Stevia Producer to Float on AIM

12/11/07 PureCircle, which develops and manufactures natural food ingredients for the global food and beverage industry, announces its intention to float on AIM in conjunction with a placing to raise approximately US$50 million.

PureCircle is the world’s leading producer of Rebaudioside-A (“Reb-A”), a natural, zero-calorie high intensity sweetener (“HIS”) extracted from the Stevia Rebaudiana Bertoni plant, for supply to the global food and beverage industry.

Magomet Malsagov, Managing Director of PureCircle, said: “Floating on AIM will enable PureCircle to access capital to maintain our crucial first mover advantage in what we believe will be a huge market for all natural, zero-calorie HIS.”

The PureCircle Group has successfully secured high value long term supply contracts from global food and beverage companies.

In May 2007 the Coca-Cola Co. and Cargill Inc. announced that they had teamed up to market a new calorie-free natural sweetener produced from Stevia under the name, Rebiana. The sweetener is Reb-A produced by PureCircle and supplied to Cargill under an exclusive supply agreement until the middle of 2008.  PureCircle is currently finalising discussions with Cargill regarding a non-exclusive supply arrangement beyond June 2008.

In addition to the supply contract with Cargill, PureCircle has successfully secured contracts for the supply of high purity Reb-A to other global food and beverage companies following the expiry of the Cargill exclusivity. Initial contracts signed with major food and beverage companies could require the supply of a combined volume in excess of 2000 MT of high purity product with terms varying, but ranging up to 5 years with prices at or above historical levels.

The development and production activities of PureCircle are currently located in Asia, specifically in Malaysia and China. The Group has an integrated vertical supply chain from plantation, primary production through to distribution of final products. This integrated infrastructure provides the Group with the ability to control supply, cost and quality.  The Directors believe that its ability to guarantee commercial volumes of high purity Reb-A to the individual specification of the different food and beverage manufacturers is a key differentiator of the Group.

In China, through its 55% owned subsidiary Ganzhou Julong (“GJH”) the Group engages in activities relating to large scale Stevia plantation in various Chinese provinces as well as production of crude Stevia extracts. The Directors believe that, through GJH, PureCircle owns and operates the largest capacity crude Stevia extraction plant in the world.  The existing annual production capacity of the crude extraction plant is approximately 1,000 tonnes of crude Stevia extract with a proposed upgrade to 3,000 tonnes per annum being completed through the 2008 calendar year.

The Directors believe that through its 100% owned Malaysian subsidiary, PureCircle owns and operates the world’s largest Stevia refining plant which produces the sought after high purity Reb-A.  The refinement plant in Malaysia is currently being upgraded such that it will be able to produce up to 1,000 tonnes per annum of Reb-A.  

Pure circle note that global food and beverage companies are seeking natural, pleasant tasting, low/zero calorie alternatives to sugar and artificial sweeteners, in response to both consumer demand for healthy products and as a platform for new product launches. This is evident against the backdrop of falling sales of carbonated drinks and increased consumption of bottled water and juices. In addition, demand for biofuels, recent high prices of high fructose corn syrup and a spike in the sugar price over 2006 have also created favourable market conditions for the Group’s products.

With a combined annual global consumption of sugar and all other sweeteners of approx 150 million MT the current production capacity of PureCircle for high purity Reb A represents a market share of just 0.2%.

As a food ingredient, Reb-A is subject to a regulatory framework. It is presently permitted to be used as a food ingredient in many countries worldwide including highly populated regions such as North Asia (China, Japan, Korea, Taiwan), South America (Brazil, Paraguay, Columbia, Argentina), Russia and South East Asia (Malaysia, Vietnam, Indonesia, Thailand). The approval list is expected to increase as many other countries intensify their consideration for approval of its use including Australia and New Zealand.

In the United States, it is legal to import and sell Stevia based sweetener as a dietary supplement, however, it is not presently permitted for use as a food ingredient. Similarly Stevia based sweetener is presently not permitted for use in Europe. However, end users such as Coca-Cola Co and Cargill have publicly stated that they are gathering the data necessary to apply for approval in the United States and that ‘we wouldn’t be this far along if we didn’t have absolute confidence that we could satisfy everybody from here’ (Wall Street Journal, ‘Coke, Cargill Aim For a Shake Up In Sweeteners, 31 May 2007).

Whilst the Directors of PureCircle cannot provide any assurance as to whether regulatory approvals will be obtained for the sale of Reb-A as a food ingredient in the USA and EU, they believe that its level of backing from international food and beverage manufacturers should provide a very strong prospect of success.

The Directors plan that PureCircle will continue to focus on developing and expanding its natural HIS integrated infrastructure globally, including plantation activities and primary extraction and refining plants in order to maintain what they consider to be the market maker position the Group enjoys today and to leverage its first mover advantage to capture a majority of the market share.

PureCircle has identified other regions in China which are suitable for establishing Stevia plantations to supply its Chinese extraction facility.  The Group has entered into an arrangement with Finlays and a local Chinese partner for such diversification activities within China.  Finlays, which is part of the Swire Group, is a major tea producer with operations in China, Kenya, Sri Lanka and Uganda.

The Group is also currently investigating new locations in other parts of the world to expand its operations in anticipation of increasing demand for Reb-A.  PureCircle is developing an initiative with Finlays for the development of plantations and the construction of an extraction plant in Kenya to add to crude Stevia extract capacity and geographically diversify risk.

Research initiatives are also underway into increasing the plant yield of Reb-A through selective breeding of high yield varieties, plant propagation techniques and improved plantation techniques.

The Directors consider that the Admission to AIM will provide a platform for the Group to access capital for expansion, broaden the Group’s investor base, provide liquidity for trading shares in the Group and enhance its profile and credibility.