French sugar group Tereos plunged to a first-half loss of almost €100 million, hit by a steep fall in sugar prices, and said it expected to be in the red across its full financial year for the second year running.
World sugar prices have dropped to their lowest in a decade this year amid a surge in supplies, partly driven by more output from the European Union after it scrapped export and output quotas last year.
Cooperative group Tereos, which last season became the world's second largest sugar maker, said on Tuesday it made a loss of €96 million ($109 million) in the six months to 30 September versus a year-earlier loss of €10 million.
The Factors
"The historic fall in European sugar prices will impact Tereos' results like other large actors of the European industry, so that Tereos will not be able to reach a positive net result," chief financial officer, Olivier Casanova, said in a call with journalists.
That confirmed an outlook given to Reuters last week by the group's Chief Executive Alexis Duval.
Tereos made a net loss of €18 million in the year ended March.
Sales were down 9% year-on-year to €2.11 billion in the six months to 30 September, as a more than 25% rise in sugar beet processing partly compensated for the price fall, Casanova said.
He said sugar prices, which have climbed off an historic low touched in August, could rise in 2019, supported partly by a lower planted area of sugar beet in Europe.
Adjusted 2019 earnings before interest, tax, depreciation and amortisation (EBITDA) fell to €143 million from €309 million in the first half of 2017/18.
Outlook
Outside of its core European sugar business, Casanova said international sugar activities as well as starch and sweeteners branches should be resilient this season.
The group's debt stood at €2.33 billion on 30 September versus €2.29 billion a year earlier, putting the net debt to adjusted EBITDA ratio at 5.4 versus 3.5 a year earlier.
Casanova said Tereos had no significant refinancing maturities over the next 12 months, excluding current refinancing. It could seek financing from banks and bonds, although it had no plans to do so at this stage.
The large first-half loss does not change Tereos' plan to open the business to new investors in around 2-3 years, Casanova said.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
