Cargill profit plummets

Oct 16, 2009
by WLJ
Cargill profit plummets

Cargill Inc.’s fiscal-first quarter earnings tumbled 65 percent amid weakened demand and a sizeable drop in earnings from the agribusiness giant’s stake in phosphate fertilizer giant Mosaic Co.

Chairman and Chief Executive Greg Page said, “Cargill posted a solid quarter, notwithstanding the comparison to last year’s all-time record.” Still, he noted the earnings were broad-based and an improvement from the most recent two quarters.

Cargill, which doesn’t provide quarterly revenue, depends on its diversity to insulate it from volatility in its commodity businesses. The company’s business includes processing crops into food ingredients and slaughtering U.S. livestock to trading complex financial instruments. Cargill, which owns a 64 percent stake in Mosaic, has struggled as the processing units that buoyed it through falling commodities prices weakened, too.

However, it has continued to open or expand major processing facilities and strengthen its supply chains. And rival Archer Daniels Midland Co. indicated it had seen signs of strengthening in the global food and animal-feed markets when it reported its quarterly earnings in August, while Cargill had seen signs of recovery in emerging markets.

For the quarter ended Aug. 31, Cargill reported a profit of $525 million, down from $1.49 billion a year earlier.

Earnings at its agricultural services and food ingredients and applications rose from a year earlier, partly owing to lower raw materials costs, lower operating expenses, and changes in product mix.

The company said earnings at its origination and processing segment, though lower, were solid. Its risk management and financial segment earnings rose substantially as the financial services business returned to profitability and a good performance in its energy businesses. Financial services, which had been a key profit driver for Cargill, lost money in two of the prior three quarters. — WLJ