US - US meat and agri-food business Cargill has seen net earnings up by a third from the same period last year, with the largest contribution by its Animal Nutrition and Protein business.
Cargill has reported net earnings of $425 million in the fiscal 2015 third quarter ended 28 February 2015, a 33 per cent increase from $319 million in the year-ago period.
For the nine-month period, the company earned $1.63 billion, up 13 per cent from last year.
Revenues in the third quarter decreased 11 per cent to $28.4 billion; nine-month revenues totalled $91.97 billion.
David MacLennan, Cargill’s president and chief executive officer, commented: “Cargill’s results were led by strong performance in our global group of meat and animal nutrition businesses. In volatile petroleum markets, we saw a rebound in our energy businesses, having gained momentum from strategic changes made in the prior fiscal year. Faced with slowing growth and currency shifts in a range of markets, our food segment lagged expectations.”
He noted the company’s third quarter was up over a relatively weak comparative period in fiscal 2014.
Mr MacLennan added: “One of the qualities that has made Cargill successful throughout our 150 years is our ability to meet challenges by uncovering new opportunities. With the uncertainties in the global economy, we are directing our full talent and capabilities to help customers adapt and thrive in this new environment. That’s essential to our growth goals, too.”
The Animal Nutrition & Protein segment made the largest contribution to Cargill’s third-quarter earnings.
On a combined basis, the animal protein businesses were up considerably over a solid quarter in the prior year, with strong performance in Australian beef processing, Central American poultry, and US pork and turkey processing.
Aided by gains in sales volume, the segment’s animal nutrition businesses jointly increased earnings from the year-ago period. The animal nutrition operations in Venezuela incurred a charge related to the country’s revision of its currency exchange system. In Velddriel, Netherlands, Cargill opened its newly expanded animal nutrition innovation centre, where Cargill scientists can work with experts from nearby universities to conduct research that supports the development of new products and services for customers in dairy, poultry and swine.
Also during the quarter, Cargill divested a feed yard in Lockney, Texas, a move related to the idling of its Plainview, Texas, beef processing plant in 2013. It closed a turkey slicing and packaging facility in Springfield, Missouri, relocating production to two other company locations.
Earnings in Food Ingredients & Applications were below the prior-year period, as segment businesses faced macroeconomic headwinds in several regions. Slowing economic growth and excess processing capacity in developing markets such as China, Brazil and Indonesia created a difficult operating environment. The strong value of the US dollar against depreciating currencies like the euro and Brazilian real also hampered results, as earnings were translated back to dollars at lower rates. Cargill revalued certain food and salt assets in Venezuela and took a charge against earnings after the country’s government restructured its foreign exchange mechanisms. By contrast, results in US road salt and deicing were up significantly over a good quarter last year, with teams executing well through a harsh winter in the U.S. Northeast. Some of the segment’s food ingredient and staple foods businesses also posted improved earnings.
Earnings rose year-on-year in Origination & Processing, based on strong performance in North America and external events that reduced segment results in the comparative quarter, including China’s rejection of US corn cargoes containing an unapproved genetically modified trait and service disruptions to North American railways due to severe weather. In the current period, the combination of record US crops, a robust export pull and limited supply from South America created healthy volumes in the North American crush sector. Grain origination and farmer services in Canada also were strong, supported by the country’s good-sized 2014 crop and continued carry-over from 2013’s record deliveries.
Meanwhile, Russian restrictions on wheat exports, changes in the export competitiveness of different origins and events such as a truckers’ strike in Brazil created challenges in some markets. During the quarter, Cargill completed the acquisition of Indonesian palm oil producer Poliplant Group. The new assets should allow Cargill’s palm oil business to take efficient, cost-effective steps in building an integrated supply chain that meets customers’ needs for sustainable palm oil. The company also started up its new canola oil refinery in Clavet, Saskatchewan. With an annual refining capacity of about 450,000 metric tons, the facility will better serve customers in the expanding North American canola market.
Industrial & Financial Services earnings were down due to decreased results in asset management. The segment’s energy businesses staged a rebound after an unprecedented price spike in U.S. power markets marred results a year ago. In the current period, the energy team successfully navigated the dramatic decline in global crude oil prices and the volatility in petroleum markets that followed. The segment’s steel processing operations were well positioned to meet manufacturing customers’ demand for just-in-time inventory in a falling price environment linked to the slowdown in global steel consumption.
TheMeatSite News Desk