Profits at Louis Dreyfus undermined by soy trading strategy

By Jane Byrne contact

- Last updated on GMT

© GettyImages/buhanovskiy
© GettyImages/buhanovskiy
Agri-commodity trader, Louis Dreyfus Company (LDC), has reported a fall in half-year profits, seeing a negative impact from its hedging strategy. It said it had taken a hit on derivative contracts used to lock in margins in its soybean business.

Its results show its after-tax profits, in the first six months to June 30 2018, dropped to $100m from $160m achieved in the comparable period a year ago.

The Netherlands headquartered company saw negative cash flow from operating activities as it dealt with volatility the main agri-commodity sectors in the period.

However, new CEO, Ian McIntosh, said LDC was optimistic about the company’s full-year results. He said it anticipates strong crush margins in the second half of the year.

“Notwithstanding a lower net income for the period, we have seen the expected reversal of the negative mark-to-market effect, as we execute our planned crush operations.

“As a result, at the end of September, year-to-date performance indicates that we are on track to deliver solid results for 2018 overall.”

The group strengthened its soybean crushing capabilities in China in the first half, completing the acquisition of a crushing plant located in Tianjin, in April, and the CEO said LDC continued to refocus on core activities, including divestment of its global metals and Australian fertilizers and inputs operations.

No tiffs at the top

The company last month denied that the sudden resignations of former top executives were linked to strategy rows or due to financial issues.

In late September, LDC said CEO, Gonzalo Ramirez Martiarena, had left to “pursue other opportunities”​ after 13 years with the group, while CFO, Armand Lumens, who joined in March 2017, had quit because of “personal reasons”.

New CEO, Ian McIntosh, recently told the Financial Times: “I would never have accepted the role of CEO if I had even the slightest concern that there were problems either financially or strategically within the company.

“I think that is a really important thing to get. Thes​e two departures were in no way related to strategy or financial issues.”

He stressed that there was no crisis at LDC. 

Key data in LDC half-year results  

  • Net sales of US$18.8bn remained constant compared with the same period in 2017
  • Income before tax of US$117m, compared to US$206m at 30 June 2017
  • Segment operating results at US$493m, against US$542m in the year ago period
  • Working capital usage of US$7.7bn versus US$6.3bn at 31 December 2017
  • Net income, Group Share at US$100m, compared to US$160m for the first half 2017
  • Net proceeds from sale of investments and fixed assets of US$468m
  • Capital expenditure ​of US$131m over the half year, compared to US$119m over the same period in 2017
  • Return on equity, group share, of 5.2%, compared to 6.7% one year before

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