Cargill profit rises in face of difficult market conditions

by Eric Schroeder
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Cargill facility
Cargill remains focused on creating a more streamlined organization.

MINNEAPOLIS — Adjusted operating earnings at Cargill increased 13% in the third quarter ended Feb. 29, rising to $476 million from $421 million a year ago. On a U.S. GAAP basis, net earnings totaled $459 million, up from $425 million. Revenues, though, fell 11% to $25.2 billion, reflecting lower commodity prices, the strength of the U.S. dollar against other currencies, and the sale of Cargill’s pork business in the second quarter.

For the nine-month period ended Feb. 29, adjusted operating earnings decreased 2% to $1.66 billion, while net earnings on a U.S. GAAP basis equaled $2.36 billion, up from $1.63 billion.

Cargill said the variance between adjusted and net earnings in the nine-month period included gains on the second-quarter sales of the U.S. pork business and Cargill’s interest in the North Star BlueScope Steel joint venture, and a charge related to a change in accounting treatment for Venezuela.

David MacLennan
David MacLennan, chairman and c.e.o. of Cargill

“With agriculture and energy markets as tough as we’ve seen in a long time, we’re pleased with the gain in earnings achieved this quarter,” said David MacLennan, chairman and chief executive officer, adding that prices and volatility in agricultural commodities remain low, as a series of big harvests have built global stocks. “Barring weather events, we don’t anticipate a near-term improvement in market conditions for agriculture. In these kinds of cycles, and we’ve been through them before, we focus on the levers under our control.”

Mr. MacLennan said Cargill remains focused on creating a more streamlined organization, competitive business portfolio and greater efficiency in how it runs plants, manages supply chains and markets products and services.

“The work we’ve undertaken this year is positioning us to better serve the changing needs of our customers and fulfill our purpose to nourish the world’s people,” he said.

Results in the company’s Food Ingredients & Applications segment was the largest contributor to adjusted operating earnings in the third quarter, Cargill said, boosted by commercial and operational execution that lifted earnings broadly across edible oils, malt, starches and sweeteners, and texturizers.

Adjusted operating earnings in Origination & Processing increased moderately from last year. Cargill said the gain came even as the segment contended with large global stocks, weak prices and low volatility in agricultural commodity markets. Within the segment, grain handling and oilseed processing in the Americas were up on a combined basis, with an additional contribution from world trading operations. U.S. producers’ sales of corn slowed due to low prices, but Argentina’s re-entry into agricultural export markets under its new administration boosted corn shipments from that country, the company said.

In the company’s Animal Nutrition & Protein segment, adjusted operating earnings decreased slightly, reflecting challenges in the beef industry. Earnings rose in animal nutrition, though, led by operations in the United States and Vietnam. Additional strong performance in U.S. turkey and value-added proteins boosted segment earnings close to the year-ago level, Cargill said.

Cargill sustained a quarterly loss in the Industrial & Financial Services segment, as excess shipping capacity sent ocean freight rates to historic lows. Crude oil markets were oversupplied relative to demand, curbing results in petroleum, Cargill said.
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