Tereos, the French sugar and ethanol group, has sealed an agreement with grain cooperative Axereal to sell its stake in their malt business and is consulting unions on a plan to close its sugar activities in Romania, it said in a document to investors.
Tereos, the world's second largest sugar producer by volume, has undertaken a wide ranging review of its businesses after a top management reshuffle in late 2020. The new team, which had expressed concern about the group's high debts, made deleveraging one of its top priorities.
In September, Tereos announced it was to sell its minority stake in two starch joint ventures in China as part of the reorganisation.
In the document, published as part of a bond launch this week, Tereos said it had sealed a deal with Axereal, France's leading grain collector, to exit their partnership started in 2014, when Tereos' current chief executive Philippe de Raynal was leading Axereal.
Tereos will sell its 11.7% stake in Copagest, the holding of Axereal's malt business Boortmalt, and buy Axereal’s 2.8% stake in Tereos Agro-Industries, it said.
Tereos Agro-Industries is the holding for the starch and sweeteners operations and part of its international sugar business, a spokesperson said. She declined to give financial details of the agreement.
Tereos estimated that its stake in Copagest was worth €62.2 million ($71.08 million) as of 31 March, the end of its 2020/21 fiscal year. Boortmalt became the world's largest malt producer after it purchased Cargill's malt business in 2019.
"Following this transaction, we will have terminated our partnership with Axereal and fully exited the malt business," Tereos said in the document.
In addition, Tereos said it was "in the process of consulting employees' representative bodies with a view to present the project of a potential shutdown of its Romanian sugar activities in the context of a pessimistic outlook."
"Since its acquisition by Tereos, the Ludus sugar plant in Romania has been facing difficulties mainly due to constant reduction in sugar beet surfaces despite several mitigating actions and has accumulated substantial losses," Tereos said.
Reuters reported in June last year that the cooperative group was seeking to exit its loss-making Romanian sugar activities.
The Romanian business had 153 permanent employees at the end of September, out of a total 15,000 for the whole group.
Tereos has said it aims to focus on its activities in Europe and Brazil. It is the second largest sugar and ethanol producer in Brazil and also has operations in Reunion Island, Mozambique, Indonesia, Tanzania and Kenya.
It could sell other operations and exit partnerships deemed non-strategic in the future, it said in the document.
Debt Continues To Rise
Tereos on Monday announced plans for a €300 million ($340 million) issue of senior unsecured notes due in 2027, which it said it would use to repay existing debt. The investor roadshow was due to last through Wednesday.
The group eventually raised €350 million with a yield set at 4.75%, IFR said later on Wednesday.
Tereos' net debt stood at 2.63 billion as of 30 November last year, up 263 million euros, or 11.1%, on 30 September, but earnings were strong, it said in the document.
For the two-months ended 30 November 2021, adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) stood at €173.0 million, up 59% on the two-month period ended 30 November 2020. It is the highest adjusted EBITDA for a two-month period since March 2017, it said.
In the eight months to 30 November, adjusted EBITDA stood at €373.4 million, up from €346.2 million on a year earlier.
It confirmed its objective to reach a full-year EBITDA of between €600 and €700 million by the end of September 2022.
The group is due to publish its third quarter results up to the end of December early February.