Stevia producer PureCircle shares plummet due to expected sales decline

Courtney Goldsmith
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Allegations of using convict labour have caused PureCircle's sales expectations to drop (Source: Getty)

PureCircle's shares plummeted more than 18 per cent in early trading after it announced sales of its low-calorie sweetener stevia would drop 14 per cent in first-half group sales.

The sweetener maker said the expected drop in sales in the first half of the financial year was directly caused by shipments that were detained by the US Customs Border Protection (CBP) last year.

In June, shipments of the company's stevia extracts that were being imported from China were seized by the CBP after the US received information alleging the stevia was produced by convict labour.

PureCircle has denied the claim, saying the detention order was based on inaccurate information, but the situation has had a significant negative impact on sales growth in the US, a market that makes up a third of the company's sales.

Read more: Stevia maker PureCircle aims for main market as profits rise

Now the company expects group sales to fall 14 per cent to $47m (£38m), down from $54m.

Group gross profit for the period is anticipated to fall 19 per cent to $18m, while earnings before interest, tax, depreciation and amortisation are forecast to drop to $8m, a decrease of $5m, reflecting lower sales and adverse margins.

Net loss is expected to be $2m compared to profit of $5m in the same period last year.

PureCircle said demand for stevia-based products is still on the rise as there were 100 new launches in the last six months that contain the company's products.

Read more: PureCircle sweetens sales as big brands adopt stevia products

But after the resolution of the CBP issue, mid to long term prospects should return to growth, said Magomet Malsagov, chief executive of PureCircle.

Malsagov said strong customer support and a diversified sales footprint have helped the company's sales grow in the rest of the world, particularly in Europe and Latin America, which represent half of the company's sales.

Market trends have also helped the company stay afloat, as the implementation of sugar taxes around the world aids the natural sweetner, Malsagov said.

The company said it is currently waiting for the CBP's decision after sending tracking documents and related data in response to the CBP's requests.

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