Cargill Q2 operating profit slips 13%

by Erica Shaffer
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MINNEAPOLIS – Declining prices for commodities and weak demand in some markets weighed on Cargill’s earnings for the second quarter. For the quarter ended Nov. 30, the company reported operating earnings of $574 million, a 13 percent decrease from $657 million in the same year-ago quarter. The results excluded gains from the sale of Cargill Pork for $1.45 billion and the divestment of its 50 percent interest in a steel mill venture valued at $720 million.

Revenues for the quarter retreated 10 percent to $27.3 billion on lower commodity prices and weaker demand in some markets. First-half revenues totaled $54.8 billion. 

David MacLennan, president and CEO of Cargill
David MacLennan, chairman and CEO of Cargill

“Cargill posted a solid second quarter against a strong comparative period in the prior fiscal year,” David MacLennan, chairman and CEO, said in the company earnings announcement. “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.”

Stronger results in animal nutrition offset declines in the company protein business. Still adjusted operating earnings in Animal Nutrition & Protein division decreased slightly during the quarter. Segment earnings were pressured by “difficult economic conditions” in North American cattle feeding and declines in Australia’s cattle supplies.

“Effective market segmentation and favorable commodity costs bolstered earnings in global animal nutrition,” Cargill said. “Areas of particular strength included the US and Vietnam overall, and aquaculture nutrition in Latin America.

“Within the segment’s animal protein businesses, poultry results in Central America, Europe, Thailand and the US rose on strong operational and commercial performance. In the US, the Thanksgiving holiday also gave a boost to fresh whole turkey sales volume.”

Adjusted operating earnings for the Origination & Processing segment declined moderately from last year’s level, the company said, while performance of Food Ingredients & Applications slipped below a year ago. Cargill noted the company made good progress toward strengthening operational and commercial execution.

Cargill reported significant declines in adjusted operating earnings in its Industrial & Financial Services segment. The company attributed the declines in part to the liquidation of certain hedge funds at an asset management subsidiary.

“Additionally, energy results were reduced by muted volatility in petroleum markets and by mild temperatures in a period when cold weather usually drives demand for natural gas and power,” Cargill said. “Performance improved in metals trading.”

MacLennan noted significant progress in reshaping Cargill’s portfolio. For example, the company is seeing benefits from the integration of ADM’s chocolate operations. Also, the addition of EWOS, a leading global salmon feed producer, brings the potential of new markets and expertise in nutrition for cold-water species.

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