Massive earnings boost for Louis Dreyfus amid global agri-commodity market turmoil

By Jane Byrne contact

- Last updated on GMT

© GettyImages/Andrew Brookes
© GettyImages/Andrew Brookes

Related tags: Louis Dreyfus, Ukraine, freight, oilseeds

Louis Dreyfus Company (LDC) generated substantial profits in the first half of 2022, saying it capitalized on its diversified business portfolio and global network to manage global trade challenges and the fall-out from the war in Ukraine.

The agribusiness group saw its segment operating results hit US$1,375m for the six-month period ended June 30, 2022, up 56.4% from US$879m for the same period a year prior, while its EBITDA reached US$1,170m, a jump of 50.4% compared to the same timeframe in 2021.

Income before tax for the six-month period ended June 30 reached US$760m, a hike of 78.8% year on year, while net income group share landed at US$662m, up 97.0% from US$336m for the same period in 2021.

Michael Gelchie, LDC’s CEO, commented: “In the current turmoil impacting global agri-commodities markets, which added to pre-existing drivers of global market uncertainty such as continued port congestion, accelerating climate challenges and concerns over the resurgence of COVID-19, LDC’s mission to bring the right product to the right location, at the right time, was all the more critical. In this challenging environment, our experienced and committed teams continued to work with business partners worldwide to keep key supply chains moving safely, reliably and responsibly, from farmers to end consumers.”

Grain and oilseeds, freight platforms

The company’s interim report​ on its financial results showed that operating results for the value chain segment, which includes its grains and oilseeds business, came in at US$945m, a hefty hike on the $525m recorded in the same period in the prior year.

The publication also summarized the key developments in H1 2022 in the global grain and oilseeds markets, and the volatility drivers:

Grain and vegetable oil prices rose rapidly in the first four to five months of 2022, driven by concerns over global supply and demand imbalances for goods usually exported from the Black Sea, and over corn and soy supply shortages due to potential drought in Argentina and Brazil. Market volatility was further fueled by export duty increases (on soymeal and oil in Argentina, for example), export restrictions (particularly on palm oil from Indonesia or wheat from India) and concerns over the consequences of COVID-19 resurgence in China.

“Prices began to decrease in June 2022, on the back of global recession fears and ahead of the opening of a grains export corridor out of Ukraine. Operations in EMEA were negatively impacted by limited and costly logistics in the Black Sea. Globally, demand for grains (particularly corn, wheat, and sorghum) remained strong throughout the period. Ethanol prices were bolstered by the rally in oil prices, as global demand for biofuels continued to grow to support carbon emission reductions. Demand for vegetable oil remained resilient as prices reached record high levels toward the end of April 2022.

“Despite increasing production costs due to inflation and high energy prices, processing activities contributed significantly to the platform’s performance and growth thanks to strong crushing and crack margins, particularly in the US, Canada and Brazil.”

The group’s freight services also benefited hugely in the period with recovering demand from northern hemisphere economies and strong demand from China, combined with port congestions tightening the overall shipping market.

Innovation

The first half of 2022 also saw LDC continue to invest in core merchandizing operations, expansion, and diversification downstream, as well as group-wide innovation and digitalization, in line with its strategic roadmap.

“Among other developments, the first semester of 2022 saw the opening of LDC’s first R&D center supporting our entry to the plant proteins market, the completion of a new soy liquid lecithin plant consolidating our position in the plant-based ingredients market, and the groundbreaking for Fuling Food Industrial Park in China - a venture with Chinese partners to meet the country’s growing demand for high-quality food and feed products,” ​said the CEO.

Positive strides in terms of sustainability and decarbonization was also achieved, said the trader. 

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