Surge in commodity prices and strong grain demand from China have supported earnings for ag companies during COVID
PARIS, France (Reuters) — Louis Dreyfus Company has reported a sharp rise in first-half profit, another sign that mounting commodity prices and strong demand for staple crops are boosting earnings for international merchants.
The improved results further ease financial pressure on the company after it completed this month the sale of a stake to Abu Dhabi holding firm ADQ, heralding the first non-family shareholder in the agricultural commodity group’s 170-year history.
Group net profit reached $336 million, up 167 percent from $126 million a year earlier, partly due to a reduced tax bill linked to currency effects, LDC said in a statement.
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Core earnings before interest, tax, depreciation and amortisation increased 23 percent to $778 million.
A surge in commodity prices and strong grain demand from China have supported earnings for agricultural merchants during the COVID-19 pandemic and helped LDC’s profits to recover last year.
An economic rebound as countries ease restrictions to curb COVID-19 has also revived demand for textiles and crop-based biofuel.
LDC said an upturn in cotton and biofuel contributed to a 4.2 percent increase in its shipped volumes in the first half.
Among its other products, grains and oilseeds continued to perform strongly while rice sustained favourable margins despite higher freight rates and logistics constraints, LDC said.
Citing “a persistently volatile environment,” chief executive officer Michael Gelchie said LDC’s market knowledge, risk management and hedging strategies led to “solid results for the first half of the year.”
LDC has sold a 45 percent indirect stake to ADQ, concluding a long hunt for an investor by controlling shareholder and chair Margarita Louis-Dreyfus, who had built up debt buying out other family members during a period of lean profits.
The ADQ deal has allowed LDC’s parent company to repay $1 billion borrowed from its operating group, a debt relating to Brazilian sugar firm Biosev that was previously owned by LDC’s parent.
LDC’s group equity as of June 30 rose to $5 billion from $4.9 billion at the end of 2020, with first-half net income partly offset by a $191 million dividend paid to shareholders, the group’s results showed.
