* Louis Dreyfus Commodities full-year net income $640 mln
* Fallout from U.S. drought hits grains, oversupply hurts
* Still seeks $4 bln spending by 2014, aims to double sales
* Eyes coffee consolidation, expanding Black Sea logistics
(Recasts with investment, sales targets to 2018, analyst
By Gus Trompiz
PARIS, March 26 Global trading group Louis
Dreyfus Commodities B.V. said it will stick to plans to double
sales within five years by boosting investments, shrugging off a
drop in 2013 profits from dought-hit grain markets and an
oversupply in soft commodities.
The 163-year-old Louis Dreyfus group is the "D" of the
so-called ABCD majors that dominate agricultural commodities,
alongside Archer Daniels Midland, Bunge and
The company aims to invest $4 billion, or on average $800
million a year, between 2014 and 2018, it said in an annual
report accompanying its results statement on Wednesday.
This would be in line with the investment pace envisaged in
the group's previously indicated $5 billion target for 2012-17,
excluding spun-off Brazilian unit Biosev, but above capital
investment of $689 million last year and $652 million in 2012.
"We are four times larger in terms of sales than in 2006,
but only half the size we plan to be by the end of 2018," Chief
Executive Ciro Echesortu, who took up his post in mid-2013, was
quoted as saying in the annual report.
Dreyfus reported full-year net sales rose to $63.6 billion,
up from $57.1 billion in 2012, supported by a 10 percent
increase in shipped volumes.
Main shareholder Margarita Louis-Dreyfus said in the annual
report that the $4 billion investment programme to 2018 would go
towards mid-size assets around the world.
The group said it was pursuing growth through vertical
integration, developing both upstream and downstream commodity
activities, and specified it wanted to play "a strong
consolidation role" in the coffee trade.
The remarks were in keeping with the group's recent strategy
of adapting to a fast-consolidating commodity trading sector by
raising investments, supported by a series of bond issues, but
stopping short of headline acquisitions or a stock market
listing, avenues pursued by other traders.
"While maintaining the spirit of a family company, we are
now aligning our business model and operations more closely with
those of a publicly listed company," Louis-Dreyfus said in the
The group completed a 500 million euro ($678 million) bond
issue in December, marking the trading firm's third foray into
bond markets in just over a year.
The Black Sea grain-exporting region has also been a focus
for the group's investments, including the creation of a joint
venture to develop a port terminal at Odessa, Ukraine, and the
development of a port at an undisclosed location on the Azov
Sea, which is bordered by Russia and Ukraine, for an expected
launch in 2015.
Louis Dreyfus said net income for the full year fell to $640
million from a record $970 million in 2012.
The worst drought in half a century in the United States in
2012 curbed global grain output the following year and sent
prices soaring, cutting volumes and processing margins for
The trading firm was more upbeat about the latter part of
2013, saying a rebound in grain supply pushed up margins,
echoing comments made by its rivals in recent earnings reports.
Second-half profits were in line with the average of
2009-2011, excluding Biosev, it said.
But the consequences of the U.S. drought on grains and
oilseeds in the first half and the difficult conditions in some
soft commodities kept profits well below the record levels of
"They don't do as much further processing as a Cargill, or
an ADM or a Bunge. So in a drought year when there are less
volumes to handle it would make sense their earnings would
decline," said Chris Johnson, analyst at Standards & Poor's in
Dreyfus said its Proteins business, which includes grains
and oilseeds, posted operating profit of $1.1 billion, down from
$1.3 billion in 2012.
Operating profit from the Tropicals arm, which includes
products such as sugar, orange juice and cotton, fell to $437
million from $844 million in 2012, or $698 million excluding
Its other activities, including metals and dairy businesses,
reported $211 million in operating profit, up from $156 million,
helped by Chinese demand for dairy products.
Last year proved tough for many commodity trading firms as
margins narrowed and competition stiffened.
Top oil trader Vitol this week reported flat full-year
revenues despite higher crude and product volumes, pointing to
competition from new entrants.
Ciro Echesortu, formerly head trader and chief operating
officer, took over as Louis Dreyfus Commodities' chief executive
last year from Serge Schoen who was subsequently named
supervisory board chairman with a strategy role.
(Reporting by Gus Trompiz; Editing by Veronica Brown and Jane