Cristal Union spurns Tereos approach despite sugar price turmoil

PARIS, March 16 (Reuters) - French sugar and ethanol maker Cristal Union on Monday firmly declined a merger offer from competitor Tereos even if, as it expects, the slump in world sugar prices will hit its profits for the next two years.

Tereos, the world's fifth-largest sugar maker, sent a letter to Cristal Union's board in early February to push the economic advantages of the merger ahead of the end of the European Union sugar quotas in 2017, expected to boost price volatility.

Cristal Union had declined the offer but its management said Tereos was still keen on the idea.

"Today, very clearly, our position is against their marriage proposal," Cristal Union Director General Alain Commissaire said at a presentation of the group's annual results. "We have the means and the outlook to ensure our future."

It was the third time Tereos has made such an offer since 1998, he said.

But like Germany's Suedzucker (Xetra: 729700 - news) in January, Cristal Union warned that the slump in world sugar prices could slash profits in the current 2014/2015 season and the following one.

"All sugar makers have come to the idea that in the next two years we will have zero results, maybe slightly higher or slightly lower," Commissaire said.

In the 2013/2014 financial year which ended on Sept 30, Cristal Union's net profit fell to 119 million euros ($126 million) from a record 226 million in 2012/2013, also pressured by a 3.3 percent drop in output linked to a poor sugar beet harvest. Sales fell 7 percent to 1.8 billion euros.

Raw ICE sugar futures hit a six-year low this week, hammered by hefty world supplies and a tumbling Brazilian currency.

Cristal Union aims to become the third largest EU sugar maker, from fifth currently, as it plans to lift its beet area in France by 20 percent by 2017.

The group, which is seeking to widen its reach in Europe ahead of the market liberalisation, said last month it had taken a stake in an Italian refinery jointly owned by the world's largest cane refiner, American Sugar Refining (ASR).

Commissaire told Reuters the group was in talks to take over a commercial firm in Britain but declined to give any detail.

It is also envisaging expanding in Africa in partnership with ASR. The U.S. group already supplies Cristal Union's jointly-owned refinery in Algeria due to start processing 350,000 tonnes sugar this summer, with capacity set to rise to 700,000 tonnes. ($1 = 0.9448 euros) (Reporting by Sybille de La Hamaide, editing by William Hardy)