Grain trader Louis Dreyfus slashes costs in drive to revive profit
China Oil and Food Corporation International is seen as potential bidder for a stake in the 168-year-old agricultural commodities firm
São Paulo — Louis Dreyfus Company (LDC) is making sweeping cost cuts, starting with travel, entertainment, hiring and salaries, as the 168-year-old agricultural commodities firm tries to revive dwindling profits.
Global trade tensions and the African swine fever epidemic in Asia have piled pressure on grain trading firms as they try to emerge from a period of falling margins. Family-owned LDC, known as Dreyfus, is the “D” of the ‘ABCD’ quartet of global traders that also includes Archer Daniels Midland, Bunge and Cargill.
LDC said an in an internal memo that five senior executives would lead a review to achieve “cost and productivity gains”.
The group is also introducing temporary “measures on travel and entertainment, hiring and salary restrictions”, the memo, which was sent to employees on Wednesday, said. A spokesperson confirmed the plan in an e-mail, saying LDC aimed to optimise its cost base in a challenging external environment.
LDC said in October that international trade tensions and the spread of a deadly pig disease in China would continue to weigh on profit. It paid out a $428m dividend — the highest since 2014 — even as first-half earnings slid.
Losses at Brazilian sugar and ethanol unit Biosev and an acrimonious buyout of minority family interests by its main shareholder and chair Margarita Louis-Dreyfus have taken their toll on LDC. The company said earlier in 2019 it may look at selling a stake, adding to speculation about consolidation after takeover approaches for US-based Bunge.
Diversified commodity group Glencore made an approach for Bunge two years ago and has said the sector needs consolidating.
China Oil and Food Corporation International, the trading arm of Cofco, has also been seen as a potential bidder for other trading firms as it seeks to continue expanding overseas.
LDC has been subject to speculation since Louis-Dreyfus took control in 2009, with the chair, at times, raising the possibility of a merger or a market listing.
Like its peers, LDC has restructured operations, exiting activities including dairy and metals trading, while focusing more on food processing, notably in Asia.
The firm has awarded dividends of up to 50% of net profits as Russian-born Louis-Dreyfus has taken on additional debt to acquire minority shares for more than $800m and support a $1bn rescue plan for Biosev.
LDC has also been through a series of CEO changes and other management reshuffles since Louis-Dreyfus assumed control of the group following the death of her husband Robert, whose family founded the company.
Earlier in November, LDC appointed former head of coffee Michael Gelchie as its new COO, while promoting Ben Clarkson to be its new coffee head. LDC has also changed the roles of two other senior executives, its website shows.
Anthony Tancredi, formerly in charge of grains and co-head of the recently merged grain and oilseeds division, has been named to a new position of senior advisor. André Roth has taken sole responsibility for grains and oilseeds after previously heading the oilseed side.
Gelchie and Roth are part of the five-strong group leading the cost review and signed the memo to staff, which said LDC’s strategy would not change as it “aims to increase revenue today and for the future”.
The other participants are CFO Federico Cerisoli; global head of risk and compliance Nigel Mamalis; and Murilo Parada, who heads the juice division and North Latin America zone.