Sugar Maker Tereos On Cusp Of Crucial Strategy Vote
Tereos, one of the world's largest sugar makers, is facing a key internal vote on Wednesday (today) that could change the group's strategy, with senior management challenged by cooperative members concerned by a plunge in profit.
Tereos, like several other European sugar producers, felt the impact of a slump in sugar prices to historic lows last year linked to a surge in supplies, partly driven by the scrapping of output quotas from the European Union in 2017.
The sugar, ethanol and sweeteners producer, gathering 12,000 French sugar beet growers, reported a tenfold increase in its net losses for 2018/2019 at €242 million ($275 million) earlier this month.
The group's results in the past two years, combined with a high debt level, have prompted an internal crisis, with dissidents accusing Tereos of hiding financial difficulties, something the group has always denied.
The cooperative's 181 regional delegates, elected earlier this month, are due to appoint a third of the supervisory board in a closed door meeting in northern France on Wednesday, with the final balance between supporters and opponents of current company management still uncertain.
Tereos chairman Francois Leroux said he was very confident about the outcome.
"Our teams are at work, are aware of the issues and so are cooperative members, despite everything we went through, including serious acts," he told reporters on June 12.
He was referring to a complaint filed in March by eight cooperative members, in which they accused Tereos of terrorism for delivering potentially dangerous sorbitol to Islamic State. Paris' anti-terrorist authorities dismissed the case.
In the run-up to Wednesday's vote, a group of cooperative members opposed to current strategy published on their website a "recovery plan" for the cooperative.
"Looking at the numbers, given the particular economic environment, we are worried. A realistic look at the situation makes us thinks it is essential to implement a plan aimed at preserving our industrial tool and our independence," the Association for the Defense of Tereos Cooperators (ADCT) said.
ADCT proposed that Tereos focus on its sugar and starch activities in Europe and sugar in Brazil while cutting costs and net debt through the sale of peripheral and remote assets accounting for 3% of total sales.
The plan also involves a change in management with a new team ready to step in, including an unnamed director general retired from international agri-good group.
Tereos had sales of €4.4 billion in 2018/2019, down 7% on the year. Over the same period its net debt rose 6% to €2.5 billion.
Tereos' surprise decision late March to pay farmers €19 per tonne of sugar beet, instead of a previously agreed €25, had raised further concern among members about the group's financial situation even though the group promised it would pay the full amount by the end of September.