Tereos Delivers Strong Results Despite Volatile Market

Revenues from Sugar (sugar beet and sugarcane) were driven up 14.1%. The cereals processing business registered a 9.5% fall in 2009/10 owing to the decline in starch product prices, which was partly offset by higher alcohol/ethanol sales for BENP and DVO.

2/14/2011 --- Tereos has reported that revenues rose by 6.7% to €3.53 billion in FY 2009/10, with adjusted EBITDA reaching an all-time high of €596 million (up 35.2%). During FY 2009/10, the Tereos Group registered further improvement in its profit margins in a climate of market volatility and continued consolidation in the sector worldwide.

Philippe Duval, Chairman of the Tereos Management Board, said: "In an international environment that is increasingly feeling the impact of highly volatile commodities prices and exchange rates, the Tereos Group delivered an impressive rise in operating income, while lowering its debt ratio. The creation and listing of Tereos Internacional, the strategic partnership with Petrobras and the large French cereal cooperatives in Brazil, will give Tereos an added advantage in preparing for the future in a sector that is undergoing significant consolidation."

Thierry Lecomte, Chairman of the Supervisory Board, added: "The excellent 2009/10 campaign and solid market trends were favourable for the European sugar beet sector. Concurrently, the market's health continues to improve. As a result, our price complements rose from €18 million in 2008/09 to €50 million in 2009/10. In 2010/11, the figures are expected to reflect further substantial increases and to be quite competitive with alternative crops."

The Tereos Group's consolidated revenues rose by 6.7% to €3,529.3 million in 2009/10, from €3,309.2 million in 2008/09. Revenues from Sugar (sugar beet and sugarcane) were driven up 14.1% by the effects of higher prices coupled with favourable changes in scope and foreign exchange in Brazil and by volume growth in Brazil and in Europe. The cereals processing business registered a 9.5% fall in 2009/10 owing to the decline in starch product prices, which was partly offset by higher alcohol/ethanol sales for BENP and DVO.

The Group's adjusted EBITDA jumped by 35.2%, reaching an all-time high of €595.6 million. The adjusted EBITDA margin widened to 16.9% from 13.3% in the previous year. Adjusted EBITDA from the Sugar from beet business jumped to 20% of revenues to €300 million under the impetus of strong sales growth and lowing production costs owing to the good quality of beets harvested during the 2009/10 campaign. The Sugarcane division delivered 66.2% adjusted EBITDA growth fuelled by the increase in sugar prices, favourable market conditions for alcohol in Brazil and higher volumes in La Réunion. The Cereals Processing division registered a 17.1% fall in adjusted EBITDA due to the steep rise in cereal prices.

Current operating income before price complements rose sharply, to €325.4 million in 2009/10 from €248.9 million in 2008/09. Net financial expenses totalled €136.1 million, €28.2 million less than in FY 2008/09. After distribution of €50 million in price complements, the Group's net income came to €150.3 million, a twofold increase on FY 2008/09.

The Net debt/Adjusted EBITDA ratio was 3.28x at September 30, 2010, compared with 3.84x at the end of the previous financial year. The Group is well within its banking covenants. Net debt was €1,952.3 million at September 30, 2010, compared with €1,689.5 million a year earlier. The increase is due to the acquisitions of Mandu and Vertente in Brazil, of Quartier Français in La Réunion and of shares in Tereos Participations, coupled with higher working capital requirements owing the rise in prices. In the months ahead, proceeds from the disposal of the Quartier Français group’s non-sugar assets will be used to pay down the Group's debt.

Tereos France had a quota of 1,188,000 tonnes. Sugar sales for all activities totalled 1,742,000 tonnes in 2009/10 due to the large quantities of non-quota sugar that became available after that year's exceptional campaign. Sales of table sugar were about the same as in the previous year.
Alcohol sales benefited from a healthy business climate. Industrial customers began to replenish their inventories as the economic crisis began to wane. Ethanol sales remained stable in a highly volatile market. In the summer of 2010, Tereos announced the creation of a joint venture with PureCircle, the world's leading producer of stevia extracts, to market this sweetener of natural origin to industrial customers, and a partnership with Danisco for betaine extraction. In the Czech Republic, TTD delivered excellent results in 2009/10, with net income of €24.9 million before tax, underpinned by its know-how in production and its business cooperation with Tereos France.

In 2009/10 Cereals division growth resumed in the European market for starch products. Against this backdrop, Syral retained its market share and increased its sales volumes in the starch, maltodextrin and polyol segments. The price trend was not as favourable, as prices were negotiated at the end of 2009 when cereal prices were on the decline. Even so, Syral maintained solid profitability owing to improvement in its product mix and to measures to control production costs. In addition, 2009/10 was impacted by continued rationalisation of production facilities, with the closure of the Greenwich plant and the build-up of many investments, including the new edible glucose line in Nesle, the new maltodextrin drying tower in Marckolsheim and the new starch dryer in Saragossa, Spain.

In alcohol, the Group retained its position as European leader in high-purity wheat alcohol for use by the spirits industry, which is produced by the Nesle, Saluzzo and Origny distilleries. One of the key events of the year was the start-up of the new grain alcohol production unit in Origny, which was approved by Bacardi. The Group also broke ground on the wheat distillery in Selby, UK. The first shipments are scheduled to begin at the end of 2011. In ethanol, after three years of substantial sales growth, during FY 2009/10, the Group focused on enhancing its production capacity utilisation rates. In 2009/10, ethanol sales advanced by 8% and Tereos consolidated its position as the European leader in alcohol/ethanol, all sectors combined.

2009/10 was an eventful year for the Tereos Group, with the creation of Tereos Internacional, the partnership with the cereal cooperatives, the strategic partnership with Petrobras, and continued expansion in Brazil and in La Réunion. Moreover, the Group’s joint ventures with PureCircle in stevia and Danisco in betaine, investments in starch-glucose production and contributions to the development of second-generation reflect Tereos’ dynamic approach and its involvement in the most highly innovative projects in the sector. In 2010/11, the Group plans to continue to expand by exploring new outlets for all of its business areas and by participating in the wave of consolidation in the sector. In addition, in France, beet sugar is confirming its position as an increasingly competitive alternative to cane sugar. This means that Europe will be able to reduce its dependency on sugar imports and its exposure to the shortages that arise whenever there is another surge in world prices. The financial outlook for FY 2010/11 is excellent, particularly as the markets are showing resilience.