Louis Dreyfus Profit Rises 3.8% as Tax Offsets Lower Food Pricesby
Sales fall 11% as market remains ‘difficult’ as China slows
Shipped volumes rise 1% on grains, oilseeds and metals
Louis Dreyfus Co., one of the world’s four biggest food-commodities traders, said first-half profit rose 3.8 percent as a lower effective tax rate countered tumbling prices and reduced trading opportunities.
Net income rose to $135 million in the six months to June 30, from $130 million a year earlier, Dreyfus, the world’s largest rice and raw-cotton trader, said Thursday in a statement. Deferred taxes recognized in income totaled $107 million in the period, helping to lower the effective tax rate to 10 percent.
“The external environment remained difficult during the first half of 2016, with growth slowing in China, the U.S.’s recovery failing to fully spread to other major economies, and numerous instances of political instability and geopolitical tensions,” Dreyfus said in the statement.
Traders such as closely held Dreyfus are struggling as benchmark prices for wheat fell to a decade low in August, while corn is near the lowest since 2009 as farmers in key growing regions, including the U.S. and Russia, reap bumper crops. Prices for wheat, corn and soybean will remain low into 2017, Chief Executive Officer Gonzalo Ramirez Martiarena said this month.
Sales at the Rotterdam-based company, controlled by billionaire Margarita Louis-Dreyfus, slipped 11 percent to $23.5 billion in the first half, while volumes rose 1 percent as the 165-year-old company shipped more metals, as well as grains and oilseeds from South America, it said.
Ramirez is trying to steady Dreyfus after 2015 profit at the firm with major trading operations in Geneva fell to the lowest in a decade. He announced plans earlier this year to seek joint-venture partners for businesses including orange juice, dairy, metals and fertilizer.
“We were able to sustain satisfactory results and even continue to increase our sold volumes, through a combination of our extensive market knowledge, our well-placed network of logistic and processing assets, and our diversified business lines,” the CEO said in a statement.
Income before tax declined 15 percent to $151 million, the company said. Operating results for its Value Chain segment, which includes oilseeds, grains, juice, sugar, rice, fertilizers and freight, fell 13 percent to $351 million. Operating results for the Merchandizing unit, which includes cotton, coffer, dairy, metals and finance, dropped 16 percent to $195 million.
Merchandizing shipping volumes were “strong,” Dreyfus said, particularly due to a “dynamic” flows for metals.
Margarita Louis-Dreyfus is considering selling a minority stake to finance the purchase of holding company shares from other family members. She controls 81 percent of the holding company that owns Louis Dreyfus Co. and is its chairwoman.
Sandrine Teran stepped down as Dreyfus’ chief financial officer on July 1, after just eight months in the role. She was replaced on an interim basis by Federico Cerisoli, formerly CFO for Louis Dreyfus in Europe, Middle East and Africa.
Archer-Daniels-Midland Co., Bunge Ltd., Cargill Inc. and Dreyfus are known as the ABCD of agricultural commodity traders. Rivals including ADM, Cargill and Wilmar International Ltd. suffered in the first half on wrong-way bets in soybean markets.