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Crop merchant Louis Dreyfus to step up spending after earnings boost

By Reuters_News

14:59, 22 March 2023

A file photo shows an aerial view of a French farmer in his tractor making bales of straw in a field in Coquelles,France, July 21, 2015.
A file photo shows an aerial view of a French farmer in his tractor making bales of straw in a field in Coquelles,France, July 21, 2015.

Writes through with details, quote

- Louis Dreyfus Company (LDC) could nearly double annual investments in the coming years as rising profits help it pursue expansion in its traditional crop trading and newer food-ingredient activities, its CEO told Reuters.

The group on Wednesday reported a jump in annual net profit to $1 billion, joining other global crop merchants in benefitting from high prices and strong demand in a year marked by Russia's invasion of fellow grain exporter Ukraine.

LDC wants to accelerate capital expenditure, including on "complementary" acquisitions, to between $800 million and $1 billion annually during the rest of this decade, Chief Executive Michael Gelchie said in an interview.

That compares with 2022 investments of $549 million, which already marked a rise from $372 million the prior year.

"That can and should be in the form of greenfield or brownfield or M&A-type investments (...), whether that's core merchandising or in innovative business that really diverisifies our portfolio," Gelchie said.

Last year's investments included the acquisition of Australia's Emerald Grain. The deal price was about $102 million, subject to closing adjustments, LDC said in its annual report.

Improved results and the sale of a stake in 2021 to Abu Dhabi holding firm ADQ have eased pressure on LDC and main shareholder Margarita Louis-Dreyfus after years of modest profits and mounting debt.

Like its peers, LDC has been developing food ingredients activities, including plant-based proteins, to tap into consumer trends and be less reliant on commodity markets.

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The group announced in December the creation of a food and feed solutions division.

Gelchie declined to give an outlook for LDC this year but said turmoil in the banking sector and rising interest rates may increase market volatility further.

Higher interest rates could dampen commodity demand and prices in the near term, though the longer-term outlook for commodities appeared bullish given an energy transition that has already boosted oilseed crushing margins for renewable fuel in North America, he added.

Regarding upheaval in the banking sector, Gelchie said LDC had no exposure to Credit Suisse and had "secure relationships" with its banks.

He declined to comment on any exposure to Credit Suisse for Chairperson Louis-Dreyfus, whose holding firm had a reduced loan arrangement with Credit Suisse worth around $240 million as of September 2021.

 

Reporting by Gus Trompiz Editing by Louise Heavens and Mark Potter

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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