Louis Dreyfus 2015 earnings down on weak commodity prices

by World Grain Staff
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ROTTERDAM, NETHERLANDS — Louis Dreyfus Commodities B.V., a merchant and processor of agricultural goods, reported on March 21 a net income of $211 million in the fiscal year ended Dec. 31, 2015, down 67% from $648 million in the same period of last year.

Sales declined from $64.7 billion to $55.7 billion. Sales were supported by a 1% growth in shipped volumes, which reached 81 million tonnes.

The decrease in earnings reflects a significant drop in market prices for most commodities. Weak price volatility meant suppliers and customers had less of a requirement for the company’s risk management skills, said Sandrine Teran, chief financial officer. As a result, margins were compressed.

A great part of 2015 results were earned on the back of industrial assets, especially in North America and Europe, fueled by large crops, Teran said. The company’s Value Chain segment recorded healthy results, with logistic and processing assets benefiting from abundant crops in most origination countries.

Global conditions brought complexity throughout the year, with key factors including doubts concerning the strength of the Chinese economy and economic slowdown in key developing countries including Brazil and Argentina, political instabilities, and very volatile foreign exchange market with several currencies plummeting against the U.S. dollar.

Total segment operating results were down 24% to $1.35 billion from $1.78 billion a year earlier. The Value Chain segment booked $836 million in operating results, compared to $1.1 billion in the same period in 2014. This performance was sustained by logistics and processing activities, mainly for Oilseeds.

Oilseeds delivered a strong performance in 2015, particularly in soybeans, reflecting an increase in sold volumes and industrial activities for almost all of its assets. In North America, results were high but at more normal levels than the previous year, which generated exceptional margins in logistics, crushing and refining assets, the company said.

In Europe and China, robust profits were also recorded throughout the year and the situation improved in South America after a first half that saw slow farmer selling.

The Grains platform performed less well this year on the back of heavy global supply, a strong U.S. dollar, reduced price volatility and lower logistic and industrial margins, notably in the U.S. and Brazil. New Russian wheat export control has also limited the opportunities in the Black Sea region but the platform was able to produce a good performance in its origination activities in Argentina.

On the logistics side, the Grains and Oilseeds platforms acquired, and started operating, a rail-to-barge terminal on the Mississippi  river, in Cahokia, Illinois, U.S., and constructed a truck-to-barge terminal at that location. The company also commissioned its newest truck-to-barge facility in Natchez, Mississippi, U.S., and began constructing one in West Memphis, Arkansas, U.S. In addition, improvements and refurbishments were carried out in the American elevation assets in Port Allen, Louisiana, U.S., and in Portland, Oregon, U.S. Further, both platforms acquired a warehouse in Irati, Parana, Brazil and started building a barge fleet in the north of the country, as part of a broader logistics project. The company concurrently finalized construction of elevators in Curuguaty, Paraguay and Paysandu, Uruguay.

In December 2015, the group, through a joint offer with Cargill, won a bidding process to operate a terminal in the port of Santos.

The Grains platform acquired a grain terminal on the Don River of the Azov district in Russia. The terminal, which is currently under development and expected to start its first phase of operation in early 2016, will initially transship grains on sea-river vessels with an annual export capacity of 500,000 tonnes, aiming to exceed 1 million tonnes. In Argentina, the Grains platform has begun construction a new elevation and storage asset for barley in Buenos Aires.

The Oilseeds platform completed construction of a new glycerin refinery of its soybean processing plant in Claypool, Indiana, U.S. Ongoing projects for the platform also included building a biodiesel plant next to the company’s existing refinery in Lampung, Sumatra, Indonesia. In Canada, the platform invested to expand both rail access and storage capacity in its crushing plant at Yorkton, Saskatchewan. In order to further the platforms presence on the market of by-products, a lecithin production unit was added to the existing plant in Wittenberg, Germany.  

“Despite adverse conditions, both in our agricultural markets and in the overall macroeconomic environment, LDC’s activity continued to expand in 2015,” said Margarita Louis-Dreyfus, chairperson of Louis Dreyfus Holding B.V. “Our Group is well-positioned to meet the global challenge of supplying food and agricultural products to a growing world population, safely and sustainably. Our sector is changing rapidly, and it is time for us to open a new chapter in our 165-year history. Our new name is as simple and functional as we want our operations to be. It reflects the company’s evolution, and also the pride we take in our heritage – as a company of entrepreneurs, united through a family culture and a vision to grow as a long-term, trusted partner to both customers and suppliers.”

The company also announced rebranding as Louis Dreyfus Company B.V., effective immediately. The new corporate identity reflects the full scale of the company’s operations and capabilities, the company said. The new brand will be rolled out progressively across the company’s more than 300 facilities and its offices worldwide.

In September 2015, the company appointed Gonzalo Ramírez Martiarena as the new chief executive officer (CEO).

“2015 was a difficult year for the entire industry, marked by geopolitical issues that contributed to an environment of reduced commercial opportunities,” said Gonzalo Ramírez Martiarena. “However, our results have shown our resilience under the circumstances. Our increased sales volumes, to 81 million tonnes shipped to destination, highlighted a more customer-centric approach that will be further reinforced in 2016. The world in which we operate is continuously evolving — consumers are becoming more demanding and our competitive landscape is changing. But our agility and our speed to adapt to new conditions is our differentiation, and helps us navigate this changing environment. It drives our success, alongside our ability to rethink our approach and reposition our activities within each business line, in a humble but decisive manner. This is what we have always done, and what we will continue to do.”

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