Cargill Reports Fourth-Quarter Losses After Soft Beef Results

US - US meat producer Cargill has reported a net loss of $51 million in the fiscal 2015 fourth quarter ended 31 May 2015.
calendar icon 11 August 2015
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That figure compares with earnings of $376 million in the same period a year ago.

The losses follow a difficult period for beef in the US, record grain crops and some adverse economic conditions in the Americas, and the armed occupation of Cargill's Ukraine sunflower seed processing plant.

Fourth-quarter revenues were $28.4 billion, compared with $36.2 billion in the year-ago period. For the full fiscal year, Cargill earned $1.58 billion, a 13 per cent decrease from $1.82 billion in the prior year.

Revenues decreased 11 per cent to $120.4 billion. Cash flow from operations totalled $3.82 billion, up 1 per cent from fiscal 2014.

“While several Cargill businesses generated very strong earnings in fiscal 2015, we lagged results from the prior year and did not meet our own expectations,” said David MacLennan, Cargill’s president and chief executive officer.

In addressing the fourth quarter, Mr MacLennan noted that all four of the company’s business segments were profitable. The loss in the three-month period resulted from charges taken at the corporate level, including an asset impairment related to the company’s enterprise resource planning (ERP) system and an additional charge related to Venezuela’s currency.

Mr MacLennan added: “The economic environment remains sluggish in many emerging markets where we have invested significantly over the past several years. Even so, we aim for growth and profitability through these cycles.

"We are moving forward with good progress on changes begun last year to optimise the business portfolio, reduce costs and increase operational effectiveness.”

"Given Cargill’s broad presence in food and agriculture, we’re in a good position to drive positive change. We want to be the most trusted source of sustainable products and services in our industry.”

Segment performance

Animal Nutrition & Protein posted increased profits for the full fiscal year, with strong performances in global animal nutrition, Central American poultry, and US pork, turkey and egg further processing.

The segment executed extremely well, drawing on its global reach, diverse products and services, and lower feed input costs.

Softer results in some animal protein businesses held fourth-quarter earnings below the year-ago level. The biggest factor was the North American market, where high cattle costs decreased beef’s competitiveness relative to other meats.

In the fiscal 2016 first quarter, Cargill agreed to sell its US-based pork business to JBS USA Pork for $1.45 billion, pending regulatory review and approval.

Full-year earnings in Origination & Processing were up slightly for the year; fourth-quarter results lagged the year-earlier period.

Recent years’ record-large crops in the Americas have seen the rebuilding of global agricultural commodity stocks, which reduced price volatility and limited market opportunities for many of the segment’s businesses.

Adverse economic conditions hampered results in Argentina, as farmers held their crops; Brazil also experienced slower farmer selling due to lower global prices for corn and soybeans.

Cargill’s evacuation and the subsequent armed occupation of its sunflower seed processing plant in Donetsk, Ukraine, in early July 2014 decreased earnings in that region during the following 11 months.

In contrast to those geographies, results in North America were strong. The combination of a record US soybean crop, limited supplies from South America and a strong export pull for most of the year boosted soybean crush volumes in North America, even in the typically slower fourth quarter.

After months of unusually high grain-handling and export volumes in Canada, driven by the country’s very large 2013 and 2014 harvests, the segment’s grain origination returned to more normal levels in the fourth quarter. Alvean, the new Cargill-Copersucar sugar joint venture, got off to a very strong start in its first eight months of operations.

Earnings in Food Ingredients & Applications trailed the prior-year period for both the fourth quarter and full year. Areas of continuing strong performance included Cargill’s salt operations, which met high demand for deicing products during a harsh northeastern winter in North America.

Ardent Mills, the North American flour milling joint venture formed by Cargill, ConAgra Foods and CHS in fiscal 2014, had a successful first year of operation. Elsewhere in food ingredients, earnings lagged.

The economic slowdown and excess industry capacity in emerging markets decreased results, as did rapidly evolving consumer preferences in developed economies. Comprehensive efforts are underway to improve profitability and reshape the portfolio for better performance.

The Industrial & Financial Services segment posted an upturn in the fourth quarter, though not for the full year. The energy businesses, especially petroleum, performed significantly better than a year ago in both periods – a function of last fiscal year’s restructuring and good positioning during calendar 2014’s sharp drop in crude oil prices.

TheCattleSite News Desk

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