Agriculture commodity merchant and processor, Louis Dreyfus Company, will be discontinuing its dairy business by mid-2019.
Louis Dreyfus is making the move as part of a three-year strategy to exit non-core areas in an effort to focus on core businesses. The move and others to come will help the company focus on investments in origination markets and expansion along the value chain in its key product lines.
Federico Cerisoli, Chief Financial Officer for Louis Dreyfus, says that the dairy segment of the business was identified in 2017 as non-core because it lacked a critical mass in the company’s portfolio.
The dairy portion of Louis Dreyfus only accounted for about 1% of the company’s revenue during 2018. Also, the dairy sector took a significant amount of capital to operate.
“Louis Dreyfus has been evaluating the best way to exit the business, either through an orderly wind down or a sale to potential buyers - these efforts are continuing and an exit will be implemented by the middle of this year. The exit will have practically no impact on our global sales, which continue to grow overall, and is expected to have a slight positive effect on our working capital from 2019 onwards,” Cerisoli adds.
Louis Dreyfus entered the dairy business in 2009 and expanded its dairy business even more in 2012 with the purchase of Dutch dairy company Ecoval Dairy Trade. The company currently sources dairy products from suppliers in North America, Europe, Australia and South America. Products like milk powders, lactose and whey are exported to a number of markets, Asia, Mexico, North America, the Middle East and Africa.
According to the company website, more than 20,000 metric tons of dairy products were imported to Mexico annually by Louis Dreyfus. The company’s dairy headquarters for the U.S. were located in Cordova, Tenn., just outside of Memphis.
“We worked hard to separate the business from the rest of Louis Dreyfus’ portfolio and will be working equally hard with our customers and suppliers over the coming months to ensure a smooth exit by mid-2019,” says Jean-Marc Foucher, Head of Louis Dreyfus’ Dairy Platform. “Following the exit, Louis Dreyfus’ only exposure to dairy will be a non-controlling stake in a dairy processing plant in Australia, operated by a joint venture partner.”
Dairy isn’t the only sector that Louis Dreyfus is exiting. The company has also divested from the metals platform and the fertilizers & inputs sector during the past 18 months.
Louis Dreyfus has been going through tough times recently with dividend payments to its family owners being suspended in 2017.