French insect-based ingredients maker Ynsect will refocus its strategy on high-margin markets like pet food, shut a production plant and cut jobs after raising 160 million euros ($177 million) from investors, its chief executive said.

The company, which is in talks for additional funding, will use the money to finance expansion of its flagship vertical insect farm in Amiens in northern France, the world's largest, and for new projects, Antoine Hubert told Reuters in an interview.

Farmed bugs, such as mealworms, are ground down to produce proteins for aquaculture, livestock, pet food, fertilisers and human nutrition. They are considered more environmentally friendly proteins because they require less land and water than crops and emit fewer greenhouse gases.

But the technology is costly, making the meal far more expensive than its plant-based alternatives.

"In an environment where there is inflation on energy and raw materials but also on the cost of capital and debt, we cannot afford to invest loads of resources in markets which are the least remunerative (animal feed), while you have other markets where there is a lot of demand, good returns and higher margins," Hubert said, referring to pet food, human nutrition and fertilisers.

Ynsect will close its Dutch production plant, acquired through the takeover of Protifarm in 2021, which rears a different type of bug, while keeping research activities. This will lead to 35 job cuts.

In addition the company will cut 38 jobs in France, out of a total of about 360 people, Hubert said.

Ynsect, which announced agreements in December to build insect ingredient production sites in the United States and Mexico, has signed sales deals for 180 million euros over three years and is in talks for an additional 1 billion euros, of which more than half is for pet food, he also said.

In its latest round of fund raising in 2020 Ynsect brought in more than 315 million euros, of which about 175 million euros was capital and the rest in debt and subsidies.

(Reporting by Sybille de La Hamaide; Editing by Sharon Singleton)