Evolva: A Cloudier Picture
Edison | Jan 16, 2017 06:31AM ET
The much-awaited stevia update has confirmed that EverSweet is still on track to be launched in 2018, and there is a new production plan. That said, talks with Cargill are ongoing and the option to enter into a JV has not yet been exercised, so the risk remains this may not occur. Moreover, FY16 revenues are now expected to be c 30% lower than previous guidance due to a milestone not being reached and customer conversion continuing to take longer than expected. We have adjusted our model to reflect these changes and our new fair value is CHF0.87/share (previously CHF1.10).
Production update – agreement not yet reached
As part of its discussions with Cargill, Evolva Holding SA (SIX:EVE) has considered various production routes for EverSweet. The contract manufacturing route was ruled out early on due to the higher costs involved, and the more likely option was a retrofit of the existing Cargill facility in Blair, Nebraska. In September 2015 Evolva guided towards a cost of CHF30m, but now the retrofit is likely to be much more limited. We forecast a cost of CHF10m. The smaller retrofit should ensure EverSweet retains its first-mover advantage ahead of DSM’s launch of a stevia sweetener in late 2018. The move to a new Evolva/Cargill facility would be accelerated under this scenario. Both the retrofit and the new facility are subject to Evolva exercising its option to enter into a JV with Cargill. Talks have been ongoing for over a year now, and the risk remains that the two parties cannot reach an agreement that Evolva deems to be value-creating for its shareholders.
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