October 12, 2016 / 4:03 PM / 10 months ago

Louis Dreyfus sees no need for share listing as JV plans progress

PARIS (Reuters) - Louis Dreyfus Company [AKIRAU.UL] does not need to turn to the stock market in the near term as it moves ahead with plans to find partners to bolster certain activities, starting with its fertilizer business, its CEO said on Wednesday.

Louis Dreyfus, like its commodity trading peers, has been grappling with ample supplies, lower prices and slower economic growth, and the group confirmed earlier this year that it would consider partnerships for some activities.

It is now in the process of selling its fertilizer business in Africa and will seek fertilizer partners in other regions, Chief Executive Officer Gonzalo Ramirez Martiarena told the Reuters Commodities Summit.

"Based on what we are analyzing for the short term for the company, we wouldn't need to be listed because we are thinking more of bringing in partners and doing joint ventures rather than buying another company," he said.

The group has launched a sale process for its African fertilizer business and expects to conclude a deal within six months, he said, adding that the sale has attracted potential buyers but not yet led to exclusive talks.

The company hopes to strike a good deal for what is a profitable business but which does not fit its overall fertilizer strategy of having multiple ties with farmers, he said.

To bolster its fertilizer activities in South America and Australia, where Dreyfus buys a lot of grain from farmers but where its fertilizer profits have lagged, it aims to find next year "one or two miners" as joint venture partners to help bear price risk, the CEO said.

The group's fertilizer division also encompasses distribution of other crop inputs such as seeds and pesticides. It does not publish figures on individual businesses but says it is one of the largest distributors of fertilisers and inputs in West Africa.

The group is also reviewing its metals, orange juice and dairy businesses, with metals expected to be next up for joint venture discussions starting in the second half of next year, he said.

INTROSPECTION

Louis Dreyfus was going through an "introspective review" like other major agricultural traders and did not foresee more large-scale consolidation further to big deals by China's state-owned COFCO International Ltd and diversified commodity giant Glencore in recent years, he added.

Bond markets have also become a much more important source of finance for commodity traders in recent years and Louis Dreyfus, which made its first ever bond issues in 2012 and 2013, will retain that as an option next year depending on conditions, Ramirez said.

The company, which is controlled by Russian-born Margarita Louis-Dreyfus through a family trust set up by her late husband Robert, also wants to improve its return on equity ratio for its shareholder, with a target to reach 10 percent as soon as possible compared with 5.5 percent in the first half of this year, he said.

Ramirez was promoted to the CEO post a year ago, after previously being head of Asia, one of a series of leadership changes made by Margarita Louis-Dreyfus.

Dreyfus, part of the so-called ABCD quartet of trading giants alongside Archer Daniels Midland, Bunge and Cargill [CARG.UL], had reported a slight rise in net profit for the first half, but saw sales and underlying profit decline again.

Weak prices for grain and oilseeds were likely to continue in the next 6-12 months as hefty supplies offset brisk demand, while soft commodities, particularly sugar, would remain stronger because of tighter supply fundamentals, Ramirez said.

But the longer-term price outlook for all agricultural commodities was favorable because of a structural need to encourage farm production to keep up with rising food consumption, he said.

Increasing food demand in China meant Louis Dreyfus did not see overseas expansion by COFCO in grain trading as a threat, with the scale of demand there creating opportunities for foreign traders to continue supplying the country, he added.

Reporting by Gus Trompiz; Editing by Veronica Brown and David Evans; Follow Reuters Summits on Twitter @Reuters_Summits

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below