Louis Dreyfus Pays Big Dividend as Billionaire Owner Seeks Cash

(Bloomberg) -- Louis Dreyfus Co. paid a big dividend to its eponymous family owners despite a 38 percent drop in first-half profit, showing how majority owner Margarita Louis-Dreyfus is squeezing the company for cash.

The company announced it will pay a dividend of $411 million, which will largely go to Louis-Dreyfus. The Russian billionaire heiress needs the cash as she faces a December deadline to buy out remaining family member shares for about $900 million.

The hefty dividend payment comes after the company, one of the largest agriculture traders, delivered a set of dismal results. Net income dropped to $100 million during the first half, the lowest since at least 2011, LDC said Monday.

The poor results will add to pressure on the company at a time of leadership turmoil and weak agriculture markets. LDC was rocked last month by the surprise exit of Chief Executive Officer Gonzalo Ramirez Martiarena and Chief Financial Officer Armand Lumens

The $411 million in “dividends were distributed in relation to the results of the years 2016 and 2017,” LDC said in the report. The company paid no dividends last year for the first time in at least a decade.

Louis-Dreyfus’s stake in the 167-year-old trading house will rise to more than 96 percent from about 80 percent after she buys out the family members.

Debt Increase

LDC took on significant borrowings during the first half, with adjusted net debt rising to $3.6 billion at the end of June, from $2.6 billion six months earlier. That increase came as the trading company bailed out its parent’s Brazilian sugar-processing unit Biosev SA with a $1 billion injection.

LDC granted a long-term loan of $1.1 billion to LDC Netherlands Holding BV during the period, the company said in the report. It gave no further details.

LDC blamed the steep drop in first-half profit on a $65 million negative mark-to-market valuation of hedges related to its soy-crushing operations. That negative position has since reversed and “year-to-date performance indicates that we are on track to deliver solid results for 2018 overall,” said Ian McIntosh, a three-decade veteran of the company who took over as chief executive officer last month.

“LDC’s performance remained resilient over the first half of 2018,” McIntosh said.

Core Business

Net income from continuing operations -- LDC’s core trading business -- dropped by 50 percent to $67 million from a year earlier. The company reported negative cash flow from operations of $72 million in the first half, compared with positive cash of $368 million a year earlier.

Some of Louis Dreyfus’s rivals have been forced to tackle volatile agricultural markets this year as soybeans plunged amid escalating trade tensions between the U.S. and China, and as drought or heatwaves in key grain producers from the European Union to Australia sent wheat soaring.

Bunge Ltd. posted a surprise loss for the second quarter due to the timing of soybean contracts. Cofco International Ltd., the trading arm of China’s biggest food company, lost more than $100 million due to wrong-way bets in agricultural markets.

LDC posted a gain of just $12 million from the $466 million sale of its metals-trading business in May to a group of Chinese investors. First-half sales were flat at $18.8 billion as higher prices offset a 6.3 percent drop in shipped volumes.

©2018 Bloomberg L.P.