Mauritius’ sugar major Terra sees profits after tax plunge by 28%
From left to right: Alain Vallet , Managing Director of Grays group; Jean Michel Gerard, General Manager of Terragen; Cyril Mayer , Managing Director; Jean Arthur Lagesse, General Manager of Agriculture and Henri Harel, Group Chief Finance Officer, at the Terra Mauricia results announcement ceremony. (Image: Cecilia Samoisi)
Sugar major Terra Mauricia presented its annual report together with its financial results to investors on July 1, 2014 at Labourdonnais Waterfront Hotel in Port-Louis.
The turnover of the group remains more or less steady around Rs 4 billion for the financial year ended December 31, 2013; however, profit after tax plunged by 28% to Rs 472.6 million from Rs 653.9 million a year-ago.
Besides, the diversification strategy of Terra from its mainstay sugar has proved crucial, with investments and activities other than sugar, energy and related business contributing a greater part of the group’s profit, at the level of Rs 165 million, from Rs 107.9 million a year-ago.
The decrease in profits is due in particular because of a lower production in the sugar sector and slowing down in demand for special sugars in the European market.
“In Europe, things do not seem to be getting better, unlike other countries where there is clear improvement. For example, in England, economic activity is picking up once again but the economic situation in France is still not back to normal, and it affects us as we depend on France for business,” stated Cyril Mayer, Managing Director at Terra.
Mayer also mentioned that Terra is already feeling the repercussions of the decision to abolition the EU sugar quota, which is planned for 2017, because demand is already decreasing and prices are lower on the European market
The energy sector also saw lower profitability due to consecutive reduction in selling price of power to Rs 2.66 / kWh in the post-debt period, based on agreements with the Central Electricity Board (CEB), which were applied in 2013 on all electricity production.
Meanwhile, the commercial sector saw profits fall marginally in a difficult competitive and statutory context.
In spite of a difficult economic situation and a low rate of growth in traditional sectors, Terra managed operational profits of Rs 313 million, a debt ratio below 7% and an operational cash flow after recurring investment to the tune of Rs 118 million.
The EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) amounts to Rs 659.6 million, while profit before tax amounted to Rs 520.4 million.
Terra is confident of the sale of its sugar on new markets. The sugar factory, Terra Milling Ltd, recently obtained a certification with Customs-Trade Partnership against Terrorism (C-TPAT), facilitating its access to the North American market.
“The results of our diversification strategy are encouraging. This strategy allowed the group to invest Rs 613 million in projects, while strengthening existing infrastructure. So, in spite of a difficult economic climate, we are confident that our new investment projects will bear fruit in the coming years,” Cyril Mayer asserted.
Indeed, Terra also widened its diversification strategy to agricultural activities. In 2013, the group produced 1032 tonnes of potatoes and 180 tonnes of onions, demonstrating its commitment to food security on the island.
Besides its traditional activities, the group also diversified into other sectors with great potential, particularly in the financial sector with a significant participation in the Swan Group, United Investment Limited (UIL) and even Banyan Tree Bank.
The group also launched an offshore company last year, AceTer Global Ltd.
The conglomerate, with its presence in the North of the island, also submitted to the Mauritius Board of Investment (BoI) a development plan for the Beau Plan region.
According to Cyril Mayer, the institution considered the Beau Plan Master Plan as a fast-track project, which should develop at least over the next ten years. The investment in this project amounts to Rs 25 billion.
In addition, Mayer revealed that the group is working on a sugar project in Africa and considers that this company, well-known for its sugar products, will not be confined to Mauritius alone but will look for other projects in the proximate and prosperous continent of Africa.