Tereos warns that its results will be weaker as EU sugar prices plummet

Tereos CEO Olivier Leducq said that a fall in European sugar price more than expected in recent months, due to large supply, will impact the company's results in the second half. This will prompt Tereos to increase exports.

In the last two years, EU markets have suffered due to large imports cheaper Ukrainian sugar. The EU executive halted shipments of Ukrainian Sugar, but imports are still 10 times more than before Russia invaded Ukraine.

The EU sugar production is also expected to increase 6% as farmers are encouraged by the high prices to plant more beets. Tereos, however, expects a slight decline in its sugar beet production as the area planted by its cooperative members has remained almost stable and yields have fallen due to poor sunlight and late plantings.

Tereos chairman Gerard Clay said in an interview that Tereos expected sugar beet yields to drop this year from last year's 80.1 tons per hectare.

The large EU beet harvest and the Ukrainian sugar influx pushed European sugar prices down in recent months. Spot prices are now around 500 euros per metric ton. This is down from 950 euro per ton in September of 2023.

Leducq stated that "we are entering a more complex period. We cannot maintain the same results with market prices that have been halved or that have fallen by 40% or even 50%."

BOOST EXPORTS

He said that the price environment on the sugar-and-starch market has already declined since the second quarter. However, the group's sugar and ethanol operations in Brazil have been a success, thanks to good sales and price levels.

Tereos (which makes sugar, starches, and ethanol) had posted a record profit for the year 2023/24 which ended on March 31, due to high prices of sugar and improved margins.

Tereos’ warning is similar to that of Europe’s largest sugar producer Suedzucker, which last week announced a 63% drop in its quarterly operating profit. It also cut its earnings estimates for the full year due to weak sugar markets.

Leducq, the French group's CEO, said that the French group plans to double its sugar sales outside the EU to 350,000 tonnes this season in order to cope with the anticipated surplus within the EU - the first surplus since 2017/18.

Leducq stated that the market cannot expand because of the stagnation in consumption in Europe. Therefore, all surplus products must be exported.

Leducq stated that the bloc is expected to export around 2.5 million tons of sweet this year. This compares to an average of 1/1.5 million during other years. The demand for sugar in the world continues to increase, so it should be easy to find a buyer.

He said the group has also finalised the sale to T&L Sugars of its UK retail division after a nearly year-long investigation by the UK watchdog CMA. (Reporting and editing by David Evans; Sybille De La Hamaide)

(source: Reuters)