purecircle limited fy16 full year...

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PureCircle Limited

FY16 Full Year Results

September 20th 2016London

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Opening Remarks Paul Selway-Swift Chairman

Overview Magomet Malsagov CEO

Financial Review Rakesh Sinha CFO

Operational Review Magomet Malsagov

Q&A

Agenda

Overview

Magomet Malsagov, Chief Executive Officer

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CEO Overview (1)

PureCircle Limited - All rights reserved September 2016

Our FY16 results demonstrated Strategy delivery.

High Sales Growth driving Margin Expansion that delivers strong financial metrics

FY16 Sales increased by 9% to $138.6m

Price / Mix driven growth, due to Value Added products

Strong year-on year Gross Margin improvement of +10% to 41%

$10.5m improvement in Net Earnings to $14.6m

Earnings per Share 8.37 cents per share, improved by 6 cents per share (fully diluted)

Positive Operating Cash Flow

H2 Sales lower than anticipated due to delayed customer launches

Performance

CBP US Customs and Border Protection (CBP) actions impacted H2

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CEO Overview (2)


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

Global obesity and diabetes continue to increase: > 600 million people predicted to be obese by 2035 (up 50% from 2013) Consumers seeking natural sustainable sources for their sweeteners

Potential of stevia market materially enhanced:- Stevia approved in Brazil and India. Now 5 billion consumers have access to stevia

- Sugar taxes being imposed in major markets

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: > 9,000 products now launched with stevia: >70% within the last three

years

All major F&B categories now adopting across all geographic regions

The Stevia Market

Innovation PCL continues to lead industry innovation and unlock market Launch Sigma D, Sigma T and Zeta suite of ingredients

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CEO Overview (3)


Production capacity expansion is in progress to meet future demand. Fully funded investment will support $450-500m sales when completed in FY17

Production Capacity

Expansion

Management & Corporate

Board strengthened with new NEDs Main Market admission in October 2015

Leaf

Leaf Innovation

Stevia is highly efficient source of sweetness:Much smaller land, carbon and water footprint than sugarUntil improved visibility of end Customer demand and large scale diversified supply, leaf pricing volatility may continue

Leadership programme continues at pace: 20* higher yield strains of rare glycosides already developed and being scaled up

Finance Review

Rakesh Sinha, Chief Financial Officer

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FY16 Financial Headlines


• Highly leveraged business model being demonstrated

• Revenue growth driven by- Price & Innovations- Europe & LatAm Region- Key Partners

• Exceptional margin delivery driven by ASP, Mix and moderating Leaf costs.

• Operating Margin improvement reinforces the business model

• Group generated positive operating cash flow $19m (before financing and investing activities)

Revenue

$138.6m+9%

Gross Margin

41.1%+949 bps

Operating Margin

23.4%+1,000 bps

Adjusted EBITDA

$37.7m+70%

Operating Cash Flow

$19.0m+$5.2m

EPS (Diluted) Cents/Share

8.4c+6c

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Profit & Loss – FY 2016

• ASP increased due to mix –Value Added products

• Moderating Leaf cost

• Margin growth despite an impacted H2

• SG&A: improved efficiency

• Other expenses increased due to bonus provision in FY16.

• Lower finance costs due to renewed terms on our financing facilities

• FX +ve; weakening Ringgit vs $ on PCSB $ receivables

• Net Profit $14.6m (FY15: $4.1m)


US$ (millions) 2016 2015 Variance

Revenue 138.6 127.3 11.3

Gross Profit 57.0 40.3 16.7 Gross Margin % 41.1% 31.6%

SG&A (24.9) (24.0) (0.9) SG&A % -18.0% -18.9%

Operating Profit 32.4 17.0 15.4 Operating Margin % 23.4% 13.4%

Other Expenses (10.2) (7.1) (3.1) Finance Costs (5.3) (7.3) 2.0 Taxation (3.3) 3.0 (6.3)

Net Profit 14.6 4.1 10.5 Net Profit % 10.5% 3.2%

EPS - Diluted (US Cents / Share) 8.4 2.4 6.0 Adjusted EBITDA 37.7 22.2 15.5

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Revenue: Diversified Revenue Streams

Basic Ingredients

46%

Breakthrough2%

Custom Blends

0%

Flavors33%

Low Purity1%

Value Added18%

Total Revenue Mix by Product Category


North America

33%

EMEA30%

Latin America

23%

Asia13%

South Asia1%

Total Revenue Mix by Geographic Region

Revenue generated from a more equitable geographical split & less dependency on a single product category

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Cash Flow

• Operating: $31.9m operating cash flow before working capital: $8.1m improvement on FY16

• $22.4m increase in inventories ahead of anticipated sales growth

• Investing: $8.8m increase in purchase of property, plant and equipment (Capex) and $5.0 increase in intangible assets

• Financing: FY15: $43m share issue for production capacity expansion; $14.8m represents the drawdown from banking facilities

• Headroom lower due to utilisation of banking facilities


US$ (millions)FY16 FY15 Variance

Operating cash flow before working capital changes 31.9 23.8 8.1

(Increase)/Decrease in inventories -22.4 23.8 -46.2(Increase) in trade and other receivables -2.5 -30.4 27.8Increase/(Decrease) in trade and other payables 12.1 -3.4 15.5

Net cash from operations before interest and tax 19.0 13.8 5.2

Net cash from operations after interest and tax 13.1 6.4 6.7

Investing activities -24.4 -10.9 -13.5Financing Activities 14.8 26.7 -11.9

Net cash flow 3.5 22.3 -18.8

Gross cash 61.0 64.3

Headroom 76.3 87.9

Operational Overview

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$44.4

$70.2

$101.0

$127.3 $138.4

FY12 FY13 FY14 FY15 FY16

Revenue ($MM)

GROWTH: Revenue +9% over FY16; CAGR +33%


+44%

+9%

+58%

+26%

Revenue By Region (FY12-FY16)

LTAM

EMEA

NTAM

APAC

Number of Products Sold

+33%

5 5

12

1720+

FY12 FY13 FY14 FY15 FY16

14

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

477

990

1314

22322406

2788

368

70%+ of launches occurred in the past

3 years

By end of FY2016 more than 10,000 F&B products had been launched using stevia with more than 70% of these occurring within the last 3 years.

GLOBAL MARKET: New Product Launches Continue to Roll

Source: Mintel GNDP, 2016

5-year CAGR41%

+62%

+66%

+31%

+29%

+146%

APAC

Europe

NTAM

LTAM

MEA

FY2016 Top-10 Global Category by Number of Product LaunchesGlobal New Product Launches with Stevia, June 2016

Growth in number of launches driven by Europe (66% 5-year CAGR) and Latin America (62% 5-year CAGR), while beverages represent the fastest growing categories

2 Year CAGR

106

111

156

196

199

207

237

240

298

393

Sugar & Gum…

Hot Beverages

Sweeteners & Sugar

Bakery

Carbonated Soft Drinks

RTDs

Dairy

Juice Drinks

Other Beverages

Snacks 0%

+34%

+7%

+19%

+26%

+23%

+23%

-2%

+1%

-2%


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INNOVATION: New Introductions Enabling Adoption of Stevia Across F&B Industry

Developed specifically for dairy applications.

Launched at Food Ingredients Europe.

Improves taste profile in tea application while enhancing tea flavours.

Launched at Institute Food Technologists Expo Chicago.

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.

v

v

v

v

v

v

JulDec

Sigma-Dairy Sigma-Tea Zeta

Dec

FY2015 FY2016

Category-specific stevia solutions that allow deeper sugar reductions without compromising taste – preserving true flavour and superior mouthfeel.

JulJul

End customers have now successfully commercialized products across both lines


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Expansion of technical capabilities

FLAVOR MODIFICATION(FMP)

SWEETNESS QUALITYIMPROVEMENT

Expanded FMP Sensory Capabilities


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SKUs & Product Categories


Basic Ingredients

46%

Breakthrough2%

Custom Blends

0%

Flavors33%

Low Purity1%

Value Added18%

Total Revenue Mix by Product CategoryBasic Ingredients

Gamma A1Gamma A2Reb A 80Reb A 97SG95

BreakthroughDeltaReb D 80Reb MZeta M

FlavorsNSF-01NSF-02NSF-03NSF-04NSF-05PSB 1001SwetaSweta-S

Value AddedAlphaAlpha 2Monk FruitPSB 1036Reb A 99SG95-20SG95-30Sigma DSigma SSigma T1Sigma T4Sigma T5Zeta LE

Custom BlendsPCB 1034 Customer X BlendPSB 1098Customer Y Blend

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STEVIA ADOPTION: Penetration of big brands, more diverse categories

BIG BRAND EXAMPLES CATEGORY INNOVATION

Coca-Cola Life (CSD)TCCCBrazil

France, UK, Germany, Italy, Argentina

40%, 45%, 50%, ,36% , and 55%reduction, respectively

7UP(CSD)India

New Product

Oikos Triple Zero(Yogurt)Danone

USA

LaLa(Yogurt)Borden

USA25% Sugar Reduction

SpriteJapan

Mirinda(CSD)India

New Product

Levite Doble Sabor(Juice Drink)

DanoneArgentina

Nature Sweet (Stevia + Monk Fruit

Tabletop)Whole Earth

USA

Karamalz (Beer)Bell (for Privatbrauerei

Eichbaum)Germany

40% Sugar Reduction

Heinz LightKRAFT HEINZ

Russia20% Sugar Reduction

Herdez (Ice Cream)NestleMexico

25% Sugar Reduction

RTE Hartley Jelly Pots

(Snack)Premier FoodsUK & Ireland


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FY16 experience major progress in clearing remaining regulatory barriers

prop

Reb M approved in Canada, Australia and EU

All 40+ Steviol Glycosides from stevia leaf are found safe for food and beverage applications according to JECFA (Joint FAO & WHO Expert Committee on Food Additive) and FDA

Steviol Glycosides Approved in India, Gulf countries and Egypt

Blends of nutritive sweetener with high intensity sweeteners approved in Brazil

PureCircle NSF-02 approved in Indonesia and China


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LEAF CHINA: Prices have declined, but still above historical levels

100

150

200

250

300

350

400

FY2012 FY2013 FY2014 FY2015 FY2016

Stevia Leaf Price Index- CHINA

Price Index

Long term stevia is highly efficient source of sweetnessUntil 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.


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LEAF DIVERSIFICATION: Accelerated Development

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

Before NowAverage Farm Size <0.5 hectares >20 hectares

Farming Practice Rain fed Drip Irrigation

Mechanization None Harvester, dryer

Average Yield/Hectare <3 MT/hectare >8 MT/hectare


22 Source: PureCircle lifecycle assessment FY2011

SUSTAINABILITY: Impact of PureCircle Stevia vs. Sugar

LOWEST CARBON FOOTPRINT

30-80%Less carbon than the next stevia sweetener or other natural sweeteners

At least

92%Less water than other natural sweeteners

LOWEST WATER FOOTPRINT LOWEST LAND FOOTPRINT

1/5 the land of cane sugar

uses

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


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PRODUCTION CAPACITY: Expansion on track for completion in FY17

PureCircle is expanding its production capacity to meet anticipated future increased volume demand, further sustain market share and its first mover advantage.

When fully commissioned (early 2017) we anticipate that the production capacity will be able to support revenue of approximately $450 to $500m.

New state of the art, fully automated plant will incorporate improved more advanced technology that will drive higher efficiency and lower manufacturing costs


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Having implemented the Sales & Distribution module of Oracle JD Edwards ERP system, in FY16 we are implemented the Manufacturing module plus and the Grower Management System for better control and traceability to the Farm.

We have engaged the services of BUREAU VERITAS for the implementation of Sustainable Agriculture Initiatives (SAI) common for F&B Industry to achieve sustainable agriculture raw material sourcing.

In FY16, corporate management appointments included the new CFO & Group Head of Human Resources.

Amber DosseyVice President Group HR

• Joined PureCircle in 2015• West Point Graduate, MBA Texas A&M• Over 17 years’ professional experience, including more

than 13 years in leadership roles and Human Resource Management positions

MANAGEMENT & SYSTEMS: Investment to Support Growth


Rakesh SinhaChief Financial Officer

• Joined PureCircle in April 2016; Elected to the Board in July 2016

• Chartered Accountant, MBA RSM (Erasmus University)• Over 25 years’ broad international experience, including

17 years at Unilever. Roles included FD Ice Cream, Australasia, CFO Food Solutions, LatAm, S&E Europe

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FY16 SUMMARY: PureCircle Business Model Reinforced

GROWTH: Sales Revenue increased 9% over FY15 with balanced regional growth, category and product portfolio diversification

INNOVATION: Launch of new specific solutions to broadened adoption across wider number of applications and increased levels of sugar reductions

NEW PRODUCT LAUNCHES: Continuous increase in the number of product launches across multiple markets and categories globally with strongest growth in beverages

REGULATORY:Scope for usage of Stevia in the Global Food & Beverage Industry has significantly increased with the recent approval of India and regulation changes in Brazil

LEAF SOURCING: Moderation of China leaf prices and accelerating global diversification of leaf sourcing with a new more effective propagation model

PRODUCTION CAPACITY: PureCircle capacity expansion on track, expect new plant commissioned in early 2017

MANAGEMENT AND SYSTEMS: PureCircle continues to upgrade its systems to become a “second to none” World Class Operation including areas of Sustainability, Leaf Traceability and HR Practices

PROFITABILITY AND CASH FLOW: FY16 is milestone with positive net profit and positive operating cash flow


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Outlook

Market Conditions continue to be favourable

Business is growing

Pipeline strength

CBP issue has impacted Q1; Resolution??

Long – Term prospects for this business is healthy; there will be volatility on the way.


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