Louis Dreyfus Company (LDC) profits jumped 66% jump for full year 2020, as resilient food demand buoyed the global crop merchant during the COVID-19 pandemic and strengthened its appeal to Abu Dhabi’s ADQ, which is poised to become a new investor, reported Reuters.
Group net income rose to $382 million from $230 million in 2019 while earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations rose to $1.324 billion from $836 million in the prior year.
The group cited resilient demand for foodstuffs, such as cereals and sugar, attractive soybean margins linked to Chinese consumption and trading opportunities on volatile commodity markets.
Demand weakened, however, for cotton and biofuels as the pandemic slowed activity in the textile and energy sectors.
LDC is seeking to bolster its financing through an agreement to sell a 45% stake to ADQ, and a separate deal to cede control of debt-laden Brazilian sugar firm Biosev.
Acceleration of transformation
"Bringing ADQ on board enables the acceleration of investments as part of our transformational strategy," chairperson and main shareholder Margarita Louis-Dreyfus said in an accompanying annual report.
Lean profits and rising debt in previous years had lent urgency to Louis-Dreyfus’ search for an outside investor.
The value of the deal with state-owned investment firm ADQ, expected to close by mid-2021, has been not disclosed.
But Louis-Dreyfus has said it will allow her to repay a $1 billion loan from Credit Suisse used to buy out family minority shareholders, while LDC has also said proceeds will contribute to reimbursing a $1 billion loan provided for Biosev.
Pandemic lifts food demand
Multinational merchants have tapped into food demand during the pandemic by responding to bouts of stockpiling by grain importers and to a shift from restaurant dining towards at-home eating.
Archer Daniels Midland (ADM) and Bunge each posted a sharp rise in fourth-quarter earnings.
The improved results led to a rise in LDC’s equity value to $4.9 billion as of December 31st 2020, against $4.8 billion a year earlier, offsetting a previously disclosed $302 million dividend to shareholders.
Adjusted net debt, removing readily marketable inventories, fell to $2.4 billion from $2.6 billion, while return on equity, group share, rose to 8.0% from 4.6% in 2019.
LDC said it faced exposure of $204 million to a delayed grain terminal project in Russia, over which it is in dispute with a joint venture partner.