French cooperative Tereos, the world's second-largest sugar maker, is holding extraordinary elections to its membership council this week which the farmer-owned group hopes will end an internal feud at the debt-laden group already struggling with an industry-wide slump.
A sharp fall in sugar prices in the European Union has triggered a crisis in the industry that has also hit rivals such as Suedzucker, Nordzucker and Associated British Foods.
For Tereos, the impact of low sugar prices has been particularly harsh due to the company's heavy debt burden and deep exposure to sugar.
Tereos posted a loss last season and is likely to record another in 2018/19, weighed down by its European sugar activities, Chief Executive Alexis Duval told Reuters.
As concern over Tereos' financial situation grew among its 12,000 members, 70 out of 172 elected members of the Council of Regions quit over the summer to protest at management strategy. Council members are designated by cooperative members to represent them at Tereos' general assembly.
The group said this week's elections to replace them, with results expected on Wednesday, were an opportunity for unity after months of public wrangling.
"Make no mistake ... the temptation to pit Tereos people and regions against each other and the chimaera to turn in upon ourselves, are deadly poisons for our cooperative," Francois Leroux, chairman of Tereos' supervisory board, told cooperative members in a letter last week.
Tereos held 15 regional meetings in October to answer cooperative members' concerns, fueled by two anonymous letters about the group's "critical" financial condition and an internal rebellion by three resigning board members.
The company has been under pressure to reduce its 2.35 billion euro ($2.6 billion) debt burden and boost cash as it looks to offset losses from its sugar operations, which account for nearly half of revenues, with the rest mostly from ethanol, starch and sweeteners.
"Tereos has been growing a lot ... but it was mostly funded by internal cash flows or from debt. Because as a cooperative, they cannot raise equity," said Maxime Puget, director at S&P Global Ratings, which rates Tereos' bonds.
"They have high levels of debt due to previous acquisitions and they have never been able to de-leverage and that's their problem."
Tereos said in June it was considering selling a minority stake to help it continue growing abroad and diversifying its activities. It is due to unveil initial details of its capital increase around Spring next year.
Tereos' fast expansion, notably in Brazil where it is the third largest sugar maker, has left many of its French sugar beet farmers frustrated because they have received little return from it.
"We feel we need to change strategy away from internationalisation and expansion at all costs because that's where the debt came from," Benoit Mazure, 44, a grower in the Beauce region South of Paris.
Three former members of Tereos' supervisory board voiced strong concern about the group's future over the summer, asking for more details and transparency.
They were expelled from the cooperative for defamation in August, a move seen as extreme by many members.
In protest, the dissidents launched a petition in September they say gathered over 2,500 votes to request an extraordinary general meeting.
"Reflection about the group's future has been seriously slowed down by this fight," said a senior Tereos employee who asked not to be named. "Plus, it doesn't make the group very attractive for a capital increase."
Industry sources told Reuters that a representative of Tereos' supervisory board had approached Germany's Nordzucker this summer to potentially seek capital through a tie-up. Tereos denied that the supervisory or the management board had contacted the German company. Nordzucker declined to comment.
"Tereos has not contacted potential investors who can participate in this project today. Neither directly nor indirectly. Because we will have to do some study first and because it is a project for the future. There is no rush," Duval said.
European sugar companies' profits have plunged as world sugar prices fell to their lowest in a decade this year amid a surge in supplies, partly driven by more output from the EU after it scrapped export and output quotas last year. .
Germany's Suedzucker, the world's leading sugar maker, slashed its earnings forecast on expectations that sugar prices will fail to recover in the near-term. The group, however, carries less debt and as a publicly listed company has been able to raise cash through equity markets.
Sources with knowledge of the company said it is unlikely Tereos will find a partner or go public until sugar prices rebound significantly.
Sugar was trading at $351 a tonne on Tuesday morning, up 17 per cent from the low touched in August but still well below the $510 traded at the same time in 2016.
"With sugar prices at $500 or $600 we would not be in the mess we are today," said Etienne Clabaut, one of the Tereos supervisory board members who left in July. "There is a danger but we can still bounce back."
(With inputs from agencies.)