French sugar group Tereos posted a narrower loss in the first half, thanks to an improved second quarter as global prices recovered from a historic low and pointed to a better price outlook for the rest of the year.
The group’s debt level, however, rose by E400m ($440.8m) from a year earlier to E2.7bn despite positive income of E215m from its asset swap with Italian group ETEA earlier this year.
European sugar companies have been struggling as world sugar prices hit their lowest in a decade late last year amid heavy oversupply.
Tereos, among the world’s largest sugar makers, now sees a slight recovery. It reported a net loss of E21m ($23m) in the first half of 2019-20, compared with a net loss of E96m in the year earlier period.
Adjusted earnings before interest, tax, depreciation and amortisation (ebitda) fell to E111m in the six months to September 30 versus 143m in the first half of 2018-19.
"As expected, the first half of the year continued to be impacted by the low cycle and drought conditions that marked the 2018-19 campaign, particularly in Europe," Tereos chief executive Alexis Duval said in a statement.
Germany’s Nordzucker last month also posted a first-half pre-tax loss, citing continuing low sugar prices.
Tereos said that although ebitda had fallen in the first half, it increased 31% in the second quarter compared to the previous year. This was helped by the recovery of its international sugar business due to a slight price rebound and operational progress in its starch and sweeteners division, in what it called a turning point.
European spot sugar prices gained 41% in the year to September 30, Platts data showed. World prices also rose although at a lower extent.
Tereos has a large part of its business outside of Europe, mainly in Brazil where it is a major player on the cane sugar and ethanol market, and relies on world prices for its export.
Tereos’ 2020 bonds rose after the results. Yields, which had hit all-time highs in the past weeks, fell back sharply with the 2023 one trading at 14.1% by 10:21 GMT, down from 24.5% at the open.
The group’s sales in the first half were virtually stable year-on-year at E2.1bn, it said.
The group is pursuing discussions over a possible opening of capital of its industrial activities over a two or three-year horizon, Tereos said.