Cargill’s largest contributor to adjusted operating earnings in the first quarter was the Animal Nutrition and Protein Division. The beef business led the way in profitability, which was helped by higher numbers of cattle in the supply chain as well as consumer demand for more beef. The poultry-based divisions, along with turkey and egg businesses, were more profitable than they were in the previous year. Animal nutrition product sales grew in Asia and North America, contributing to the strong growth as well. Aqua Feed sales were down in some countries due to weather-related incidents. The segment’s new aqua nutrition unit offset part of the impact with its overall sales strength. Cargill wants to grow its protein portfolio, so it purchased Five Star Custom Foods, which specializes in cooked protein products for food service and food manufacturing sectors.
From the National Association of Farm Broadcasting news service.
Cargill reports fiscal 2017 first-quarter results
Earnings rise on balanced performance across most of the company
Cargill reported financial results for the fiscal 2017 first quarter ended Aug. 31, 2016. Key measures include:
- Adjusted operating earnings rose 35 percent to $827 million in the first quarter, compared with $611 million in the year-ago period.
- Net earnings on a U.S. GAAP basis were $852 million, up 66 percent from $512 million a year ago. The variance between adjusted and net earnings was largely a function of timing differences related to inventory, derivatives and hedging.
- Revenues were $27.1 billion, essentially even with last year’s $27.5 billion.
“We posted a strong start to the new fiscal year,” said David MacLennan, Cargill’s chairman and chief executive officer. “We’ve been charting a new path to higher performance, and it’s rewarding to see the many changes we’ve made resulting in gains across much of the company.” He noted that recent acquisitions have brought in new capabilities alongside Cargill’s continuous work to optimize plant efficiency, supply chains and cost structure. “These actions are making us more competitive and equipping us to serve a broadening range of customer needs.”
The Animal Nutrition & Protein segment was the largest contributor to adjusted operating earnings in the first quarter, with results up sharply from the prior year. Profitability was led by the segment’s beef business, which benefited from the North American market’s ongoing transition to increased cattle supplies as well as renewed consumer demand for beef. The global group of poultry businesses, along with U.S.-based turkey and further processed eggs, delivered increased earnings over the prior year. Animal nutrition contributed to the strong results, as well, with sales growth in parts of Asia and in North America. Sales volume for aqua feeds was reduced by weather-related events in some countries. The segment’s new aqua nutrition unit offset part of the impact with its sales strength in high-value functional feeds and in raw material sourcing.
To grow its protein portfolio, Cargill purchased Five Star Custom Foods, which specializes in cooked protein products for the foodservice and food manufacturing sectors, with facilities in Fort Worth, Texas, and Nashville, Tennessee. Cargill is selling two cattle yards in the Texas Panhandle to Amarillo-based Friona Industries, which is already a significant supplier of fed cattle to Cargill. The sale will allow capital used today to buy and feed cattle to be redeployed in other parts of the business. With the upcoming introduction of the antibiotic-free Honest Turkey™ product line, the company is expanding its commitment to turkeys raised without the use of antibiotics, which will differentiate these products from conventional offerings.
Origination & Processing earnings rose moderately from last year’s first quarter, due in part to the realization of improved soybean processing margins in the current period along with the reversal of mark-to-market losses taken in the preceding quarter. Results also were boosted by good performance in Brazil, North American grain exports, canola in Canada, and biodiesel in North America and Europe. As announced in August, Cargill is selling to Bunge its soybean and rapeseed crush, oil refining and related bulk storage assets in Amsterdam, and soybean crush facility in Brest, France. The transaction is subject to regulatory clearance from the European Union. Cargill is retaining its soybean processing plants in Barcelona, Spain, and Liverpool, U.K, as well as other oilseed processing and refining facilities in Europe.
Improved earnings in starches and sweeteners, and edible oils lifted segment earnings in Food Ingredients & Applications. Cocoa and chocolate products contributed to the upturn, though earnings were restrained by this season’s shortage of mid-crop cocoa beans in Ghana. Salt earnings were flat, with good performance in salts for food and other applications offset by less demand for road salt and deicing products in the current period. The segment’s flour business in Argentina was sold to Molinos Cañuelas, a local, family-owned retail food company with a flour business of its own.
Industrial & Financial Services was profitable for the quarter, with returns from Cargill’s asset management investments offsetting weak performance in other parts of the segment. Petroleum results were impacted by low global demand for oil in oversupplied markets; likewise, the metals business in North America dealt with weak demand as it works to reduce inventory.
MacLennan emphasized Cargill is keeping its focus on three connected priorities: sustainability, food security and nutrition. The August debut of the Midwest Row Crop Collaborative shows how Cargill can bring unique insights to advancing sustainable agriculture. Industry and conservation leaders came together in this collaborative to bring sustainability work to a larger scale. In its launch, the MRCC announced it will support and build out current programs that seek to improve soil health and water quality in Illinois, Iowa and Nebraska. MacLennan noted, “Cargill is committed to the success of the MRCC because we believe that sustainability programs like this will benefit agricultural supply chains from end to end.”
Cargill and Heifer International began a new partnership in Qingshen in southwestern China, aimed at improving farmer livelihoods, agricultural practices and food security. About 100 small, family-owned poultry farms, most led by women, will receive chicks, business training, and access to nutrition expertise and veterinary support. Plans provide for expanding the program over time as each farming family gifts livestock to another family in need. Cargill’s animal nutrition business is committed to sharing its knowledge of animal husbandry through farmer training and other means. It hopes this project will be the first of many to succeed with this innovative format.