MINNEAPOLIS — Despite a decline in earnings during the quarter, Cargill said it made good progress on efforts to improve the company’s efficiency and accelerate the pace of technology and process improvements. Net earnings for the first quarter ended Aug. 31 were $425 million, down 26% from $571 million in the same period a year ago. Revenues in the first three months totaled $33.3 billion, down 2% from $33.8 billion.
“Although Cargill’s first quarter was not as strong as last year, we had several areas of good performance and are optimistic about the opportunities ahead,” said David MacLennan, president and chief executive officer. “This year’s big crops, not just in North America but across agricultural production areas worldwide, will enhance food security after several years of weather disruptions. Our company is well positioned to connect these new supplies to growing demand.”
Mr. MacLennan said the first quarter was marked by a great deal of geopolitical uncertainty, but Cargill’s regional teams did an “excellent job” serving customers while managing the impact. He also said Cargill improved its efficiency and accelerated the pace of technology and process improvements.
Among Cargill’s business segments, Origination & Processing was the largest contributor to first-quarter earnings, with results slightly below the year-ago level.
“Global commodity markets for corn, soybeans and wheat were characterized by falling prices, reduced price volatility, lower soybean crush volumes and limited farmer selling in some countries,” Cargill said. “Grain shipments in Canada remained brisk due to the large carryover from the country’s record 2013 crops.”
In the company’s Food Ingredients & Applications unit, earnings decreased moderately from last year. Cargill said many food ingredient businesses experienced softer volumes, which often were tied to sluggish economic conditions in a number of countries. On the upside, strong demand for corn-based ethanol lifted Cargill’s corn processing results in North America, the company said.
Segment results for Animal Nutrition & Protein rose moderately in the first quarter. Cargill said the segment’s animal nutrition operations performed well, with higher sales volumes but slightly lower earnings due to a gain on the sale of a milling business in last year’s first quarter. Meanwhile, the segment’s animal protein businesses jointly delivered a strong performance.
“Beef processing in Australia benefited from ample cattle supplies and strong export demand,” Cargill said. “In North America, lower input costs bolstered cattle feeding results; on the processing side of the business, cattle costs were very high during most of the period, but consumer demand for beef stayed strong. The expected shortage of hogs caused by the porcine epidemic diarrhea virus (PEDv) was less detrimental to Cargill’s U.S. pork operations than anticipated, allowing for a good first quarter. Cargill’s chicken and turkey operations in Central America, Europe, Thailand and the U.S., also realized higher earnings on a combined basis.”
Earnings within the Industrial & Financial Services segment fell moderately from last year’s first quarter, with mixed results. Performance in energy rebounded, driven by the decision in the preceding quarter to focus on crude oil and petroleum products, and North American power and natural gas, but trading results in ocean shipping were reduced by an erratic Capesize vessel market. Performance in metals also fell, with tightening credit markets in China diminishing demand and prices for iron ore and steel, Cargill said.
During the first quarter, Cargill closed its beef harvest facility in Milwaukee, citing tight cattle supply brought about by producers retaining cattle for herd expansion. The ground beef plant at the site remains open to meet customer needs, Cargill said.
Cargill also announced it will close its Memphis, Tenn., corn milling facility in January. Cargill said the plant is underutilized and said it plans to keep the corn oil refinery open and operating as a stand-alone facility.
A number of projects were completed during the first quarter, including the formation of a new global sugar-trading joint venture with Brazil’s Copersucar. Named Alvean, the venture began originating, marketing and trading raw and white sugar Oct. 1. Additionally, Cargill acquired Turya?, a Turkish fats and oils company and opened an expanded and remodeled Food Innovation Center in Plymouth, Minn., where the company’s food scientists work side-by-side with food and beverage manufacturers and food service customers to help them innovate and bring new products to market.In early September, Cargill reached agreement to buy Archer Daniels Midland’s chocolate business, which includes six processing facilities in the United States, Canada and Western Europe, and a number of chocolate brands. Subject to regulatory clearance, the acquisition is expected to be completed in the first half of calendar 2015.