FOCUS - Louis Dreyfus open to third-party investment in metals business

print Print this document.  Post this story to Facebook.
Perrine Fayeperrine.faye@fastmarkets.comDeputy Editor-in-Chief; Head of Physical+44 (0) 20 7337 2140

London 14/10/2016 - Louis Dreyfus Commodities is open to third-party investment in its already ring-fenced metals business sometime in the second half of next year, with a view of consolidating its trading position and seizing potential growth opportunities, Metal Bulletin understands.

"Our metals division could eventually be ready for a conversation with potential partners in the third or fourth quarter of next year," a representative confirmed on Friday, October 14.

CEO Gonzalo Ramirez first told Reuters about the plan on Wednesday this week.

The firm's metals business already operates as a stand-alone entity under the name of Louis Dreyfus Company Metal Suisse; a stake sale would simply formalise that.

"Louis Dreyfus has grown a lot in the past five years and the upside to further organic growth isn't great," a source close to the company said.

"The market has changed and conditions are tougher. LDC is well positioned but a partnership would help seize opportunities if and when they present themselves," another well-informed source said.

Louis Dreyfus doesn't have a specific investment in mind but would like to be in a better position to consider purchasing assets in the base metals and warehousing space, for instance.

The status quo would be maintained should a suitable partner failed to come forward, Metal Bulletin understands.

The firm's net sales reached $23.5 billion in the first half of this year, down from $26.4 billion a year ago, reflecting a weak price environment for most agri-commodities and a significant decrease in metals prices, it said in an earnings report late in September.

The metals division had a very good first half, driven by sales of zinc and copper concentrates, copper and aluminium trading, and the performance of the Namibian tolling business, the firm said.

"This was accomplished on the back of a good read of the Chinese market and improvements in base metals fundamentals," it added in the report, also noting increasing shipment volumes.

The firm had a more difficult third quarter due to slower trading conditions, according to market sources.

Louis Dreyfus metals division is active in the refined and concentrates non-ferrous markets. It is well established in the copper, zinc and lead markets and has expanded into nickel and aluminium in the past two years. It operates from Geneva, Shanghai, Singapore, Connecticut, Lima, Santiago and Johannesburg.

It also has a 51% stake in warehouse operator GKE Metal Logistics Pte Ltd, which has three LME-listed warehouses in Singapore and operations in Shanghai.

The remaining 49% stake was initially hold by Singapore-based GKE, which is fully owned by Van der Horst Energy Ltd, but the group signed a memorandum of understanding to sell the share to Hung Lin Holding Ltd in February this year.


(Editing by Mark Shaw)



Fastmarkets.com
mailto:press@fastmarkets.com
8 Bouverie Street, London, EC4Y 8AX, UK
+44 (0)845 241 9949