Chinese stevia sales drive profits higher at GLG Life Tech

15-Nov-2010 - Last updated on 15-Nov-2010 at 15:04 GMT

Related tags China Supply and demand United states

GLG Life Tech has posted higher third quarter profits, driven by increased stevia sales in China, growing demand for natural products in North America and global health concerns, the company has said.

The company, which grows, markets and distributes stevia extracts, reported gross profits of C$7m for the third quarter ended September 30, up from C$4.1m for the prior year period. Revenue was up 41 percent to C$21m in the third quarter.

“This increase is due to a substantial increase in sales in China compared to prior periods, when the majority of sales were made in the US,” the company said in a statement.

GLG said that China’s growing wealth and expanding middle class have led to an expanding Chinese food and beverage industry. However, the country has not been able to supply enough sugar to meet this increased demand, and production has shrunk as farmers have turned to crops with higher returns, particularly maize, according to the Food and Agriculture Organization.

GLG Life Tech has said that stevia, as a domestic agricultural product, could help bridge the gap between sugar supply and demand, offering Chinese food and beverage manufacturers sugar/stevia blends as an alternative to dependence on sugar imports. Although no definitive agreement has yet been reached, the company said it has been in discussions with the Chinese government and its distribution partner in China, FXY, and plans to provide the China Sugar Reserve a blend of sugar and stevia that would reduce the calories normally provided by sugar in food and beverage products by 50 percent.

However, GLG said that 50 percent of its revenue is dependent on distributors with whom it has agreements across the world, along with new customers and distributors in the US and Europe, with which it is in negotiations. These potential agreements provide the company with some uncertainty about its revenue outlook

“We have experienced delays in negotiation with respect to larger opportunities for distribution of our products in the US and in Europe, and there is no assurance that we will eventually reach definitive agreements in these situations,” GLG said.

As a result, the company has downgraded its outlook for 2010 revenue from C$70-80m to C$65-70m.