Cargill has reported its results for the fiscal 2019 third quarter and first nine months ended February 28, 2019. Key measures include adjusted operating earnings up 8 percent compared to the US$559 million earned last year. Net earnings on a US GAAP basis for the quarter were US$566 million, a 14 percent increase from US$495 million in the year-ago period. For the nine months, net earnings declined 3 percent to US$2.33 billion. Animal Nutrition & Protein was the most significant contributor to Cargill’s adjusted operating earnings, according to the company, but there were mixed results for Food Ingredients & Applications.
“Disruptions and uncertainty in the global business environment continued to present challenges during the quarter,” says Dave MacLennan, Cargill’s Chairman and CEO. “We remain focused on our growth objectives. To achieve them, we are innovating on what matters for our customers so they can win with consumers in local markets.”
Within Food Ingredients & Applications, starches and sweeteners earnings declined on historically low ethanol prices in North America and higher energy and raw material costs in Europe. Lower sales volume and higher operating costs in North America trimmed otherwise strong cocoa and chocolate performance in other regions. Edible oils pulled ahead of last year on good positioning and operating efficiencies.
Earlier this month, Cargill announced its acquisition of Smet, a Belgium-based supplier of chocolate and chocolate decorations. The purchase aligns with Cargill’s intent to accelerate growth in specialty ingredients, as Smet would broaden product offerings and services to artisan, chocolatier and foodservice customers.
Within the Animal Nutrition & Protein segment, revenues in North American protein exceeded the year-ago period, supported by continued robust domestic and export demand for beef as well as consumer demand for egg products. Higher production costs at Cargill’s poultry processing joint ventures in the Philippines and UK contributed to a decline in global poultry results.
Two recently acquired value-added chicken processors – Campollo in Colombia and Konspol in Poland – both got off to a good start as part of Cargill. Increased sales volumes for functional feed in North America improved earnings in aqua nutrition, but animal nutrition results in total trailed the prior year due in part to the outbreak of African swine fever in China and other countries.
Earnings in Origination & Processing reflected a challenging environment with ongoing trade tensions and other supply chain disruptions. In North America, soy and canola crush operations ran at high capacity, but the near absence of the Chinese market for US soybean stocks reduced profitability. The trade turbulence also negatively affected soybean crush operations in China, as did lower demand for soybean meal for feed following the culling of hogs to control the spread of African swine fever. The segment’s European and South American operations both posted higher profits over the prior year, with soybean and soft seed processing leading the way in Europe and corn and soybean origination improving in Brazil.
Partnerships for sustained prosperity
During the quarter, Cargill launched updated policies to strengthen protections for forests and promote rural agricultural development across its supply chains, with the launch of a South America Sustainable Soy Policy, a Human Rights Commitment and an updated Forest Policy. In conjunction with this, Cargill joined its fellow members of the Soft Commodities Forum (SCF) in committing to a common framework for monitoring and reporting progress on transparent and traceable supply chains for soy in Brazil's Cerrado region.
