Loss-making stevia supplier GLG Life Tech has reassured investors that it is still “very much” in business in a Q&A document designed to answer questions about its financial affairs.
GLG’s stock price plummeted last year after it reported a sharp drop in sales and revealed it had renegotiated its 10-year supply agreement with Cargill such that it would no longer be obliged to purchase 80% of its stevia supply from GLG.
In May 2012, GLG’s shares were suspended after it was issued with a cease and desist order from the BC Securities Commission owing to a failure to file its full-year 2011 accounts by the March 30, 2012 deadline.
However, things have been improving steadily this year as the beleaguered firm has won new business and reduced operating costs, said investor relations head Stuart Wooldridge.
We have cut our debt, lowered our costs, written down inventory, and diversified our customer base
In a mailing to investors and other stakeholders, Wooldridge responded to the question ‘Are you still in business?’ by saying:
“Very much so. We sold $6.7m of stevia in the second quarter of 2012. We have reduced our debt, lowered our operating costs, written down our inventory to reflect current pricing, and diversified our customer base.
“We now have over 20 agents and distributors and two major flavor houses distributing our products. We have a number of new customers, several of which are global multinational companies.”
High facility charges affect our profitability at low volumes
While the stevia industry has “endured a period of downward pressure on pricing” as a flurry of small suppliers and traders have entered the market, the stevia market will continue to expand rapidly, he predicted.
“Although the size of our operation - two modern production facilities at a combined extractive capacity of 3,000t/year - leads to high facility charges that affects our profitability at low volumes, we remain convinced that the ability to supply stevia in large quantities at a low price with consistent quality, is of utmost importance to customers.”
Stevia has entered the mainstream sweetener market like sugar and HFCS
He added: “Management believes that stevia has entered the mainstream sweetener market like sugar, HFCS and the artificial sweeteners. We have built our company to be a key supplier in this market.
“We have a fully integrated supply chain from our patented leaf to our stevia finished products including food and beverage formulation capability and we adhere to the highest standards of quality, traceability and transparency.”
Our consolidated loss for 2011 was $90.5m
GLG’s consolidated loss for 2011 was $90.5m, acknowledged Wooldridge. However, much of this was due to asset impairment charges and start-up charges associated with the firm’s new Chinese consumer products subsidiary Dr. Zhang's All Natural and Zero Calorie Beverage and Foods Company (AN0C), he said.
“The EBITDA loss on our $17.1m in stevia sales in 2011 was $5.5m.”
Shares to resume trading after a review by British Columbia Securities Commission
Meanwhile, GLG had filed its 2011 audited accounts along with its Q1 and Q2 2012 accounts on August 14, 2012, he said.
“Since we had been under a Cease Trade Order for more than 90 days, the late release resulted in a mandatory review by the British Columbia Securities Commission.
“The review is ongoing, after which we anticipate that our shares will resume trading on the Toronto Stock Exchange.”