Louis Dreyfus sales drop 6% to $17.5bn amid trade war, ASF

7 Oct 2019 | Alex Riabukha

Net sales at Louis Dreyfus Commodities (LDC), one of the world’s largest agricultural trading companies, plunged 6% to $17.5 billion in the first six months of 2019 amid the US-China trade war and an outbreak of African swine fever (ASF), half-year results showed on Monday.

Gross margins were down 5% from last year to $495 million, while net income dropped 45% to $71 million.

Volumes shipped by the company from February 1 to June 30 this year were down 7% year-on-year, while net sales in its Value Chain segment, LDC’s core business, were down almost 10% compared with the same period in 2018.

Profits in the Value Chain Segment stood at $225 million in the first six months of 2019, 30% below the same period last year, as LDC pointed to the impact of ongoing global trade tensions and an ASF outbreak, which have led to a decrease in China’s soybean and soymeal demand.

Its oilseeds business was also hit, as the company did not receive a US biodiesel waiver, unlike in 2018. It also reported losses from its hedging.

“The mark-to-market impact of board crush hedges led to a negative $38 million by the end of the period,” the report said, although it noted this was 41% smaller than its loss during the first half of 2018.

Its Grain Platform posted positive results, which the company attributed to “successful price risk management,” although it did not break out full figures.

LDC said weather and trade issues continue to pose a risk to its full-year results – particularly for corn in the US, where rains and flooding delayed planting and logistics.

Echoing guarded comments from other traders this year, LDC Chief Executive Officer Ian McIntosh described the interim report as “sound results… within a particularly challenging trading environment”.

McIntosh’s statement also re-emphasised the company’s strategy of vertical integration and diversification into other markets, drawing attention to its recent investments in coffee roasting, animal feed production, and alternative proteins.