Dreyfus profit drops after grain surplus
2014-03-27 10:18:23
Louis Dreyfus Commodities, one of the world’s largest food trading houses, has reported a sharp drop in annual profits, weighed down by weakness in several of its key markets including sugar.
The privately owned company, which along with Archer Daniels Midland, Bunge and Cargill, dominates the world’s commodity food flows, said adjusted net income from continuing operations fell to $640m in the year to December from a record $970m in 2012.
A global sugar surplus and poor yields from its Brazilian orange juice crop because of heavy rains before harvest led to operating results at the trader’s “tropicals” business, which includes sugar, cotton and coffee, halving to $437m.
Profits were also lower in the company’s “proteins” division, which encompasses oilseeds, grains and vegetable oils, although margins recovered towards the end of the year.
The worst drought in half a century in the US in 2012 led to stockpiles of grains and oilseeds falling to the lowest levels in decades, limiting processing and training opportunities for agricultural trading houses in the first half of 2013.
That situation started to reverse in the second half of 2013 as ample harvests of grain and oilseeds materialised.
“2013 witnessed a transition in the supply of agricultural products, from inventories limited by exceptional climate events in 2012, to replenishment with abundant crops during the year,” said Serge Schoen, chairman of parent company Louis Dreyfus Commodities Holdings, in the company’s annual report.
“With the entire industry impacted, Louis Dreyfus Commodities responded successfully, delivering a solid performance with $63.6bn in sales and $1.7bn in operating profits,” he said.
Dreyfus said second-half profits were in-line with the average of 2009-2011, excluding its Brazilian sugar subsidiary Biosev. In the first six months of the year, the trader reported $258m in net income, down 13 per cent on the same period a year earlier.
The company, owned by the Louis Dreyfus family and some of its executives, has been increasing its public exposures in recent years. After tapping the bond market for the first time in its 160-year history, Dreyfus now files its accounts with the Singapore Stock Exchange.
It has also embarked on a large spending programme to keep pace with a wave of consolidation across the global agribusiness industry. The expansion has been spearheaded by Margarita Louis-Dreyfus, who has consolidated control of the 163-year-old trading house since the death of her husband Robert Louis-Dreyfus in 2009.
Last year, Ms Dreyfus increased her stake in the trader’s holding company to 65.1 per cent, buying a 4 per cent holding from a family member. The deal valued Louis Dreyfus Holdings, which controls 80 per cent of Louis Dreyfus Commodities, at $6bn.
In the annual report, Ms Louis-Dreyfus said the family trust she controls would buy more shares if the opportunity arose.
“I would be pleased for the Akira Foundation, established by Robert Louis-Dreyfus, to indirectly increase its stake in Louis Dreyfus Commodities,” she said.