US: Drought hits quarterly profits at Cargill
By Dean Best | 9 October 2013
Profits from Cargill's animal nurtition and protein division were up
US agribusiness giant Cargill today (9 October) reported a 41% fall in first-quarter profits due in part to the impact of last year's severe drought in the US.
The company booked net earnings of US$571m for the three months to the end of August, down from $975m a year earlier, which the firm said had been a "record quarter".
As a privately-owned company, Cargill does not provided detailed results for its divisions but said earnings from its largest business - origination and processing - were down. Last year's drought in the US Midwest "reduced grain handling opportunities" ion the quarter.
Profits from food ingredients and applications fell "moderately", Cargill said.
However, earnings from Cargill's animal nutrition and protein division increased thanks to improved margins.
Earnings from its industrial and financial services business were down "significantly", Cargill added.
Group revenues "matched" the $33.8bn recorded in last year's first quarter.
"Cargill did an excellent job managing the remaining effects of last year’s severe drought and smaller crops," chairman and CEO Greg Page said. "Our agricultural supply chain and food ingredient businesses were focused on helping customers and the company to successfully manage their raw material purchases and inventories during the market uncertainty that precedes the transition to new crops in the northern hemisphere."
In December, Page will move to a role of executive chairman after six years as chairman and CEO. Cargill COO David MacLennan will become chief executive.
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MINNEAPOLIS – Oct. 9, 2013 – Cargill today reported net earnings of $571 million in the fiscal 2014 first quarter, down 41 percent from last year’s record quarter of $975 million. First-quarter revenues of $33.8 billion matched the year-ago period.
“Cargill did an excellent job managing the remaining effects of last year’s severe drought and smaller crops,” said Greg Page, Cargill’s chairman and chief executive officer. “Our agricultural supply chain and food ingredient businesses were focused on helping customers and the company to successfully manage their raw material purchases and inventories during the market uncertainty that precedes the transition to new crops in the northern hemisphere.”
Page noted that Cargill’s performance was balanced, with nearly three-fourths of its business units recording profits.
Cargill adjusted its business segments to provide greater clarity. Among the four segments:
Earnings rose slightly in the Animal Nutrition & Protein segment in the first quarter. Global animal nutrition results exceeded last year’s profits, due in part to margin improvements. U.S. beef processing operations benefited from increased slaughter plant efficiencies.
Although results were down from last year, the Origination & Processing segment was the largest contributor to Cargill’s first-quarter results. Supported by strong global analytics, sourcing, logistics and risk management, the segment successfully navigated the uncertainty surrounding crop production in the northern hemisphere, including weather gyrations in North America. The segment’s South American-based supply chains performed well, utilizing the region’s big crops to serve strong export demand. Conversely, in North American farm services, the remaining impact of last year’s severe drought in the U.S. Midwest reduced grain handling opportunities in the first quarter.
Food Ingredients & Applications earnings decreased moderately from last year’s record first quarter. Segment businesses closely managed the purchase and delivery of raw materials to processing facilities, which decreased the supply chain risks presented by choppy markets and provided for assured supplies to customers. The segment was the second largest contributor to company earnings.
Results in Industrial & Financial Services were down significantly from last year’s strong first quarter. The segment’s energy businesses posted a weak performance due to the combined effects of mild weather, soft demand and low market volatility. Backed by strong analytics, results in steel and iron ore markets were solid, though somewhat below last year’s first quarter. Asset management results softened, largely due to rising economic pressures in emerging markets.
Cargill continues to invest around the world to meet the rising expectations of our customers and help them succeed in new and expanded markets, product and services. The company’s bid to buy Joe White Maltings in Australia was accepted. The acquisition, which is subject to regulatory approval, is expected to be completed prior to the end of 2013. The purchase would round out Cargill’s global malt footprint, enabling it to better serve brewers in Australia and Asia. Cargill also purchased full ownership of the Prairie Malt joint venture in Saskatchewan. Lastly, it acquired a shrimp feed manufacturer in Thailand; the country and the region is a major center for shrimp production.
Original source: Cargill
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US: Drought hits quarterly profits at Cargill
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