Cargill posts net profit on special gains; revenue down

(Dave Bedard photo)

Reuters — Global commodity trader Cargill on Wednesday said it turned in a quarterly net profit, boosted by special gains that offset poor results from trading and oilseed processing.

Revenue for the privately held company declined for the eighth straight quarter.

Minnesota-based Cargill reported net income of $15 million for the fourth quarter ended May 31, compared with a net loss of $51 million a year earlier (all figures US$). Revenue fell five per cent to $27.1 billion.

Excluding items such as inventory adjustments and gains or losses from sales of assets, the company posted an operating loss of $19 million, compared with a year-earlier profit of $230 million.

Cargill’s report was the latest in a series of disappointing financial statements from agriculture-focused companies.

Last week, rival agribusiness Archer Daniels Midland reported a sharply lower quarterly profit due to volatile grain prices and weak trading and processing margins. Bunge, another Cargill rival, posted higher earnings but warned of near-term headwinds due to tightening margins.

After ample global crop supplies limited trading opportunities for large grain companies earlier this year, a weather-related harvest shortfall in South America riled markets this summer and caught traders wrong-footed.

Cargill is in the midst of a restructuring aimed at bolstering margins and making itself more responsive to commodity market swings.

“We have about $28 billion of equity in the books and about $1.6 billion in earnings on an adjusted basis. That’s around the five per cent mark and that’s obviously not where we want to be,” chief financial officer Marcel Smits told Reuters in an interview.

In the past year, Cargill has spent $3 billion on expansions of existing facilities and acquisitions such as fish feedmaker EWOS and divested nearly $2.4 billion in assets, including its U.S. pork business and some cattle feedlots. It said it has realized more than $625 million from new products and services and from efficiency gains.

“We’re making progress in terms of positioning ourselves for a future that is meaningfully more profitable,” Smits said.

The food ingredients and applications unit, bolstered by the recent acquisition of ADM’s global chocolate business, posted stronger results in the quarter, as did the animal nutrition and protein business.

But Cargill’s origination and processing segment lost money due to losses in soybean trading and volatile oilseed crush margins.

Industrial and financial services recorded a losing quarter, due to a charge taken for counterparty risk in its ocean shipping business.

— Karl Plume reports on agriculture and ag commodity markets for Reuters from Chicago.

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