• Making major strides in our R&D

and Agronomy Programs

• Operationally prepared for growth

with refinery capacity expansion completed.

Summary Increased Market Opportunities Outlook

• Scope for usage of Stevia in the

Global Food and Beverage Industry has significantly increased in the past 12-months

• Increasing number of countries

implementing Sugar Taxes

• Launch of new specific solutions

to broadened adoption across wider number of applications and increased levels of sugar reductions.

• Continuous increase in the number
• f product launches across multiple

markets and categories globally with strongest growth in beverages.

• Our overall business will return to

its solid growth trajectory after a period of recovery post the US CBP issue

• Innovation pipeline is strong
• Well positioned to capitalise on

consumer trends of wellness, natural ingredients and less sugar.

• Long term prospects for this

business is healthy; there will be volatility on the way.