Louis Dreyfus gets profit boost in pandemic but equity shrinks

By Gus Trompiz

PARIS (Reuters) - Agricultural commodity merchant Louis Dreyfus Company (LDC) said its first-half profits rose as it adjusted to price volatility and shifts in food demand during the coronavirus pandemic.

However, the 169-year-old group, which is considering bringing in an outside investor for the first time, reported a decline in its equity as it paid out a dividend to shareholders led by chairwoman Margarita Louis-Dreyfus.

LDC said first-half group net income reached $126 million from $71 million in the year-earlier period, while core earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations rose to $634 million from $423 million.

The group said demand for food commodities held firm and it was able to adapt to consumption patterns such as more at-home coffee drinking, while price swings allowed it to capture profit margins.

Like rival merchants Archer Daniels Midland Co <ADM.N> and Bunge Ltd <BG.N> in their second-quarter results, LDC highlighted brisk Chinese demand for Brazilian soybeans.

Cotton and biofuel, however, were affected by a drop in demand due to lockdowns, it added.

LDC's improved interim profits came after a slide in earnings last year blamed on international trade tensions and a swine fever epidemic in China.

Deputy Chief Executive Officer Michael Gelchie, who will succeed retiring CEO Ian McIntosh on Oct. 1, said he was "optimistic" for the rest of the year and that the effects of a cost-savings programme would be seen in LDC's full-year results.

The group's recent focus on food innovation and the consumer end of the supply chain, like other crop merchants, would not replace its trading base which was vital for profitability, he told Reuters by phone.

First-half profits were curbed by a $74 million decrease in the fair value of its shares in Luckin Coffee, the Chinese coffee chain hit by an accounting scandal, as well as an $83 million negative currency impact mainly linked to the Brazilian real, the group said.

LDC paid a $302 million dividend during the first half, which combined with a negative impact from financial hedging instruments, lowered group equity to $4.5 billion at June 30 compared with $4.8 billion on Dec. 31, 2019.

After Louis-Dreyfus said in January she could sell a sizeable non-controlling stake, Bloomberg reported this month that LDC was in talks to sell a stake to Abu Dhabi investment fund ADQ.

Gelchie declined to comment on potential discussions with investors, adding there was no timeline for any move.

(Reporting by Gus Trompiz, Editing by Louise Heavens, Kirsten Donovan, Andrew Cawthorne)