An executive with a cunning plan must judge the right moment to share it fully with the boss. Misjudge this, and the wheeze may look either half-baked or presumptuous. You may then be forced out. That was apparently the fate last year of Gonzalo Ramírez Martiarena, chief executive of agricultural commodities group Louis Dreyfus. Owner Margarita Louis-Dreyfus was uneasy about Mr Ramirez discussing possible tie-ins with Glencore and two partner pension funds.
Ms Louis-Dreyfus needs to come up with her own plan. The reason? Malthus was wrong. One pundit calculates the world population has risen from 3bn 60 years ago to 7.5bn now without food prices jumping in real terms. Technology has lifted the carrying capacity of planet earth.
Tragically for agricultural commodities traders, even weird weather linked to global warming has not induced much price volatility. Steady production and stable demand leaves them with skinny margins. Louis Dreyfus made net income of just $357m on sales of $36.4bn last year.
The classic response is to bulk up, move downstream (into food production), or both. Fine in theory. Not so much in practice, in the eyes of Ms Louis-Dreyfus. She may have twigged that negotiations with Glencore’s Ivan Glasenberg often culminate in deals that are a win-win — for Ivan Glasenberg and Glencore.
Ms Louis-Dreyfus is pretty determined herself. She just bought out a big stake held by members of the dynasty she married into. That left her with an estimated $900m of debt. Louis Dreyfus claimed to have net debt of $3bn at the end of 2018. But that figure deducted easily-sold inventories. Discount the deduction by a prudent 50 per cent, and the ratio of net debt to ebitda is a hefty 5 times.
The company still needs a deal. Joint ventures with Cofco of China or Bunge of the US could be worth exploring. New chief executive Ian McIntosh should give Ms Louis-Dreyfus daily updates. Always wise to keep the boss in the loop.
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