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UPDATE 1-Louis Dreyfus stems profit slide but commodity headwinds persist

* Trading group's first-half net profit edges up to $135 mln

* Volumes rise, lower costs curb impact of sales drop

* Group says Q2 speculative inflows added to tough conditions

* Ample supply, tepid economy still weighing on commodities (Writes through to add detail, analyst quote)

By Gus Trompiz

PARIS, Sept 29 Agricultural trading giant Louis Dreyfus Company eked out a small rise in 2016 first-half net profit, saying steady shipped volumes helped it weather another tough period in commodity markets.

Louis Dreyfus has been grappling with ample supply, lower prices and slower economic growth that have cut margins, while also going through a leadership shake-up under main shareholder Margarita Louis-Dreyfus.

The privately owned company said on Thursday that net income was $135 million compared with $130 million in the first half of 2015, with lower costs and tax offsetting weaker underlying profit.

Operating profit for its business segments fell to $546 million from $638 million as net sales dropped to $23.5 billion from $26.4 billion.

Unexpected capital inflows in commodities in the second quarter added to the difficult trading conditions, it added.

"Posting reasonable results during such periods and a context of continued oversupply illustrates our ability to adjust to changing conditions," Chief Executive Officer Gonzalo Ramirez Martiarena said in an interim results report.

It said shipped volumes rose 1 percent in the first half, supported by grain and oilseed exports from South America and healthy flows at its metals business.

"With a 1 percent increase in volumes they appear to be keeping or slightly increasing market share," James Dunsterville, analyst with Geneva-based Agflow, said.

"But there is no comment on the situation from July onwards and I think the second half is proving very difficult for the trade."

Autumn corn and soybean harvests in the United States, expected to yield record volumes, will be a major factor for trading firms in the second half of the year.

Recent rallies in sugar, coffee and juice could also influence firms such as Louis Dreyfus that have wide exposure in soft commodities. Sugar futures hit four-year highs this month.

Dreyfus, part of the so-called ABCD quartet of trading giants alongside Archer Daniels Midland, Bunge and Cargill, had previously reported a plunge in net profit for 2015 and confirmed it was seeking partners to help some businesses expand, starting with its fertiliser division.

It did not give any update on partnerships in the first-half report.

The unfavourable landscape has also led Louis Dreyfus' rivals to reorganise. ADM said last month it was pulling back in ethanol and exploring sales of corn dry mills that produce the biofuel as weak ethanol results contributed to lower quarterly profits.

In the first half, margins at Dreyfus' fertiliser business remained hurt by weak demand from farmers, leading it to focus on key markets including in Africa, it said.

But its juice platform, also earmarked for a joint venture partner, posted improved results, helped by inventory cuts and marketing changes, it said.

The group, which this year changed its name to Louis Dreyfus Company from Louis Dreyfus Commodities, again restrained capital expenditure. It came to $132 million, close to the $135 million in the first half of 2015, with a focus on existing assets. (Editing by Alexander Smith and David Evans)

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