Louis Dreyfus Company has paid out almost $330m to its top shareholder, Margarita Louis-Dreyfus, as part of a bumper $400m dividend just weeks after one of the world’s biggest food traders was rocked by the resignation of its chief executive and finance director.
LDC paid out $411m dividend to its owners, ultimately controlled by Louis Dreyfus Holding. Ms Louis-Dreyfus, the Russian-born widow of Robert Louis-Dreyfus whose family founded the company in 1851, holds an 80 per cent stake in LDH.
The payout comes as the privately owned trading house surprised the agricultural community last month by announcing its chief executive Gonzalo Ramírez Martiarena had departed after three years in the job to “pursue other opportunities”, and chief financial officer Armand Lumens had left for “personal reasons”.
Ms Louis-Dreyfus has been tightening her grip on the group and is seeking to buy out other family shareholders by the end of the year, which will raise her stake to 96.6 per cent.
Through Akira, a family trust, Ms Louis-Dreyfus is trying to secure a bridging loan to fund the buyout, which people with knowledge of the situation said would cost more than $900m, and may consider selling a minority stake in the business once the deal is completed.
According to the accounts, during the first six months of the year, LDC saw negative cash flow from operating activities as it battled volatile markets for its key commodities.
“So here is a trading company, struggling with its business model in difficult market conditions, that also has to get poorer to support very demanding shareholders,” said Jean-François Lambert of consultancy Lambert Commodities.
LDC extended a $1.05m loan to the Louis Dreyfus group, mainly used to shore up Biosev, the struggling Brazilian sugar affiliate, and net debt rose by $1bn to $3.6bn at the end of 2017 as bank loans at the end of June rose 65 per cent from the end of 2017 to $4.7bn. Its interest payments in the six months to June totalled $202m, up almost 50 per cent from the same time last year.
Post tax profits for the six months to June fell from $160m to $100m, reflecting the negative impact from its hedging activities.
Like many of its peers, LDC was affected by the higher volatility in agricultural prices caused by the US-China trade war. The company said it had taken a $65m mark-to-market loss on derivative contracts used to lock in margins in its soyabean business. As the underlying deals roll-off later this year the impact is expected to be reversed.
The soyabean hedging led to a 17 per cent fall in operating profits in its “value chain” segment, to $286m. Its core agricultural segment posted operating profits of $207m, up slightly from $196m a year before. Cotton “delivered solid results” thanks to a surge in prices, while coffee saw “limited business opportunities and a performance that lagged behind last year’s”.
Ian McIntosh, who took the helm of the 167-year-old company after Mr Ramírez Martiarena’s exit, said the company was “on track to deliver solid results for 2018 overall”.
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