Louis Dreyfus to exit its Dairy business by mid 2019

By: "Farm Tender" News
Regenerative Ag & Carbon Farming News
Jan 17, 2019
534 views
Share

By Lynda Kiernan

Louis Dreyfus Company announced its intentions to exit its dairy business by the middle of this year. The announcement comes amid a strategic overhaul of its business started three years ago that will allow the company to focus on its core businesses, including investments in origination and destination markets, vertical and horizontal downstream development with an eye toward end consumers, and expansion in food innovation.

Louis Dreyfus has been in the dairy business for 10 years, originating supplies from North America, Europe, Oceania, and South America, and shipping milk powder, whey, and lactose to high-demand and emerging markets across Asia, the MENA region, Mexico, and North America.

“LDC’s Dairy Platform was identified as non-core in 2017 due to its lack of critical mass within the company’s portfolio,” said CEO Federico Cerisoli. “The business accounted for roughly 1 percent of our revenues in 2018 and demanded substantial working capital resources. LDC has been evaluating the best way to exit the business, either through an orderly wind down or a sale to potential buyers – these efforts are continuing and an exit will be implemented by the middle of this year.”

Ad -Need to shift some Hay? Try Mazaratto Hay Freight, Singles, Doubles, Triples, Big or Little Squares, Rolls, North or South. Give them a try - Ad

As a member of the ABCD global commodity traders that include Archer Daniels Midland (ADM), Bunge, Cargill, and Louis Dreyfus, Louis Dreyfus is not alone in facing significant headwinds in recent years due to adverse market conditions, bumper crops, high global stockpiles, and low prices.

These conditions have led each of the top four traders to undertake strategic restructuring and reorganization through streamlining operations, seeking out joint ventures, or shifting focus along the value chain in search of greater margins. As part of this strategy, in June of 2017, Louis Dreyfus announced the sale of Fertilizers and Inputs Holding B.V. – the holding company of Louis Dreyfus’ African fertilizers and inputs business to Helios Investment Partners for $200 million.

With the goal of reaching further downstream, at the end of 2018 the company announced the creation of a new role in the organization – Head of Food Innovation & Downstream Strategy, and the appointment of Kristen Eshak Weldon to the position.

“…I am confident that her appointment will contribute to LDC’s successful implementation of our strategic plans and projects to innovate in food and move further downstream, as we strive to meet global demand for food and sustain a growing population,” said Ian McIntosh, chief executive officer and member of LDC’s executive group at the time.

Historically, LDC’s business structure involved two pillars: Value Chain and Merchandising. However, last year the company’s evolution led to a shift whereby the Value Chain unit today includes the Juice, Grains, and Oilseeds platform along with Freight and Global Markets – what was once called the Finance Platform. The Merchandising pillar now includes the combined sugar, rice, coffee, and cotton segments.

Ad -Need to shift some Hay? Try Mazaratto Hay Freight, Singles, Doubles, Triples, Big or Little Squares, Rolls, North or South. Give them a try - Ad

One category that Louis Dreyfus has marked as being a core business has been its orange juice division, and through a spokeswoman, the company has expressed to Reuters that it will be seeking out partners able to support a growth strategy that would require “significant investment”.

In its most recent earnings disclosure issued in October 2018, LDC posted net income of $101 million for its first half ending June 30 – a decline of 37 percent compared to net income of $159 million for the same period a year prior.

However, the exit from its dairy business is not expected to have a negative impact on the company’s results.

“The exit will have practically no impact on our global sales … and is expected to have a slight positive effect on our working capital from 2019 onwards,” said Cerisoli.