Final Results

PURECIRCLE LIMITED

FY 2012 RESULTS

PureCircle (www.purecircle.com) the world's leading producer of and marketer of high purity stevia ingredients announces its audited results for the financial year to 30 June 2012 (FY 2012) together with audited comparatives for the year ended 30 June 2011 (FY 2011).

1.1 HIGHLIGHTS FOR THE YEAR

Financial Highlights

The audited results for FY 2012 comprising the Group's consolidated statement of comprehensive income, statement of financial position and statement of cash flows are set out on page 10 to 14. The Group's full Annual Report and accounts will be posted to shareholders in November 2012. A summary of the financials for FY 2012 with FY 2011 comparatives is set out below.

Summary financials

Sales: In FY 2012 sales were $7.8m (15%) lower than FY 2011. This reflected FY 2012 being the first year in the Company's history with no pre committed "Take or Pay" contracted sales, which had totalled $22m in FY2011 ($29m in FY 2010 and $54m in FY 2009). Our non "Take or Pay" high purity sales have increased from $6m in FY2010 to $39m in FY 2012, with FY 2012 volume growth of 125%

Sales volumes: In FY 2012 total volumes of high purity stevia increased by 26%. Volume increases were led by sales of the portfolio of proprietary new ingredients introduced over the past eighteen months (Alpha, SG95, Natural FlavorTM range), each of which increased by more than 100%. The Group has established a portfolio of ingredients and a well balanced mix of sales is anticipated going forward.

Despite the volume increase, FY 2012 sales levels remained sub-scale and did not reflect the strong growth in end market usage of high purity stevia. This is principally due to the continued impact of inventory at Beverage Global Key Accounts (BGKAs).

Gross profit: In FY2012 gross profit was $4.9m (11% of sales), an increase of $0.8m (19%) over FY2011, despite the lower sales revenues. The Group's variable contribution margin for high purity stevia revenues improved by ten percentage points over FY 2011, reflecting improved product mix and lower variable costs.

Foreign exchange: In FY 2012 the Group incurred foreign exchange costs of $2.1m against gains in FY 2011 of $5.2m, a year on year profit impact of $7.3m.

EBITDA: In FY 2012 the Group's EBITDA was a loss of $15.2m which was $5.3m higher than the loss of $9.9m reported in FY 2011, reflecting the foreign exchange noted earlier. Both years have been impacted by the exceptional costs relating to the temporary slowing down of Reb A production which was effected across CY 2011 so as to reduce Reb A inventory to levels better aligned with current market demand. Production of Reb A increased in early calendar 2012.

In FY 2012 the Group's total cost base reduced by $3m despite supporting higher sales volumes and the Group's $1m share of sales and marketing investment in our EU Joint Ventures.

Net cash from operations, before financing: The Group generated $4.5m of operating cash-flow before interest and financing, a $15m cash-flow improvement on prior year.  

Inventories: At $74m inventories are $23m lower than at June 2011 and $40m lower than their peak at December 2010. Further reductions are expected as sales volumes increase before they stabilise at a consistent proportion of sales demand.

Cash and net debt: The Group ended FY2012 with gross cash of $24m, net debt of $78m and cash and facility headroom of $44m. Headroom was further boosted after the year end with the $31m proceeds of our Private Placement completed in August 2012. The Group is sufficiently funded for its current expansion plans.

Business developments

Overview: With our technologies proven and our production scaled, our business development focus is concentrated on increasing global usage of high purity stevia. There were encouraging developments in usage across FY 2012 that suggests large scale adoption will be apparent during CY 2013 and CY 2014.

F&B product launches: Up to August 2012 F&B product launches with high purity stevia are running at a rate of 1,000 new launches for CY 2012, a 65% increase over CY 2011 and taking total products launched with high purity stevia to more than 2,600 (source Datamonitor). Encouragingly PureCircle stevia ingredients are being used across the full range of F&B product innovation including reformulations of existing mainstream products, brand extensions and new product launches.

EU impact: EU clearance for high purity stevia was achieved in December 2011, thus opening up the world's largest single sweetener market. Although it had only modest impact on FY 2012 sales, EU adoption of high purity stevia has been fast and is accelerating with almost 400 launches in the EU. High purity stevia ingredient products are now on sale in 49 countries (both sources Datamonitor).

Carbonated Soft Drinks (CSDs): Due to their global ubiquity, CSDs are likely to represent the largest single category volume for high purity stevia. FY2012 saw encouraging progress with a number of high purity stevia sweetened CSD launches notably including the reformulation of Sprite in France in April 2012 and Fanta in China in February 2012.

Wider F&B category penetration: In FY 2012 F&B launches were made in a number of new categories including confectionery, ketchups and dairy.

Customer base: PureCircle is building a diversified customer base. In FY 2012 we sold to 121 different customers around the world, counting each Global Key Accounts as just one customer. Our largest customer in FY 2012 represented 8.5% of revenues and was not a Beverage GKA and our top ten customers amounted for only 60% of sales. The numbers of orders we process has increased with a current monthly average in excess of 100 customer orders.

Geographical spread: In FY 2012 the Group sold to 47 different countries of destination. The USA now represents 40% of total sales, with strong growth in sales to China, Mexico, Europe and Brazil.

Regulatory: High purity stevia now has regulatory approval in most major markets. FY2012 approvals included Indonesia and Philippines as well as the EU. The key remaining countries are India, Canada, Thailand, South Africa and Canada. Approval is expected in all of these before end June 2013 and will provide a further 1.6 billion new consumers with access to high purity stevia.

PureCircle product portfolio: FY2012 was the first full year of sales for our proprietary ingredients SG95 and Natural FlavorTM range; in addition in FY 2012 we launched Alpha. Reb A represented just 40% of our total revenues (FY 2009: 90%). Our enhanced ingredient range comprises new products developed specifically in response to customer needs and they are proprietary. Market response has been positive, with year on year sales growth well in excess of 100% and pipeline growth even higher.

PureCircle's innovation is what sets us apart in the industry and we have further innovative product plans in the pipeline.

Technical support: We have expanded our technical support opening application laboratories in key markets such as Europe (UK), China and soon Mexico. We have developed the PureCircle University programme in response to customer demand for direct access to our technical support. Launched in FY 2012 this already has a strong pipeline of customer participation and is building deep relationships.

Stevia advocacy and sustainability initiatives: Our initiatives continue to provide real industry leadership and long term value for PureCircle.

- The PureCircle Stevia TrustmarkTM is now used on 160 products launched across 32 countries with additional product launches in the pipeline for FY 2013. 

- Our carbon and water footprint audits are being developed further to provide clear consumer benefits to our customers

- Our Insights Group is building market studies directly in partnership with key customers

- The Global Stevia Institute (GSI) is now established with advisers active across 4 continents. The GSI now attracts 3,000 subscribers to its monthly newsletter 

Joint Ventures: With the opening of the EU market, FY 2012 saw the first sales contributions from our Joint Ventures. The pace of F&B launches in the EU suggests that the JVs will experience sales growth in future years.

Supply chain: In FY 2012 our supply chain supported overall sales volume increases of over 26% and delivered new product volumes up more than 100% on a lower cost base and with reduced variable costs. This provides a platform for improved profitability as sales volumes increase. The true extent of the production efficiency gains made in FY 2012 is masked by the one off costs and the higher production overheads charged to profit due to lower inventory levels.

Commenting on the audited results, the Chairman Paul Selway-Swift said:

"FY 2012 was the first year that our sales were not supported by committed "Take or Pay" contracts. Despite this our high purity sales volumes increased. Further some 85% of sales comprised demand that did not exist three years ago. This augurs well for future sales growth.

Our recent results have been impacted by the tough decisions we made in 2011 to slowdown Reb A production temporarily to better align inventories to current market demand. Results should improve as the evident growth in market usage of our products starts to translate into higher sales.

We remain confident of the future of our high purity stevia business but continue our guidance that this should be seen as a mid to long term opportunity."

2. BUSINESS REVIEW

2.1 CHAIRMAN'S STATEMENT

FY 2012 has been a year of considerable progress in the development of the high purity stevia industry and in the establishment of PureCircle as the leading company in the industry, although clearly that progress is not yet evident in our reported financial results.

Notable milestones for the high purity stevia industry have included regulatory approval for the EU market in December 2011, which opens up the world's largest sweetener market, and the first launches of major Carbonated Soft Drinks containing high purity stevia. Each of these developments increases materially the addressable market for high purity stevia.

During FY 2012 PureCircle has further diversified its customer base, delivered new proprietary ingredients to market, increased sales volumes by more than 26% and reduced its cost base, whilst continuing to invest in innovation and leaf development. These developments all provide confidence in the robustness and sustainability of our business model.

We remain confident about the long term future of the high purity stevia industry and of the opportunity for PureCircle to play the leading role in it. PureCircle is operationally geared and our financial results are sensitive to sales revenues. Our guidance remains that it is likely to be CY 2013 or 2014 before mass volume adoption of high purity stevia is evident and the benefits of increased usage starts to be reflected in our results.

2.2 CEO Review

OPERATIONS

Market

Our market is defined by the demand for our proprietary ingredients by the world's food and beverage (F&B) companies. In turn the size and dynamics of this market are influenced by the end consumer demand for F&B products using PureCircle ingredients. FY 2012 saw important growth in our market and in consumer demand for high purity stevia.

Datamonitor reports F&B products using high purity stevia launching across CY 2012 to-date at an annual rate of 1,000 new products, an increase of 65% on a year ago and 606% increase since the start of 2009. More than 2,600 products have now been launched using high purity stevia as an ingredient.

Stevia product launches have been reported in more than 49 countries in CY2012, boosted by the opening of the EU market in December 2011. The EU, which is the world's largest market for sweeteners, has seen more than 40% of the total new launches made to-date in CY 2012.

Consumer awareness of stevia continues to grow sharply. In the USA consumer awareness is over 62%, up more than 30 percentage points from 3 years ago. In Germany and France awareness is already at or above 50%, almost 30 percentage points higher than in 2010.

Regulatory

With the opening of the EU, Indonesia and Philippines markets, high purity stevia is now approved in almost all major consumer markets. India, Thailand, Canada and South Africa, which are the principal countries still awaiting clearances are each expected to secure approval within twelve months. When they do so, approval will grant about 1.6billion new potential consumers access to high purity stevia, representing almost 23% of the world's population.

Other commodity sweeteners

In FY 2012 both sugar and high fructose corn syrup continued to experience tightening of supply against demand and volatility in their pricing. These trends can only help the future development of mass volume demand for PureCircle ingredients.

Sales

In FY 2012 our sales of $45.4m were $8m (15%) lower than FY 2011. This reflected FY 2012 being the first year in the Company's history with no pre committed "Take or Pay" contracted sales, which had totalled $22m in FY2011, $29m in FY2010 and $54m in FY 2009. Our non "Take or Pay" high purity sales have increased from $6m in FY2010 to $39m in FY 2012, with FY 2012 volume growth of 125%.

In FY 2012 total volumes of high purity stevia increased by 26%. Volume increases were led by sales of the portfolio of proprietary new ingredients introduced over the past eighteen months (Alpha, SG95, Natural FlavorTM range), each of which increased by more than 100%. Reb A contributed just 40% of revenues in FY2012. This portfolio of ingredients will help the Group have a well balanced mix of sales going forward.

Co-products were $6m (15%) of FY12 revenues (FY 2011 $7m).

Sales included $1.1m share of sales by Joint Ventures, principally from our EU partnerships with Tereos and Nordzucker which benefitted from the opening of the EU market in December 2011.

During FY2012 PureCircle further extended its customer base in all markets, with the largest increases seen in the newly opened EU market, where customers are serviced principally through our Joint Ventures, China and in Latin America. In FY 2012 we serviced more than 121 customers, with each Global Key Account counting as just one. Our largest customer represented just 8.5% of sales and was not a Beverage Global Key Account. In FY 2012 PureCircle sold into 47 countries: the USA represented 40% of sales, followed by China, Mexico and the EU.

Reviewing the food and beverage products launched into market that are using high purity stevia, it is clear that PureCircle and our partners continue to secure the major share of market. This has been further underpinned by the successes of our proprietary new products launched within the last eighteen months.

Marketing and technical support

We have expanded out technical support and further developed our stevia advocacy and sustainability platforms.

We have opened application support laboratories in Europe (UK) and China and, soon to be opened, Mexico. Our pipeline of customer technical projects is growing and the number of customer working sessions has increased significantly.

Our stevia technical support, advocacy and sustainability initiatives are based on the five platforms of the Global Stevia Institute, the PureCircle Insights Group, the PureCircle Trustmark solutions, PureCircle University and our sustainable partnerships. Each have developed strongly during the year under review and are now each recognised as industry leaders in their own right. Each provides an excellent basis for deeper partnership relationships with our customers.

- The PureCircle Stevia TrustmarkTM is now used on 160 products launched across 32 countries with additional product launches in the pipeline for FY 2013. 

- Our carbon and water footprint audits are being developed further to provide clear consumer benefits to our customers

- Our Insights Group is building market studies directly in partnership with key customers

- The Global Stevia Institute (GSI) is now established with advisers active across 4 continents. The GSI now attracts 3,000 subscribers to its monthly newsletter 

- The PureCircle University programme was developed in response to customer demand for direct access to our technical support. Launched in FY 2012 this already has a strong pipeline of customer participation and is building deep relationships.

Supply chain

In FY2012 Leaf supply has been further diversified and strengthened with Kenya, Paraguay and USA being added to China. Although Reb A production was slowed down in CY2011 production of other products in portfolio increased strongly as reflected in the higher overall volume of high purity stevia sold. This was achieved on a lower total cost base and with lower variable costs.

Overall the supply chain is in robust shape and ready to respond to increased market demand in the future.

R&D

The group actively continued to invest in innovation and is working to commercialize new and exciting products to further strengthen its portfolio and enhance future earnings.

3. Management

The Group has ambitious long term growth plans. To deliver these we will continue to invest in management with the skills and experience to drive and support our growth plans in all aspects of our business. Our priority in FY 2012 has been sales and marketing with investment focusing on our EU, China and Latin America sales businesses and on expanding our technical and application capacity. 

Moving forward we will strengthen further our global supply chain and logistics to better service the anticipated increase in demand.

4. Group Financial review

The Group's FY 2012 financial year covers the year from 1 July 2011 to 30 June 2012. FY 2011 comparatives are for the year from 1 July 2010 to 30 June 2011.

Set out below is an extract from the audited FY 2012 accounts. The full consolidated statement of comprehensive income, statement of financial position and statement of cash flows follow in pages 10 to 14.

EBITDA (15,171) (9,902)

Segmental reporting: The Group operates as a single segment company comprising the integrated production and marketing of high purity stevia products.

Sales: Sales for FY 2012 were $8m (15%) lower than FY 2011. This reflected FY 2012 being the first year in the Company's history with no pre committed "Take or Pay" contracted sales, which had totalled $22m in FY2011 ($29m in FY 2010 and $54m in FY 2009). Our non "Take or Pay" high purity sales have increased from $6m in FY2010 to $39m in FY 2012, with FY 2012 volume growth of 125%

Sales volumes: In FY 2012 total volumes of high purity stevia increased by 26%. Volume increases were led by sales of the portfolio of proprietary new products introduced over the past eighteen months (Alpha, SG95, Natural FlavorTM range), each of which increased by more than 100%. The Group has established a portfolio of products and a well balanced mix of sales is anticipated going forward. 

Despite the volume increase, FY 2012 sales levels remained sub-scale and did not reflect the strong growth in end market usage of high purity stevia. This is principally due to the continued impact of inventory at Beverage Global Key Accounts (BGKAs).

Gross profit: In FY2012 gross profit was $4.9m (11% of sales), an increase of $0.8m (19%) over FY2011, despite the lower sales revenues. The Group's variable contribution margin for high purity stevia revenues improved by ten percentage points over FY 2011, reflecting improved product mix and lower variable costs.

Foreign exchange: In FY 2012 the Group incurred foreign exchange costs of $2.1m against gains in FY 2011 of $5.2m, a year on year profit impact of $7.3m. This is included in other income and expenses.

EBITDA: In FY 2012 the Group's EBITDA was a loss of $15.2m which was $5.3m higher than the loss of $9.9m reported in FY 2011, reflecting the foreign exchange noted earlier. Both years have been impacted by the exceptional costs relating to the temporary slowing down of Reb A production which was effected across CY 2011 so as to reduce Reb A inventory to levels better aligned with current market demand. Production of Reb A increased back to normal levels in early calendar 2012.

In FY 2012 the Group's total cost base reduced by $3m despite supporting higher sales volumes and the Group's $1m share of sales and marketing investment in our EU Joint Ventures.

Net cash from operations, before financing: The Group generated $4.5m of operating cash-flow before interest and financing, a $15m cash-flow improvement on prior year.  

Inventories: At $74m inventories are $23m lower than at June 2011 and $40m lower than their peak at December 2010. Further reductions are expected as sales volumes increase before they stabilise at a consistent proportion of sales demand.

Cash and net debt: The Group ended FY2012 with gross cash of $24m, net debt of $78m and cash and facility headroom of $44m. The Group's net debt has remained constant since December 2010 $77m reflecting the Group being operating cash-flow neutral across the period, despite the relatively low sales volumes and the temporary production slowdown.

Our cash and facility headroom was further boosted after the year end with the $31m proceeds of the Private Placement completed in August 2012. The Group is sufficiently funded for its current expansion plans.

Gross assets: The Group has gross assets of $233m. This represents the fully invested supply chain that is capable of delivering 2,800 tonnes of high purity stevia in a flexible manner reflecting the Group's portfolio of proprietary products. When running at capacity the existing supply chain can support sales of at least $280 to $300 million.

Appendix 1 - AUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME, STATEMENT OF FINANCIAL POSITION AND STATEMENT OF CASHFLOWS

AUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

AUDITED STATEMENT OF FINANCIAL POSITION

AUDITED STATEMENT OF FINANCIAL POSITION (CONT'D)

AUDITED CONSOLIDATED STATEMENT OF CASHFLOWS

AUDITED CONSOLIDATED STATEMENT OF CASHFLOWS (CONT'D)