June 12, 2018 / 7:04 AM / 6 months ago

France's Tereos considers opening capital in tough sugar markets

PARIS, June 12 (Reuters) - French sugar cooperative group Tereos, faced with historically low world sugar prices, is considering opening up its capital as part of a diversification and internationalisation strategy, it said on Tuesday.

Tereos also posted 2017/18 results in which earnings slipped 2 percent as a fall in prices offset higher output.

Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) fell 2 percent to 594 million euros.

Tereos had a record production of 5.3 million tonnes raw value of sugar in the 2017/18 season to March 31, up 26 percent, making it the world’s second-largest sugar maker in volume, it said.

However, Tereos’ sales only rose 3.5 percent in value to 4.99 billion euros, hit by lower prices.

“The group successfully limited the impact of lower world sugar prices and sugar prices in Europe in the second half of the financial year thanks to higher sales, profits from advanced hedging and progress in the performance plans,” it said.

“In this context, the group will continue to implement a development strategy driven by the diversification and internationalization of its businesses; the decision to consider possibly opening up the capital also forms part of this development strategy,” Tereos said

The unit opened offices in Vietnam and South Africa, adding to France, Switzerland, Brazil, Singapore, Kenya and India.

QUOTAS ABOLISHED

European sugar makers which drastically boosted output after the European Union abolished production quotas last year are now fighting to survive as prices and profits plunge.

Tereos sees the surplus in sugar production on the world market, where average sugar prices fell 27 percent in the 2017/18 season, lasting into the next fiscal year.

“This environment should affect the results forecast for the Sugar Europe division,” it said.

The international division’s results should prove more resilient than those in Europe, benefiting in particular from new performance gains and strong ethanol prices in Brazil, where the group had a record year in volume in 2017/18 with more than 20 million tonnes of sugar cane refined, it said.

Tereos was also upbeat on its starch and sweeteners division which saw an 11 percent rise in sales and expected a further increase in volumes in 2017/18 in an environment it considers more favourable for starch products than in recent years.

Its trading branch Tereos Commodities marketed nearly 1.4 million tonnes of sugar, up around 40 percent, it said.

Commodities transformed by Tereos in 2017/2018: • Sugar beet (France, Czech Republic, Romania) : 24.1 million tonnes (+32 pct vs 2016/17) • Sugar cane (Brazil, Reunion, Mozambique, Tanzania, Kenya) : 22.8 million tonnes (+2 pct) • Grain, potatoes, manioc (Europe, Brazil, Asia) : 5.2 million tonnes (+8 pct) Output: • Sugar: 5.3 million tonnes raw value (+26 pct vs 2016/17) • Starch products: 2.6 million tonnes (+11 pct) • Alcohol and ethanol: 1.8 cubic meters (+8 pct) (Reporting by Sybille de La Hamaide; editing by Jason Neely)

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