Louis Dreyfus to Explore Stake Sale in Metals Unit
Louis Dreyfus Company (LDC), one of four traders that dominate global agricultural trading, is looking to focus on its grain and oil seed core agricultural business operations. As part of the move the 166-year-old company seeking partners for its non core business such as the metals, dairy, fertilizer and orange juice units, FT reports.
“These partners could help finance the units’ expansion, and enable LDC to free up capital and deploy it elsewhere in the company.”
Louis Dreyfus along with competitors: Archer Daniels Midland, Bunge and Cargill, has been hit by falling prices and weak demand after long boom in agricultural commodity prices.
For Louis Dreyfus first on the line is its fast-growing metals unit, value of just over $275 million, to reduce its debt load.
“Metals trading consumes a lot of working capital in part because of the need to providing finance packages to mining and smelting companies to secure long-term supplies,” according to FT.
In 2015, LDC Metals contributed about one-fifth of the parent company’s net income, or $40 million. The metal unit’s annual net profit has been around $48 million between 2013- 2015.
“Our metals division can eventually be ready for a conversation with potential partners in the third or fourth quarter next year,” Chief Executive Gonzalo Ramírez Martiarena said at the Reuters Commodities Summit, in Oct, 2016.
There have already been several expressions of interest, including some from Asia, he added.
“We definitely have a platform that is extremely attractive today to someone willing to invest in fixed assets in the base metals space because we don’t have assets, we have some specific assets in warehousing and blending,” he said.
“So anyone willing to go harder on assets investment has the advantage of a very solid team and flows that already exist. We would continue to expand into warehousing,” he added.
the metals business, which trades more than two million tonnes of metals and metals products a year, is a separate legal entity already but it is still fully owned by LDC, Ramírez said.
LDC started trading non-ferrous metals including copper, zinc and lead concentrates in 2005 and its metals unit has offices in Shanghai, Singapore, Connecticut, Geneva, Lima, Santiago, Puebla and Johannesburg. It also has warehousing and logistical operations in Peru, Mexico, Chile, Africa and Taiwan.
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