Paris | Reuters –– Louis Dreyfus Co. said on Wednesday it would sell or wind down its small dairy business by the middle of this year as part of an overhaul to revive growth at the agricultural commodity giant.
Privately-held Louis Dreyfus had previously earmarked dairy as one of several activities to be sold or turned into joint ventures in order to focus on core products like grain and oilseeds.
“The (dairy) business accounted for roughly one per cent of our revenues in 2018 and demanded substantial working capital resources,” chief financial officer Federico Cerisoli said.
“The exit will have practically no impact on our global sales… and is expected to have a slight positive effect on our working capital from 2019 onwards,” he said in a statement.
Like rival agricultural commodity groups, Louis Dreyfus has reorganized operations amid declining margins in traditional merchandising while also planning to develop higher-margin food processing and ingredient activities.
Its biggest divestment has been the sale of its profitable metal trading business for US$466 million last year. It has also sold fertilizer distribution activities in Africa and Australia.
The orange juice division had also previously been earmarked for a sale or to be turned into a joint venture. A spokeswoman said Louis Dreyfus considered juice a core business and it was looking for partners to support growth plans requiring “significant investments.”
Louis Dreyfus last month announced the creation of a new role of head of food innovation, mirroring efforts by other agricultural traders to into higher-margin areas.
The firm has been trying to revive profits after they slipped to a decade low in 2015.
It suffered a sharp fall in first-half earnings, blaming a hedging effect relating to soybean crushing, but new CEO Ian McIntosh pointed to a improved performance in the second half.
The group, which dates back to the mid-19th century, has also been wrestling with family shareholding issues.
Majority shareholder Margarita Louis-Dreyfus, who inherited control of the group when her husband Robert died in 2009, said in November she had secured financing to cover a requirement to buy most of shares in the holding firm held by other family members.
— Reporting for Reuters by Gus Trompiz.Tagged commodities, dairy, divestment, Fertilizer, joint venture, Louis Dreyfus, orange juice