Union InVivo, the largest exporter of French wheat, said it’s in talks with Archer-Daniels-Midland Co. (ADM:US) about cooperating in grain trade as new Chief Executive Officer Thierry Blandinieres reviews strategy.
Talks are at an early stage, with nothing decided about how the companies might cooperate or through what legal entity, Blandinieres said in an interview in Paris today. The CEO said he’s met with ADM management in Europe.
“The discussion we’ve started is to see whether we can’t join forces,” Blandinieres said. “How to export together in zones where we are in competition.” ADM spokeswoman Jackie Anderson in a telephone interview said the company doesn’t have an immediate comment.
Blandinieres became CEO Oct. 1, inheriting a second year of losses at InVivo’s international grain trading business. The increased magnitude of price swings in grain markets has made trading more risky, he said.
InVivo and ADM each own 50 percent of U.K. grain trader Gleadell Agriculture Ltd. and are co-owners of German trader Alfred C. Toepfer International GmbH, with the French company holding 20 percent and ADM 80 percent.
“We have to start with what we have,” Blandinieres said. “InVivo has to position itself more forcefully internationally, and we’re lucky to have a privileged relationship with ADM.”
Blandinieres said the strategic review started two months ago, and he will present a plan next year. The CEO replaces Patrice Gollier, who resigned effective July 1 due to his wife’s ill health.
InVivo sales rose 8.3 percent to 6.1 billion euros ($8.3 billion) in 2012-13, while net income was “break even,” the company reported this week. InVivo Grains, which includes the trading unit, exported 8.6 million metric tons of grains in the season, up 19 percent from a year earlier, with sales rising 15 percent to 2.5 billion euros, the company said.
The grains unit had a net loss for a second year, according to Blandinieres. Losses were attributable to international grain trading, with the futures-trading unit Sigma Terme and InVivo’s storage and transport business meeting budgets, he said.
The international business had been operating with a trading philosophy based on price swings of 5 to 10 euros a ton for grain, when in reality fluctuations have increased to 30 or 40 euros in recent years, according to Blandinieres.
Results for InVivo’s international grain trading business since July 1 have been “generally positive” as it took less risk and increased guarantees, Blandinieres said.
“It’s nevertheless a problem of the industry adapting to the current economic trend,” the CEO said. “Competitors aren’t doing so great either. The pure-player model in trading is in danger.”
InVivo has about 50 people in the international trading business, according to Blandinieres.
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