PARIS, France (Reuters) — Louis Dreyfus is seeking partners for some of its businesses to help the commodity trading group weather a market downturn that hit full-year profits.
Lower prices, plentiful supply and faltering economic growth in emerging economies have put pressure on commodity traders like Louis Dreyfus that collect, export and process crops.
Louis Dreyfus’ net income dropped 67 percent to US$211 million last year from $648 million in 2014, while net sales fell to $55.7 billion from $64.7 billion, the company said.
“We will still see abundant supplies (this year),” chief executive officer Gonzalo Ramirez Martiarena said. “If you don’t lose one or two crops in the world, you won’t see volatility.”
Controlled by billionaire Margarita Louis-Dreyfus, the group reined in capital investments last year to $420 million from $592 million in 2014. It also finalized a new 10-year strategy under which it will seek partners and change the focus of some businesses to revive growth.
It plans to separate its fertilizer, juice, dairy and metals activities from the rest of the group and consider alliances, with the process under way at its fertilizer and seeds division, it said.
Martiarena said the company had received offers for its fertilizer business after hiring Credit Suisse to look into sale options but wanted to retain ownership within a partnership.
A company source had said in January that Louis Dreyfus was ring-fencing its fertilizer, metal, juice and dairy businesses and considering options ranging from joint ventures to disposals.
For the fertilizer business, the aim was to bring Dreyfus’s distribution network among farmers together with a major producer, Ramirez said.
The juice business, which has been suffering from slowing consumer demand, would look to join up with a distributor to capitalize on Dreyfus’s efficient production assets, he added.
The dairy and metals activities needed partners to develop scale and then pursue acquisition op-portunities, he said.
Ramirez said destocking by China was weighing on agricultural markets, and this strategy could continue for another 18 months, after which the country would need to renew its reserves.
He pointed to ChemChina’s $43 billion takeover of Syngenta as potentially transforming Chinese crop output through access to the kind of technology that has boosted global supply.