Louis Dreyfus Profit Plunges to 10-Year Low on Weak Prices

  • Commodity trader suffers from reduced volatility, supply gluts
  • Results also reflect declining local currencies against dollar

Louis Dreyfus Co. said full-year profit fell 67 percent to the lowest in a decade as the world’s largest trader of rice and raw cotton was hurt by lower prices, reduced volatility and an oversupply of agricultural commodities from wheat to soybeans.

Net income declined to $211 million in 2015 from $648 million a year earlier, the Rotterdam-based company said Monday. That’s the lowest since 2005, according to figures from previous annual reports, and compares with a record profit of $1.05 billion in 2010. Sales dropped 14 percent to $55.7 billion.

The industry suffered “an environment of reduced commercial opportunities” in what was a “difficult year,” Chief Executive Officer Gonzalo Ramirez said in a statement. “Our results have shown our resilience under the circumstances.”

While a lack of price volatility for the commodities Louis Dreyfus trades affected the bottom line, the results also reflect declines in local currencies against the dollar, particularly the Brazilian real, according to Chief Financial Officer Sandrine Teran. Currency devaluations in Brazil and elsewhere resulted in a non-cash tax expense charge of $132 million.

“2015 was a year of very high volatility for foreign exchange,” Teran said at a media briefing in Paris.

Seeking Partners

Amid the market rout, billionaire Margarita Louis-Dreyfus, who controls the firm through a family trust, is considering selling a stake in the 165-year-old trading house to finance the buyout of remaining family shareholders. The company is also seeking joint-venture partners for businesses including orange juice, dairy, metals and fertilizer.

Ramirez said Louis Dreyfus hired investment bankers from Credit Suisse Group AG to find partners for the fertilizer business. The company has received “multiple offers” for the entire unit but hopes instead to partner with a fertilizer producer in a joint venture, according to the CEO, who was appointed in September after an 18-month search.

The yield on Louis Dreyfus’s bonds maturing in 2020 narrowed to 6.54 percent on Monday, after widening to a record 9.26 percent on Feb. 11.

Shipped sales volumes grew 1 percent to 81 million metric tons last year. Pretax profit fell by half to $416 million amid insufficient price volatility and a lack of supply disruptions, the company said.

Return on equity, a key measure of profitability for the commodities trader, dropped to 4 percent last year from 14.4 percent in 2014 and as much as 29.9 percent in 2007.

As part of a plan to counter weak prices and the persistent lack of volatility, the company is seeking to increase its grain-processing facilities and will seek acquisitions in that area, Ramirez said.

The firm, formerly known as Louis Dreyfus Commodities BV, re-branded itself as Louis Dreyfus Co. with immediate effect.

Russian-born Margarita Louis-Dreyfus recently gave birth to twin girls, the company said in an earlier statement Monday.

The closely held firm paid its shareholders, including Louis-Dreyfus, a dividend of $205 million in 2015, down from $602 million the year before. Capital spending fell to $420 million from $592 million in response to the “bearish” environment, it said.

The company accounts for about 10 percent of global agricultural commodity flows and operates in more than 100 countries.

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