France's Tereos, which last season became the world's second largest sugar maker, on Wednesday posted a sharply higher net loss in 2018-2019 as it continued to be hit by a slump in prices that triggered an industry-wide crisis in Europe.
Tereos' annual net loss widened to €242 million ($274.3 million) in its financial year to the end of March from a €23 million loss in the previous year.
Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) fell to €275 million, down €320 million from 2017-2018, mainly due to the sharp decline in European and world sugar prices, the company said.
Impact Of Price Slide
Europe's sugar industry has been grappling with the effects of a price slide caused by a surge in output that followed the ending of European Union production quotas in 2017, with some manufacturers planning to close factories.
For Tereos' European sugar division, which accounted for just 14% of adjusted EBITDA in 2018-2019, the first half of 2019-2020 was expected to be in line with the previous six months before an improvement in the second half of 2019-2020.
"Tereos is well positioned to benefit from the recovery of sugar prices from the second half of the year," it said in its results statement, adding that spot sugar prices had climbed 33% since the end of its past financial year.
The group expected its EBITDA to remain positive in 2019-2020, chief executive Alexis Duval told Reuters, declining to give guidance for net profit.
An agreement with Italian group ETEA covering alcohol and starch assets in Europe was expected to further boost Tereos' non-sugar activities that have cushioned the impact of the sugar market crisis, he said.
Tereos said in its results statement it would buy ETEA's 50% stake in Sedalcol France and sell to ETEA its 50% interest in Sedamyl and Sedalcol UK.
The deal, expected to be completed this summer, would reduce Tereos' net debt by €220 million and bring a capital gain of €140 million, the company said.
Duval said the agreement was also projected to have a positive impact on operating profit of around €15 million a year.
The group's net debt rose to €2.50 billion from €2.35 billion at the end of March last year.
Tereos, which has said it does not plan to close any factories, is aiming to generate €200 million in additional operating profit by 2022 through efficiency gains and diversification, and is also considering opening up its capital.