Cargill reports fiscal 2017 first-quarter results
Cargill posted a strong start to the new fiscal year, said David MacLennan, the company's chairman and CEO.
"We've been charting a new path to higher performance, and it's rewarding to see the many changes we've made resulting in gains across much of the company," MacLennan added. He noted that recent acquisitions have brought in new capabilities alongside Cargill's continuous work to optimise plant efficiency, supply chains and cost structure. "These actions are making us more competitive and equipping us to serve a broadening range of customer needs."
The Animal Nutrition & Protein segment was the largest contributor to adjusted operating earnings in the first quarter, with results up sharply from the prior year. Profitability was led by the segment's beef business, which benefited from the North American market's ongoing transition to increased cattle supplies as well as renewed consumer demand for beef. The global group of poultry businesses, along with US-based turkey and further processed eggs, delivered increased earnings over the prior year. Animal nutrition contributed to the strong results, as well, with sales growth in parts of Asia and in North America. Sales volume for aqua feeds was reduced by weather-related events in some countries. The segment's new aqua nutrition unit offset part of the impact with its sales strength in high-value functional feeds and in raw material sourcing.
To grow its protein portfolio, Cargill purchased Five Star Custom Foods, which specialises in cooked protein products for the foodservice and food manufacturing sectors, with US facilities in Fort Worth, Texas, and Nashville, Tennessee. Cargill is selling two cattle yards in the Texas Panhandle to Amarillo-based Friona Industries, which is already a significant supplier of fed cattle to Cargill. The sale will allow capital used today to buy and feed cattle to be redeployed in other parts of the business. With the upcoming introduction of the antibiotic-free Honest Turkey™ product line, the company is expanding its commitment to turkeys raised without the use of antibiotics, which will differentiate these products from conventional offerings.
Origination & Processing earnings rose moderately from last year's first quarter, due in part to the realisation of improved soybean processing margins in the current period along with the reversal of mark-to-market losses taken in the preceding quarter. Results also were boosted by good performance in Brazil, North American grain exports, canola in Canada, and biodiesel in North America and Europe. As announced in August, Cargill is selling to Bunge its soybean and rapeseed crush, oil refining and related bulk storage assets in Amsterdam, The Netherlands, and soybean crush facility in Brest, France. The transaction is subject to regulatory clearance from the EU. Cargill is retaining its soybean processing plants in Barcelona, Spain, and Liverpool, UK, as well as other oilseed processing and refining facilities in Europe.
Improved earnings in starches and sweeteners, and edible oils lifted segment earnings in Food Ingredients & Applications. Cocoa and chocolate products contributed to the upturn, though earnings were restrained by this season's shortage of mid-crop cocoa beans in Ghana. Salt earnings were flat, with good performance in salts for food and other applications offset by less demand for road salt and deicing products in the current period. The segment's flour business in Argentina was sold to Molinos Cañuelas, a local, family-owned retail food company with a flour business of its own.
Industrial & Financial Services was profitable for the quarter, with returns from Cargill's asset management investments offsetting weak performance in other parts of the segment. Petroleum results were impacted by low global demand for oil in oversupplied markets; likewise, the metals business in North America dealt with weak demand as it works to reduce inventory.
MacLennan emphasised that Cargill is keeping its focus on three connected priorities: sustainability, food security and nutrition. The August debut of the Midwest Row Crop Collaborative shows how Cargill can bring unique insights to advancing sustainable agriculture. Industry and conservation leaders came together in this collaborative to bring sustainability work to a larger scale. In its launch, the MRCC announced it will support and build out current programs that seek to improve soil health and water quality in Illinois, Iowa and Nebraska. MacLennan noted: "Cargill is committed to the success of the MRCC because we believe that sustainability programmes like this will benefit agricultural supply chains from end to end."
Cargill and Heifer International began a new partnership in Qingshen in southwestern China, aimed at improving farmer livelihoods, agricultural practices and food security. About 100 small, family-owned poultry farms, most led by women, will receive chicks, business training, and access to nutrition expertise and veterinary support. Plans provide for expanding the programme over time as each farming family donates livestock to another family in need. Cargill's animal nutrition business is committed to sharing its knowledge of animal husbandry through farmer training and other means. It hopes this project will be the first of many to succeed with this innovative format.