PureCircle’s FY18 results demonstrate the business is recovering well from the problems in North America. Transition to the superior StarLeaf stevia product is proceeding well and should continue to be accretive to margins. The innovation pipeline remains strong and the company is well positioned to continue to capitalise on the shift away from sugar and towards natural sweeteners.
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PureCircle |
StarLeaf to drive growth
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Consumer |
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21 September 2018 |
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PureCircle’s FY18 results demonstrate the business is recovering well from the problems in North America. Transition to the superior StarLeaf stevia product is proceeding well and should continue to be accretive to margins. The innovation pipeline remains strong and the company is well positioned to continue to capitalise on the shift away from sugar and towards natural sweeteners.
Bounceback in North America
FY18 sales were 10% above the previous year, with volumes up 17%.Sales growth was driven by both the North American recovery and new business wins across key accounts. The successful launch of StarLeaf stevia is significant: it contains a better-tasting variant of stevia, which enables customers to achieve no added-sugar formulations, rather than having to mix stevia with sugar or other sweeteners. StarLeaf is also accretive to margins and remains a 100% natural product.
Uniquely positioned
PureCircle is increasingly well-diversified. Geographic diversification helps to reduce geopolitical and climate risks, and the company is now well diversified both by end market and by geographies where stevia is grown. By category, stevia has moved well beyond the traditional carbonated soft drinks market with which sweeteners have long been associated. Indeed, the area with most stevia launches is now the snacks category. PureCircle is uniquely positioned in the industry through its vertical integration, which spans from plant breeding through to extraction and application. This allows deep expertise regarding stevia, as PureCircle is involved at every stage of the process, from breeding seedlings through to extracting stevia. This expertise is backed up with intellectual property, and the company is increasingly looking to become a solutions provider for its customers, by working ever more closely with them on their innovation.
Valuation: In line with global peers
PureCircle trades at consensus FY20e P/E of 29.3x, which is at the upper end of its global ingredients peer group. While it lacks the scale of some of its peers, it is on a strong growth trajectory as stevia continues to gain traction as a natural sugar substitute. Competition is likely to increase during FY19 as a number of competitors have recently launched biosynthesised stevia alternatives. This could, however, help to drive an overall increase in market size for stevia.
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Consensus estimates
Source: Company data, Bloomberg |
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