Cargill’s Fiscal Year Begins With 26% Earnings Drop
Cargill Inc., began its latest fiscal year with a 26 percent drop in net earnings, the Wayzata-based food and agricultural products giant announced Tuesday.
The company reported net earnings of $425 million for its first fiscal 2015 quarter ending Aug. 31, down from $571 million in the same period a year ago. Revenues, meanwhile, totaled $33.8 billion, up 2 percent from the $33.3 billion earned last year.
In a news release, Cargill president and CEO David MacLennan cited geopolitical uncertainty as hurting the company’s first quarter but remained “optimistic about the opportunities ahead.”
“This year’s big crops, not just in North America but across agricultural production areas worldwide, will enhance food security after several years of weather disruptions,” MacLennan said in a statement.
Tuesday’s report was the company’s first since August’s annual report announcing a 19 percent decrease in profits: $1.87 billion for fiscal 2014, down from $2.31 billion in 2013 due in part to last year’s U.S. drought and changing economic conditions abroad. Cargill’s full-year profits have been tumultuous in recent years: The company reported a 56 percent drop in 2012 with $1.17 billion in profits just one year after recording a record $2.69 billion in 2011.
Christopher Johnson, a Standard & Poor’s credit analyst, said Cargill’s first-quarter results weren’t out of the ordinary. “A certainly degree of volatility is expected,” he said. “It’s part and parcel for the agribusiness industry.”
Less so is the up and down nature of the company’s annual results of late.
“That sort of normalization is not what we’ve come to expect,” Johnson said.
In its first quarter, Cargill closed a beef harvesting facility in Milwaukee because of the tight cattle supply brought about by producers retaining cattle for herd expansion. Cargill will keep open a ground beef plant at the same site. The company said the U.S. beef cattle herd is at its lowest level since 1951.
Cargill will also close its Memphis, Tennessee, corn-milling plant in January. It said it was underused because of its location far from the Corn Belt. However, a corn oil refinery will stay open and operate as a stand-alone facility.
Other recent developments include:
• Announcing plans last month to acquire Chicago-based Archer Daniels Midland’s chocolate business for $440 million
• Opening an expanded and remodeled “Food Innovation Center” in Plymouth
• Forming a new, global sugar trading joint venture, Alvean, with Brazilian sugar and ethanol giant Copersucar
• Acquiring TuryaÄ, a Turkish fats and oils company
• Purchasing a salt production facility in Hersey, Michigan, that will manufacture water softener salt and agricultural salt products