Louis Dreyfus First-Half Profit Slumps 50% on Lower Prices

  • Sales drop 22% to $26.4 billion even as volumes increase 4%
  • Uncertainty in China and Brazil makes environment difficult

Louis Dreyfus Commodities BV said first-half profit dropped 50 percent because of a “significant” decline in the price of commodities from sugar and coffee to milk and other dairy products.

Net income fell to $130 million in the six months through June from $260 million a year earlier, the Rotterdam-based company said Tuesday in a statement. Sales at the world’s largest rice and raw-cotton trader slipped 22 percent to $26.4 billion, even as volumes increased 4 percent on larger shipments of grains and oilseeds.

“Despite reduced commercial opportunities in this overall challenging
environment, we were able to increase our sold volumes once again, largely
through our logistics and processing operations,” acting Chief Executive Officer and Chief Financial Officer Claude Ehlinger said in the statement.

The 164-year-old agricultural commodity trader, controlled by billionaire Margarita Louis-Dreyfus, said shipments of cotton, sugar, rice and coffee fell because of supply gluts. Economic uncertainty in China and Brazil, alongside political upheaval in the Black Sea region and Ukraine, made it a difficult period for the business, the company said.

New CEO

From its trading hub in Geneva, Louis Dreyfus accounts for about 10 percent of global agricultural flows, while also trading metals and operating a hedge fund.

A lack of price volatility, which is often a key factor in generating profits for commodity traders, was the “principal feature” of the first half of the year, Louis Dreyfus said in a report on its website. The reduced swings in prices reflected “the addition of another year of large crops to already high stocks,” the company said.

Gonzalo Ramirez, a 48-year-old Argentine who heads the company’s Asia business, will take over as CEO in October after a 17-month executive search. A plan to hire former Viterra Inc. CEO Mayo Schmidt fell apart in December when the two sides couldn’t agree terms.

Louis-Dreyfus has tightened her grip on the trading house by purchasing more shares in Louis Dreyfus Holding BV from family members. The trust, named Akira, now owns about 80 percent of Louis Dreyfus Holding, which controls about 85 percent of Louis Dreyfus Commodities.

Louis Dreyfus has been aligning management and governance to the standards of publicly traded companies in case of an initial public offering or sale of a shareholding. There aren’t any immediate plans for a sale, Louis-Dreyfus said in March.

Dreyfus is one of the four so-called ABCD agricultural commodity companies, that also include Archer-Daniels-Midland Co., Bunge Ltd. and Cargill Inc.

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