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Low ag price volatilty hits Louis Dreyfus profits

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Louis Dreyfus is struggling due to agricultural commodity prices, with little volatility, as its returns hit their lowest level in the decade.

The company warned that agricultural commodity prices could continue to decline over the medium term.

Louis Dreyfus, one of the biggest ag-trading groups in the world, saw its net profit fall buy 67% in 2015, to $211m, a ten-year low.

Sales were down 14%, at $55.7bn, although volumes edged up by 1% to 81m tonnes.

Louis Dreyfus cut its capital expenditure in response to a "bearish" environment, down to $420m over 2015, compared to $592m in 2014.

The company paid $205m in shareholder dividends.

Reduced opportunities

It "was a difficult year for the entire industry," said Louis Dreyfus chief executive Gonzalo Ramírez Martiarena.

"We are at a challenging point in the commodities cycle," warned Mr Martiarena, who took over at Louis Dreyfus in October last year.

"Geopolitical challenges, such as the Chinese economic slowdown, the Brazilian recession, and developments in the Black Sea region have contributed to an environment of limited commercial opportunities."

Little hope for a rally

And Louis Dreyfus saw little prospect for rallying prices to come.

"Supply has outstripped demand over the last two years, bringing a low price and volatility environment," the company said.

"Oversupply conditions and price decreases may continue over the medium term," the company warned.

Chair consolidates power

On Monday the company confirmed that chairperson Margarita Louis-Dreyfus recently gave birth to twins.

Ms Louis-Dreyfus has controlled the firm through a family trust, since the death of her husband, Robert Louis-Dreyfus, in 2009.

Ms Louis-Dreyfus has already moved to consolidate her control of the company, by buying out minority family shareholders.

In November it was reported that Ms Louis-Dreyfus was considering opening up the company to outside investors, in order to buyout remaining family shareholders, a stake of around 16%.

According to media reports, Ms Louis-Dreyfus' partner is the Black Rock vice-chairman, and former Swiss central bank boss, Philipp Hildebrand.

Sector weakness

This is the latest in a series of weak results from the agribusiness giants.

Last month shares in Bunge hit six year lows, as it warned of "challenged" oilseed processing margins, and ongoing headwinds in Brazil.

And ADM shares tumbled earlier in February, as its earnings plummeted even faster than analysts had expected.

By Agrimoney.com

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