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Sugar maker Tereos overhauls its operations in France

FILE PHOTO: The Tereos logo is displayed at a sugar beet processing plant in Chevrieres

By Sybille de La Hamaide

PARIS (Reuters) - France's largest sugar and ethanol group Tereos on Wednesday announced a reorganisation, including the closing of its sugar activities in a factory in northern France that would lead to 123 job cuts, as it faces a sharp drop in sugar beet output.

The company, which said last year it did not rule out closing a sugar factory in France, also aims to close its distillery in Morains and is looking for a buyer for its potato starch plant in Haussimont, both in eastern France.

A surge in prices helped Tereos post improved third-quarter results last month, but the group is still struggling to cut its debt which is expected to rise again this season.

Despite high sugar prices the company said it will receive 10% less beet from its cooperative members for the upcoming 2023/24 season.

"The profitability of growing beet is certainly improving at Tereos, but cooperative members are facing regulatory (legislative, health, environmental) and economic constraints that are resulting in a sustained reduction in sown areas," Tereos said in a statement.

Sugar beet crop area is set to fall to a 14-year low in France this year as farmers are deterred by potential crop damage because of restrictions to use neonicotinoid pesticides, the head of beet growers group CGB told Reuters late last month.

Following the closing of sugar activities at Escaudoeuvres, sugar beet produced close to the plant will be processed by neighbouring plants, Tereos said.

"Sugar factories from beets are capital-intensive industrial sites with high fixed costs. Therefore it is logical in a context of a decline in an area in France to close sites to reallocate the beets," a sugar trader said.

Concern over possible crop damage this year had grown after an EU court last month overturned French policy allowing sugar beet growers another year's use of an insecticide banned by the bloc.

Tereos is the world's second-largest sugar producer by volume thanks to its substantial activities in Brazil.

(Reporting by Sybille de La Hamaide and Pascal Rossignol; Editing by Gus Trompiz, Louise Heavens and Shounak Dasgupta)