US: "External" issues hit Cargill profits
China rejected some of Cargill's corn shipments
Cargill has blamed "external" effects - including problems with corn shipments to China - for a slump in earnings in its third quarter.
The US agribusiness giant booked a 28% drop in net earnings to US$314m for the three months to the end of February.
Cargill had seen profits fall in the first half of its financial year but had witnessed an improvement in its second quarter. The drop in third-quarter earnings led to lower profits for the first nine months of the financial year.
David MacLennan, Cargill's president and CEO, said the company’s earnings were hit by a trading loss related to an "unprecedented" price spike in US power markets in late January, part of which has been recovered and weather-related disruptions to railway service in North America. He also pointed to the "rejection" of some US corn shipments to China.
Among Cargill's four business divisions, third-quarter earnings rose "considerably" from its animal nutrition and protein. The company saw improved volumes, an "effective sales mix", increased efficiency and exports in US and Australian beef.
Cargill said profits from its food ingredients and applications were "solid" but "moderately below" last year's third-quarter, which included gains from a "trade-related claim" and the sale of a cultures and enzymes business. Results were also tempered by "lacklustre" consumer demand and by costs from recent acquisitions and capex.
Third-quarter revenues were $32bn, "essentially even" with a year earlier. Nine-month revenues totalled $98.7bn, compared to $101.2m.
Cargill reports third-quarter fiscal 2014 earnings
MINNEAPOLIS – April 8, 2014 – Cargill today reported net earnings of $319 million in the fiscal 2014 third quarter ended Feb. 28, down 28 percent from $445 million in the year-ago period. Nine-month earnings were $1.45 billion, down 21 percent from $1.83 billion a year ago. Third-quarter revenues were $32 billion, essentially even with the year-ago period; nine-month revenues totaled $98.7 billion.
“External events affected our quarterly results, even as we saw operational improvements in key businesses,” said David MacLennan, Cargill’s president and chief executive officer. “Our animal protein results are much improved from last year, and, with 2012’s acquisition of Provimi, our global animal nutrition operations are on a record pace for the year. Despite one of the worst winters on record, we reliably delivered a near-record tonnage of road salt and deicing products to our customers across North America’s snow belt.”
MacLennan said the company’s earnings were trimmed by a trading loss related to an unprecedented price spike in U.S. power markets in late January, part of which has been recovered; the rejection of certain U.S. corn shipments to China; and weather-related disruptions to railway service in North America.
Among Cargill’s four business segments, third-quarter earnings rose considerably in Animal Nutrition & Protein compared with the same period a year ago. Within the segment, global animal nutrition results were boosted by improved volumes and an effective sales mix. Animal protein results were lifted by increased operating efficiencies and by exports in U.S. and Australian beef. Earnings strengthened in Industrial & Financial Services. Mixed but overall weaker results in energy and metals were offset by good performance in asset management and ocean transportation.
Food Ingredients & Applications earnings were solid, though moderately below last year’s third-quarter performance, a period that included one-time gains from a trade-related claim and the sale of a cultures and enzymes business. Current results were tempered by lackluster consumer demand and by additional costs from recent acquisitions and new or expanding facilities in several countries. Origination & Processing finished the quarter below the year-ago level, with earnings decreased by costs related to China corn trade and, in general, limited opportunities in grain trading and storage.
Cargill’s capital investment program for fiscal 2014 is on track. The company celebrated the grand opening of its new corn wet mill in Castro, in Brazil’s southern state of Paraná, in February. It broke ground on two new facilities in India: a corn wet mill in the state of Karnataka, and a dairy feed mill in the state of Punjab. In Europe, Cargill is doubling the capacity of its chocolate facility in Mouscron, Belgium, to serve growing demand for specialty ingredients. At its starches and sweeteners campus in Barby, Germany, Cargill is adding a new facility that will convert locally grown wheat to premium ethanol for the European beverage, cosmetic and pharmaceutical industries. Cargill also completed the acquisition of two specialty chemical companies in the U.S. and Turkey that add more capacity and applications expertise to its biobased industrial products business, a recent recipient of the 2013 U.S. Presidential Green Chemistry Challenge Award.
As the fourth quarter began, the company opened its newly expanded research and development center in Vilvoorde, Belgium, a multidisciplinary hub for food and feed ingredients science, and nonfood applications such as personal care and fermentation technology.
MacLennan said Cargill is committed to improving its profitability. “Our focus is steady: invest, innovate, bring a smarter, more efficient approach to how we operate, and be the partner that helps customers and other stakeholders thrive.”
Original source: Cargill
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