ROTTERDAM, THE NETHERLANDS — Net income at Louis Dreyfus Company B.V. (LDC), a merchant and processor of agricultural goods, in the first half of 2016 ended June 30 was $136 million, up 6.3% from $128 million in the same period of last year.
Net sales fell to $23.52 billion, down from $26.39 billion, reflecting a weak price environment for most agri-commodities and a significant decrease in metals prices, despite a 1% rise in shipped volumes year-on-year.
|Gonzalo Ramírez Martiarena, CEO of Louis Dreyfus Company B.V.|
“I’m especially pleased that in this challenging environment for our sector, we were able to sustain satisfactory results and even continue to increase our sold volumes, through a combination of our extensive market knowledge, our well-placed network of logistic and processing assets, and our diversified business lines,” Gonzalo Ramírez Martiarena, chief executive officer (CEO) of Louis Dreyfus Company B.V., said when results were announced on Sept. 29. “In the first half we invested $132 million in further developing our operations and capabilities, thereby adding significant value for our customers. Through any cycle and any change in market conditions, our business remains fundamental: sourcing, transforming, transporting and supplying soft commodities to an ever growing population for whom food will always be a vital need.”
The external environment remained difficult during the first half of 2016, with growth slowing in China, the United States’ recovery failing to fully spread to other major economies, and numerous instances of political instability and geopolitical tensions.
The 1% increase in shipped volumes year-on-year was driven by the group’s Value Chain segment’s robust grains and oilseeds export volumes from South America. In particular, the segment (comprising the Oilseeds, Grains, Juice, Sugar, Rice, Fertilizers & Inputs and Freight platforms) booked $351 million in operating results, compared to $405 million in the same period of last year.
Total segment operating results were $546 million, down 14.4% from $638 million in the same period of last year. The overall context turned more challenging than expected, especially during a second quarter that saw irrational volatility in futures markets. Despite this, fundamentals of large stocks and crops prevailed, which limited commercial opportunities. The company was able to navigate this environment and sustained lower but decent results overall.
The Oilseeds platform increased its origination activities in South America, marking another consecutive period of growth of its overall sold volumes, particularly with soybeans shipped to Asia. During the second quarter, LDC focused the platform on recording healthy margins in its processing, refining and biodiesel assets in Argentina, Indonesia and to a lesser extent in the U.S., and also maximizing its port elevation capacity in Brazil.
The Grains platform recorded modest results. The platform improved commercial activity in some origination areas such as Brazil and Argentina. It combined this with a profitable distribution through its extended asset network, notably in Egypt and South Africa. The performance was largely offset by both compressed industrial margins, notably for ethanol in North America, and the second quarter’s brutal volatility swings.
The Grains platforms’ ongoing construction projects include the West Memphis river terminal in Arkansas, U.S., a grains elevation and storage asset in the province of Buenos Aires, Argentina, and the expansion of a grains terminal in Russia’s Rostov region.
On the logistics side, in December 2015 LDC and Cargill won a bidding process to operate a berth in solid bulk terminal located at the port of Santos in Brazil for the next 25 years. The investment will occur over 3 years, with the first capital injection into the newly-created joint venture being made in the first half of 2016. In three years’ time, the new terminal should have the capacity to handle more than 4.1 million tonnes of grain annually, which will reinforce LDC’s presence and position in the Brazilian grains and oilseeds market, LDC said
Concurrently, both the Grains and Oilseeds platforms continued to build and develop a barge fleet in Brazil as part of the North Corridor export project. In Argentina the Bahía Blanca port terminal was opened and the company also is finalizing the construction of West Memphis river terminal in Arkansas, U.S. As well as adding truck-to-barge capabilities to the terminal it operates in the Mississippi river in Cahokia, Illinois, U.S.
After the Grains platform acquired a terminal on the Don River in the Azoz district in Russia in 2015, investments in the first half of 2016 were focused on starting to increase its transshipment capacity with the aim of reaching one million tonnes in the near future.
In Argentina, the Grains platform is constructing its new elevation and storage asset for barley in the province of Buenos Aires.
Within the Oilseeds platform, LDC started to operate its new biodiesel plant next to the existing refinery in Lampung, Sumatra, Indonesia. In Canada, the platform continued to invest in its canola crushing and refining plant in Yorkton, Saskatchewan.
LDC’s Merchandizing segment (including the Cotton, Coffee, Dairy, Metals and Finance platforms) sustained strong shipped volumes, assisted particularly by dynamic flows for metals. The segment’s operating results stood at $195 million for the semester, down from $233 million one year before.