Cargill earnings ease 66% in first quarter
Oct. 10, 2011
by Eric Schroeder
MINNEAPOLIS — Earnings from continuing operations at Cargill fell to $236 million in the first quarter of fiscal 2012 ended Aug. 31, down 66% from $693 million in the same period a year ago. Last year’s first quarter included an additional $190 million in earnings from Cargill’s former majority investment in The Mosaic Co. Net sales in the most recent quarter rose 34% to $34.6 billion.
“It was a tough quarter,” said Greg Page, chairman and chief executive officer. “With results down from recent levels, we’re focused on regaining our earnings momentum. Cargill is backed by a strong balance sheet, with broad resources and capabilities, including those we are gaining from a diverse group of acquisitions over the past 12 months. We’re well prepared to invest and grow through innovation, our partnerships with customers and the resiliency built into our business mix.”
Mr. Page attributed the softer financials in part to a high degree of uncertainty in the global economic environment, which in turn injected turbulence into commodity markets and limited prudent trading opportunities.
The prevailing “risk-on, risk-off" dynamic in financial markets also caused capital to move in and out of commodities rapidly, which reinforced taking a disciplined approach to risk-taking, he said. Other factors included acquisition-related expenses and outlays related to the flooding on U.S. inland waterways, which increased freight costs and required measures to be put in place to protect supply chains to customers.
Among the five business segments that Cargill operates, earnings only increased in agriculture services. Results in the origination and processing segment decreased from last year’s first quarter, dragged down by the combination of adverse weather, reductions in projected grain supplies and the weakening world economy.
Results virtually were unchanged in the food ingredients and applications segment.
The last two segments — animal protein and risk management and financial — also were weaker.
Cargill completed several previously announced acquisitions in the first quarter of fiscal 2012, including the German cocoa and chocolate company Schwartauer Werke Kakao Verarbeitung Berlin (KVB), Central American poultry and meat processor Corporacion Pipasa and Italian animal feed company Raggio di Sole Mangimi.
In August, Cargill signed an offer to acquire Provimi, a leading global animal nutrition company, for approximately €1.5 billion. The transaction, which is expected to be completed by calendar year end, will provide a range of enhanced products and services for serving customers globally.