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Supply Chain

Tereos Does Not Rule Out Closing Sugar Factory In France

French sugar group Tereos may close some of its capacity in France as part of a wider strategy review as it anticipates further declines in sugar beet production.

Tereos, France's largest sugar maker and the second biggest in the world as a result of its sugarcane activities in Brazil, had always said it would not close factories in France in contrast to competitors Cristal Union and Südzucker's Saint Louis Sucre that closed some in 2020.

"Yesterday's reality is not necessarily tomorrow's reality," Tereos Head of Sugar Europe Olivier Leducq told reporters after the presentation of the group's yearly results.

He said the review was ongoing and a cut in capacity did not necessarily mean the complete closure of a factory.

Sugar Beet Production

The sugar beet area sown by Tereos cooperative members has shrunk by 10% in the last five years and Leducq said he expected it to fall by another 10% by 2024.

Sugar beet production in France has decreased regularly since European Union quotas ended in 2017. Farmers have been deterred by low prices and, more recently, diseases that ravaged crops.

At the same, Tereos faces over-capacity in Brazil where the group suspended operations for a year at its Severinia sugar and ethanol mill north-west of Sao Paulo to optimise output between its refineries after a poor cane harvest.

Chief financial officer Gwenael Elies said the decision to stop activities in Severinia was temporary and would be reviewed next year. The group has no intention of selling the unit, he said.

Lower production and high costs, mainly because of soaring gas prices, were likely to push sugar prices higher in Europe in the fiscal year to 31 March 2023, while world sugar prices were expected to remain close to current high levels, he said.

High ethanol and sugar prices have boosted investor interest in Brazil where nearly 30% of the sugarcane crushing capacity is idle.

News by Reuters, edited by Checkout. For more Supply Chain stories, click here. Click subscribe to sign up for the Checkout print edition.

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