Cargill Reports Uneven Performance In First Quarter
Agricultural conglomerate Cargill posted its fiscal first quarter results on Wednesday, revealing an uneven performance for the Wayzata company as its earnings leaped from a year ago while revenue sunk.
For the three-month period ending August 31, Cargill, the nation’s largest privately held company, said its profits rose 20 percent, from $425 million last year to $512 million now. Revenue declined sharply—about 17 percent—to $27.5 billion, down from $33.3 billion during the same time last year. Its operating earnings fell $8 million from $619 million a year ago to $611 million in its first quarter of 2016.
A number of factors played into the sizeable decrease, such as overseas sales of starches and sweeteners due to historically low sugar prices. Cargill also noted a poor performance in the cattle and beef markets across North America. The agribusiness said, “cattle costs remained high,” which resulted in consumers seeking cheaper alternatives such as pork and poultry.
David MacLennan, Cargill’s CEO, said in a statement that the company “posted a productive start to the new fiscal year” and cited grain, oilseeds processing and animal nutrition as positive growth areas. “Weather-driven agricultural commodity markets” and the effects of “more volatile emerging markets, currency fluctuations and other macroeconomic uncertainty” drove the quarter’s decline, McLennan said.
In August, Cargill spent roughly $1.5 billion to purchase a Norwegian salmon feed maker called EWOS. CEO MacLennan noted the purchase in his statement after mentioning Cargill’s success in the area of animal nutrition, especially within aquaculture nutrition in Latin America.
For months, Cargill has shown a shift in interest toward aquaculture production. Sarena Lin, president of Cargill’s Feed & Nutrition business, noted at the time of Cargill’s EWOS acquisition that “the need for protein is expected to grow by 70 percent worldwide by 2050.” Lin added, “Farmed fish and shrimp offers one solution to meeting this demand.” Less than a month before buying EWOS, Cargill also made a $30 million investment in building a shrimp feed facility in Ecuador.
Additionally, Cargill is working to expand its offering of cocoa products by acquiring global chocolate business ADM for $440 million in August. Cargill said the integration of ADM is “proceeding on target.”
For more on Cargill, check out TCB’s 150-year timeline of how the company grew from a single grain storage facility in 1865 to a global food powerhouse today.