US: Cargill H1 profits down, reports Q2 progress

By Dean Best | 10 January 2014

Higher crops helped raw material costs for Cargills animal protein business

Higher crops helped raw material costs for Cargill's animal protein business

Cargill has reported a fall in half-year profits but said earnings improved in three-quarters of its business in its second quarter.

The US agri-giant booked a 19% fall in first-half profits to US$1.13bn. The lower earnings came as a 36% jump in the second quarter failed to offset a slump in the first three months in Cargill's financial year.

In October, Cargill reported a 41% fall in first-quarter profits due in part to the impact of the severe drought in the US in 2012.

As a privately-owned company, Cargill does not provided detailed results for its divisions but said three of its four businesses reported better earnings in the second quarter.

Profits from food ingredients, animal nutrition and protein, plus its industrial and financial services division improved.

Cargill said earnings from animal nutrition and protein were up "significantly" as better crop production in 2013 helped the unit's raw material bill.

Earnings from Cargill's agricultural supply chain arm fell to a build-up in oilseed crush capacity across the industry.

Cargill's first-half revenue was down 3.3% at $66.7bn. Second-quarter sales dropped 7% to $32.9bn.

Show the press release

Cargill reports second-quarter fiscal 2014 earnings

MINNEAPOLIS – Jan. 9, 2014 – Cargill today reported net earnings of $556 million in the fiscal 2014 second quarter ended Nov. 30, up 36 percent from $409 million in the year-ago period. First-half earnings were $1.13 billion, down 19 percent from $1.38 billion a year ago. Second-quarter revenues decreased 7 percent to $32.9 billion, which brought first-half revenues to $66.7 billion.

“Cargill posted a solid second quarter, with earnings improved in three of our four segments,” said David MacLennan, Cargill’s president and chief executive officer. “We also oversaw the opening of several new investments that support customers’ growth and success.” The company’s results were supported in part by 2013’s improved crop production. The impact on supply and demand caused prices for agricultural commodities to come down from last year’s highs, providing relief to Cargill’s animal nutrition and protein segment.

Segment performance

The Food Ingredients & Applications segment was up slightly from the year-ago period; it also was the largest contributor to second-quarter results. Demand in some product lines improved appreciably. For example, markets for cocoa powder saw firmer demand and sales volume, while increased U.S. corn supplies lifted domestic and export demand for ethanol. Still, many segment businesses experienced softer demand and sales volumes due to the sluggishness remaining in parts of the global economy.

Earnings in Animal Nutrition & Protein rose significantly. Improved profitability among the animal nutrition units was linked to lower input costs, good price risk management and a well-managed mix of bulk, specialty and customized animal feeds. The animal protein businesses also realized the effects of new-crop supplies, which eased last year’s high feeding costs. Larger export volumes and increased operating efficiencies also contributed to stronger results, especially in beef processing. 

Agricultural Supply Chain results decreased from the year-ago period, due in part to an industrywide buildup in oilseed crush capacity that reduced crush volumes in certain markets, including South America. In North America, profits increased due to higher grain handling and export volumes, along with renewed demand for grain marketing products. 

Earnings in Industrial & Financial Services increased slightly. Although energy results were weak, the segment benefited from increased demand for ocean transport of coal and iron ore, and from favorable trends in U.S. steel manufacturing and processing.

Investment

Cargill completed the acquisition of Joe White Maltings in Australia, a key addition to better serving brewers in Australia and Asia, and providing Australian farmers with more marketing options.  

Several projects came on line that better serve food, feed, farm and other customers. In the United States, Cargill began processing corn into ethanol at the Fort Dodge, Iowa, corn wet mill that was purchased in 2011. The facility will anchor the development of a biorefinery campus that can support the manufacture of other biobased products. Cargill’s multiseed processing plant in West Fargo, N.D., was modernized and expanded to support increased demand from food processors and foodservice companies for sunflower and canola oils. Cargill began constructing a sunflower seed crush plant in southwestern Russia, its first crush facility in that country. The plant will produce sunflower oil for domestic and global food manufacturers. The company also purchased a minority stake in a deep sea port terminal in Novorossiysk on the Black Sea. The investment opens an important channel for connecting Cargill’s Russian grain origination to customers in North Africa, the Middle East and beyond.

Original source: Cargill

Sectors: Commodities & ingredients, Financials, Meat & poultry

Companies: Cargill

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