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July 17, 2018

Cargill reports fiscal 2018 fourth-quarter and full-year results




Cargill has reported US$3.2 billion in adjusted operating earnings for the 2018 fiscal year, one of its best performances.

The fourth quarter was also "very strong," according to the company. Cargill's improved financial results over the past two years are the outcome of significant efforts by its teams to redefine how Cargill operates. The organisation runs with greater agility and stronger integration to serve customers' rapidly changing needs, it added.

Key results for the quarter and fiscal year ended May 31, 2018, include:

Fourth quarter - Adjusted operating earnings totaled US$809 million, a 76% jump from US$460 million a year ago; net earnings on a US GAAP basis were US$711 million, more than double last year's US$347 million; revenues increased 7% to US$30.4 billion.

Full year - Adjusted operating earnings reached US$3.2 billion, up 6% from last year's strong comparative of US$3.04 billion; net earnings equaled US$3.1 billion, a 9% increase and the third straight year of improved performance on a US GAAP basis; both adjusted and net earnings included a provisional net charge of US$86 million related to the US Tax Cuts and Jobs Act enacted in December 2017. This represents a decrease from the estimate provided in the company's third-quarter release.

In addition, Cargill reported that its revenues had grew 5% to $114.7 billion. Cash flow from operations increased 11% to US$5.22 billion.

"Our strong results show we are creating the connections the world needs for vibrant food and agriculture both today and tomorrow," said David MacLennan, Cargill's chairman and chief executive officer.

"Cargill has always moved food from where it is produced to where it is needed. Today, we are pioneering new capabilities and partnerships to invest for the future. We are innovating alongside our customers to develop healthy, delicious products made the way consumers want. We are working with farmers and others to implement sustainable agricultural practices. And we are standing up for inclusive global trade that lets food move freely."

Segment results

Cargill's animal nutrition and protein segment surpassed last year's strong results, making it the largest contributor to Cargill's adjusted operating earnings in the fourth quarter and the full year. The protein business delivered an exceptional performance, fueled by rising domestic and export demand for North American beef and steady expansion in value-added egg products. Global growth in feed additives, micronutrients and premixes for customised animal nutrition also boosted earnings for the year. Excess supplies of chicken relative to domestic demand in Thailand contributed to a moderate decrease in global poultry results in both periods.

During the year, the segment invested significantly to serve growing demand for protein. It acquired Pollos El Bucanero, a leading retail-branded poultry business in Colombia. It also formed UK-based Avara Foods, a fresh poultry joint venture, and opened a major poultry processing plant in the Philippines with Jollibee Foods.

In the US, the segment expanded facilities for fresh ground beef, and cooked meat and eggs.

In animal nutrition, Cargill acquired US-based Diamond V and invested in Austria-based Delacon - the companies are leaders in improving animal health through fermentation- and plant-based feed additives, respectively. The segment purchased Integral Animal Nutrition, a Brazilian producer of cattle mineral feeds. In the US, it bought Pro-Pet, a private-label pet food maker, and the animal feed business of Southern States Cooperative. Across Asia, it added to its existing network of feed mills and opened technical application centers supporting aqua nutrition in India and Vietnam. It also invested in Dublin-based Cainthus, an animal facial recognition startup, and broadened its farm management software offerings; both will provide farmers a digital boost to their productivity and profitability.

Cargill's origination and processing segment exceeded last year's quarterly and annual results, putting up its best fourth quarter in seven years.

For most of fiscal 2018, rising demand for grains and oilseeds was muted by big crops, building stocks and low market volatility. Toward year-end, this changed, as drought in Argentina and other market forces began to influence global flows of corn, soybeans and related products. With markets moving and prices coming off lows, the segment improved origination, processing and trading results in key geographies.

Through investments in technology, the segment has improved connections of its global operations and supply chains. It has also strengthened its trading and analytical edge, bringing greater insight to customers. During the year, it modernised several oilseed processing plants in Brazil and the US. As fiscal 2019 began, it formed a joint venture to meet increasing demand for soybean meal and oil in Egypt.

Reporting broad-based progress

On August 7, Cargill will release its annual report for fiscal year 2018. The report details how Cargill is strengthening global food and agriculture in ways that position the company, its customers and other partners for sustainable, long-term success. It includes examples of how Cargill is advancing world-class capabilities in digitalisation and analytics, risk management, sustainable supply chains, and more.

As an illustration of this type of work, during the fourth quarter, the company launched a three-year project with Nestlé Purina and The Nature Conservancy that will use technology to improve the sustainability of the beef supply chain. Smart weather sensors in the fields of row crops will enable farmers to make more informed irrigation decisions. This will correspondingly improve the water use of beef supply chains, as cattle consume feed made from these crops. The project will take place in the US state of Nebraska – an important area for food production – but will seek to develop methods that are broadly scalable.

Nebraska was selected as it has the largest share of irrigated acres in the US and the second-largest cattle population.

"At the center of everything we do is our purpose: to nourish the world in a safe, responsible and sustainable way," MacLennan said.

"With our diverse set of partners, we are activating tomorrow's solutions across food, agriculture and nutrition."

- Cargill

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