Cargill reports a 20% earnings loss in Q2

By Beth Newhart contact

- Last updated on GMT

"We are pushing to ready our businesses for the future with continuous improvement, financial discipline and a disruptive mindset." Pic: ©GettyImages/MicroStockHub
"We are pushing to ready our businesses for the future with continuous improvement, financial discipline and a disruptive mindset." Pic: ©GettyImages/MicroStockHub

Related tags: Cargill, Mergers and acquisitions, financial report, Trade

Cargill took a hit in its second quarter with a 20% drop in net earnings compared to the year-ago period. It cited a ‘world of uncertainty’ affected by the struggling US dairy industry and lingering trade wars throughout 2018.

At the close of its second fiscal quarter, Cargill reported its net earnings were US$741m, a 20% decline from $924m in the year-ago period. The adjusted operating earnings were $853m, down 10% from last year’s $948m earned. The first-half earnings were $1.74bn, a 5% decrease.

Sector by sector

The global Cargill corporation splits into four business sectors: Animal Nutrition and Protein, Food Ingredients and Applications, Origination and Processing and Industrial and Financial Services. In the 2019 second fiscal quarter, all reported losses except for Origination and Processing.

It managed to leverage a global network “to keep products moving while navigating volatile agricultural markets disrupted by trade turbulence.”

Increased protein consumption in North America and Europe bolstered demand for soybean meal for livestock feeds. Oilseed processing, grain exports and biodiesel production also strengthened the quarter for North America, with particularly good crops in Argentina boosting the South American market.

But the Food Ingredients and Applications sector decreased and saw mixed results. Starches and sweeteners were down thanks to record-low ethanol prices in North America and high energy costs in Europe. Uncertain effects of recent global trade conflict impacted Cargill’s investments, causing another low finish for the Industrial and Financial Services sector.

The Animal Nutrition and Protein sector also fell short of last year, though continued demand for beef and eggs in North America was represented in high production and sales to domestic and export markets.

Global poultry was down due to political instability in Central America and market challenges in Southeast Asia. Animal nutrition earnings were impacted by factors like low hog volume in China and Vietnam, and the poor outlook for the dairy and poultry industries in the US.

Dave MacLennan, chairman and CEO of Cargill, said, “Our teams executed in a world of uncertainty to bring the best solutions to our customers and the consumers they serve. Now, we are pushing to ready our businesses for the future with continuous improvement, financial discipline and a disruptive mindset."

Sales, projects and acquisitions

Cargill sold off its malt business just before the new year​ after 40 years in the industry. French grain cooperative Axéréal acquired Cargill’s malt business under the Axéréal malt subsidiary Boortmalt, affecting 15 global facilities and more than 500 employees.

But Cargill recently expanded in Colombia by acquiring Campollo, a local leading maker of chicken and protein products. It follows Cargill’s last year purchase of Colombia-based Pollos El Bucanero to further serve a growing protein demand in emerging markets.

The company’s ingredients sector also introduced Avansya, a project developing a zero-calorie sweetener through fermentation called EverSweet, launching early in 2019. According to Cargill, it’s a “more scalable, sustainable and cost-effective alternative to extracting them from stevia plants.”

With a new foray into digitizing the agricultural supply chain, the Origination and Processing sector formed Grainbridge. The tech venture intends to “provide support to North American farmers on grain marketing decisions, e-commerce and account management software,”​ by consolidating information “on production and grain marketing into a single digital platform for farmers at no cost to them.”

Cargill is also exploring a collaboration project to develop new ways for standardizing and digitizing global agricultural shipping transactions. It can help reduce time- and resource-intensive processes, “lowering costs and increasing transparency for customers in supply chains.”

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