Louis Dreyfus Company, one of the world’s biggest traders of agricultural commodities, has reported a small increase in half year profits as it battled erratic prices moves and unfavourable market conditions
In the six months to June, the privately-owned company reported a near 4 per cent rise in net income to $135m on sales of $23.5bn. Shipments were up 1 per cent on a year ago driven by a rise in grain exports from South America. Adjusted net debt was $3.6bn, against $3.2bn in December.
LDC’s chief executive Gonzalo Ramirez said “intense” and “erratic” moves had hit the performance of its main operating units, writes Neil Hume.
“The second quarter witnessed irrational volatility moves on certain markets, echoing unexpected strong speculative capital inflows,” he said. “Posting reasonable results during such periods and a context of continued oversupply illustrates our ability to adjust to changing conditions.”
Like its peers, which include Archer Daniels Midland, Bunge and Cargill, — making up the so-called ABCD companies — Dreyfus has been grappling with difficult market conditions. Bumper grains crops and absence of significant supply disruptions had crimped margins from trading commodities and hit prices.
LDC’s ‘supply chain’, or procurement and refining arm posted operating profits of $351m, down from $405m in the same period a year ago, knocked by wild swings in oilseed, grains and sugar prices.
Soyabean prices surged more than 30 per cent in the second quarter, mainly due to unexpected flooding in Argentina which affected crops and attracted large speculative inflows from financial investors.
Sugar prices also jumped by nearly a third in the period, wrong-footing traders and upending hedging strategies.
In LDC’s ‘merchandizing’ or trading recorded operating profits of $195m, down from $233m a year before. Weak demand and the release of government stocks in China affected its cotton business.
LDC said its fertiliser business, which it has ring-fenced as it searches for an investor, continued to struggle as farmers put off purchases because of weak grain prices. LDC also wants joint venture partners for its dairy, metals and orange juice units to boost their reach and competitiveness.
Louis Dreyfus Company is controlled by Russian-born billionaire Margarita Louis-Dreyfus, the widow of flamboyant businessman Robert Louis-Dreyfus who died in 2009 after a battle with cancer.
Ms Louis-Dreyfus is looking for a strategic investor to buy a stake of about 16 per cent in the holding company that controls Dreyfus. The stake is owned by other members of the Louis-Dreyfus family who have exercised options allowing them to sell. LDC did not comment on the sale process in its interim results announcement.
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