French sugar group Tereos vowed on Wednesday to press ahead with plans to cut debt and improve results but warned that poor sugar output and low margins in the European starch sector would weigh on earnings in the first half of 2021/22.
Tereos, the world's second largest sugar maker by volume, reported a net loss of €133 million ($162 million) in the year to 31 March, against a profit of €24 million a year earlier, mainly hit by €76 million worth of asset depreciation.
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for 2020/21 rose 11% to 465 million euros, while net debt at the end of March stood at 2.5 billion euros, stable from a year earlier.
The group delayed by six months an objective to grow EBITDA to €600 million to €700 million, due in 2021/2022.
"It is clear that these results are insufficient," said Tereos Chairman Gerard Clay, a longstanding critic of the previous management, who was elected in December after an extraordinary board meeting dismissed the chief executive.
'Sugar and Ethanol'
Clay said the group would now focus on sugar and ethanol in Europe and Brazil, where it is one of the leading producers, and on starch and renewables in Europe.
It aims to achieve by 2024 an EBIT (earnings before interest and tax) margin of 5%, recurring generation of positive free cash flow, and a net debt below €2 billion.
The 20% cut in the group's debt would be done through improved positive cash flow and possible divestitures, Tereos Chief Executive Philippe de Raynal said.
"In a certain number of situations that are not core of the business, some sale options can be looked at and completed," he said, declining to give further details.
Sources close to the matter told Reuters that Tereos was in talks with Singapore's Wilmar International to sell its stake in their starch joint venture in China, and was seeking to cease its loss-making sugar activities in Romania.
The previous management's plans to open up the group's capital to other investors have been dropped, Clay said. "It is a plan of the past," he told reporters.