GLG Life Tech Expecting 50-60% Growth for Stevia Business

The stevia sweetener business is expected to grow 50 to 60% from 2010 with the largest portion expected to come from China. The Company has assumed the initial delivery of the healthy sugar order to the China Sugar Reserve.

2/3/2011 --- GLG Life Tech Corporation, the vertically-integrated leader in the production of high quality stevia, has announces its financial guidance for 2011 that includes both its stevia sweetener business and its new consumer products business. This is a pivotal year for the Company as it continues to grow its stevia business and launch its consumer products joint venture AN0C.

The stevia sweetener business is expected to grow 50 to 60% from 2010 with the largest portion expected to come from China. The Company has assumed the initial delivery of the healthy sugar order to the China Sugar Reserve will commence in the fourth quarter of 2011 and the full delivery of the first unit in 2012.  Key growth markets outside of China include the US, Mexico, South America, the Middle East, India and Australia. Other key assumptions include raw sugar prices remaining in the range of $600 to $800 per metric ton and the RMB to USD exchange rate declining approximately 3% in 2011. The Canadian dollar to the US dollar exchange rate is assumed to be at par for the year. Revenue in the first half of 2011 is expected to be similar to the amount generated in both 2009 and 2010 and is expected to account for approximately 20 to 25% of the full year revenue forecast.

Stevia is expected to generate $30 to $33 million of EBITDA in 2011. Lower EBITDA profitability in the first half of 2011 has been assumed due to an expected decline in the RMB to US dollar exchange rate and relatively lower revenues in the first half. EBITDA margins are expected to improve in the last half of 2011 with the expected introduction of Huinong 2 (“H2”) special leaf variety in the 2011 harvest year.  It is expected the Company will grow 100% of its stevia leaf requirements in 2011 with the H2 strain.  As previously announced, the H2 strain is expected to deliver reduced stevia leaf processing costs starting in late third quarter 2011. 

The Company is expected to incur some maintenance capital expenditures for its four stevia processing facilities in China and does not expect to increase capacity in 2011 based on the stevia revenue forecast for 2011. The current revenue generating capacity of its four facilities is between $250 and $300 million per annum.

The AN0C revenue forecast assumes the launch of 12 beverage products including six iced tea drinks, three juice drinks and three dairy drinks in 2011, with the initial product launch occurring in late first quarter or early second quarter. There are two major sales seasons in China for the beverage market, which have historically been January through March and July through September. GLG will be able to catch only the second major sales season for 2011. However, 2012 and beyond sales will include both major selling periods.

AN0C revenue in the first half of 2011 is expected to be approximately 20% of full year forecasted revenue. Other key assumptions for the revenue forecast include the Company’s expectation that the China food and beverage market will grow 20% in 2011 and that the Company will be able to launch its products in China nationwide, covering both major and regional cities in most provinces.

AN0C’s EBITDA is expected to generate between $0 and $6 million EBITDA in 2011.  First priority for the development of the AN0C business is to take a leading position in the marketplace and to build a number one brand (both GLG corporate and AN0C for consumer products) in the all natural, zero calorie food and beverage sector. With this achievement it is expected that AN0C should achieve the largest market share for the all natural and zero calorie market segment with plans to penetrate most of the other major food and beverage market segments in 2011. These are the most important objectives for AN0C in 2011 rather than EBITDA generation. 

The AN0C senior executive team has many years of experience in operating profitable, multi-billion dollar beverage companies in China and has developed a plan to get the business to positive EBITDA in the first year of operation.  GLG joint venture partner, China Agriculture and Healthy Foods Company Limited (“CAHFC”) also has lower ingredient costs by utilizing GLG stevia extracts relative to the use of sugar. On a sweetness equivalency, CAHFC has lowered its sweeteners cost by 40 to 50% by using GLG BlendSure stevia extract in the production of AN0C’s food and beverage products, as compared to sugar.