Commodty prices reduce Cargill interim earnings

Global agricultural crop trader and processor Cargill has reported a fall in profitability and revenues for the first half of the current financial year, in line with lower commodity prices and weaker demand in some of its markets.

Adjusted operating earnings were $1.19 billion on revenues of $54.8 billion in the six months to the end of November 2015, compared to the $1.21bn on revenues of $63.6bn from H1 2015.

Adjusted operating earnings for Q2 were $574m on sales of $27.3bn, respective falls of 13% and 10% from the $657m and $30.3bn at the same stage of the previous year.

The company says net earnings before adjustment, which include proceeds from the divestment of its US pork business to JBS and an interest in a steel joint venture, would show Q2 and H1 earnings of $1.39bn and $1.9bn, compared to $784m and $1.21bn from a year earlier.

By activity, the second quarter saw higher earnings from Cargill’s Animal Nutrition business offset by a weaker performance by the meat processing arm, mainly from the red meat sector in the US and Australia. It says effective feed market segmentation by Animal Nutrition and favourable commodity costs lifted earnings, with a strong feed performance in the US, Vietnam and by the aquaculture business in Latin America.

The Origination & Processing business segment saw a moderate decline in earnings. The grain and oilseed supply chain businesses were well ahead of the previous period, with improved soybean crush results in most areas and good risk management as plentiful world supplies saw declining prices. But there were weaker results from grain handling in Canada after two very large harvests, as well as in cotton, soft seed crush and sugar.

Earnings from the Industrial & Financial Services segment were significantly down, following the liquidation of certain hedge funds at an asset management subsidiary.

“Cargill posted a solid second quarter against a strong comparative period in the prior fiscal year,” states David MacLennan, Cargill chairman and chief executive officer. “Within the segments, we saw performance gains in key global businesses, including animal nutrition, grain and oilseed processing, most of our poultry operations, and several food ingredients categories.  We are delighted to welcome global salmon feed producer EWOS to Cargill, as it brings new markets and deep expertise in nutrition for cold-water species.”

Commenting on leadership team changes made in November to address strategic direction and the performance of its business segments, Mr MacLennan adds:  “It’s fitting we take this action now, as we celebrate Cargill’s 150th anniversary and position the company for success in the generations to come.”

Posted on January 8, 2016 and filed under Company News, Feed.