ROTTERDAM, NETHERLANDS — Louis Dreyfus Company B.V. (LDC), one of the world’s largest agribusiness companies, on Jan. 16 announced its decision to exit its dairy business by mid-2019.
The move is in line with the company’s strategy over the past three years to exit non-core areas and refocus on its core businesses, including investments in origination markets and expansion along the value chain in its key product lines.
“LDC’s dairy platform was identified as non-core in 2017 due to its lack of critical mass within the company’s portfolio,” said Federico Cerisoli, chief financial officer. “The business accounted for roughly 1% of our revenues in 2018 and demanded substantial working capital resources. LDC has been evaluating the best way to exit the business, either through an orderly wind down or a sale to potential buyers — these efforts are continuing, and an exit will be implemented by the middle of this year. The exit will have practically no impact on our global sales, which continue to grow overall, and is expected to have a slight positive effect on our working capital from 2019 onwards.”
In its most recent earnings report released in October 2018, LDC said its net income for the first half ended June 30, 2018, totaled $101 million, down 37% from $159 million in the same period a year ago.
“We worked hard to separate the business from the rest of LDC’s portfolio and will be working equally hard with our customers and suppliers over the coming months to ensure a smooth exit by mid-2019,” said Jean-Marc Foucher, head of LDC’s dairy platform. “Following the exit, LDC’s only exposure to dairy will be a non-controlling stake in a dairy processing plant in Australia, operated by a joint venture partner.”
LDC has been in the dairy business since 2009, originating from key suppliers in North America, Europe, Oceania and South America. It delivers mainly milk powders, lactose and whey products to key demand markets, including Asia, Mexico, North America, the Middle East and Africa.
As part of its strategy to exit non-core areas, LDC has divested both its fertilizers and inputs and its metals platforms in the past 18 months. LDC said this leaves the company well positioned to grow in its core business areas.
LDC said it is pursuing ambitious growth plans. These include continued investments in origination and destination markets, further vertical and horizontal development downstream toward the end consumer, and expansion in food innovation, with the aim of sustainably meeting the needs of a growing population.
LDC operates its business worldwide under two segments: Value Chain and Merchandizing. In 2018, the company modified the composition of its two segments. The Value Chain segment now includes the Juice, Grains and Oilseeds platforms, along with Freight and Global Markets (formerly called the Finance Platform). The Merchandizing segment now combines Sugar, Coffee, Cotton and Rice.