REFILE-UPDATE 2-Cargill profit quadruples, led by grain sector
* Earnings strong despite U.S. drought
* Revenue up 6 percent to $35.2 billion
* Focus turns to capital investments, away from acquisitions
CHICAGO, Jan 9 (Reuters) - U.S. agribusiness giant Cargill Inc reported a four-fold increase in quarterly earnings on Wednesday, tapping its global command of cash markets and food processing and posting strong profits from trading operations after a poor performance a year ago.
The strong results came as the United States, the world's top food producer and exporter, struggled with the consequences of its worst drought in more than 50 years. Commodity prices rose and fell sharply during the September-November quarter as fears of crop losses gripped the markets.
Cargill's expertise in worldwide markets helped it navigate the turbulence, company officials said. Cargill is a top trader in dozens of commodity markets, from cocoa and sugar to livestock, grains and cotton.
"Given Cargill's strength in analysis and risk management, logistics, we are able to match those to the market conditions," said Cargill spokeswoman Lisa Clemens.
"A year ago our markets were dominated by political and macroeconomic uncertainty," she said, citing the European debt crisis which hurt trading results a year ago.
Minneapolis-based Cargill, one of the world's largest privately held businesses, said net earnings soared to $409 million for the quarter ended Nov. 30 from $100 million a year earlier. Quarterly earnings a year ago were Cargill's worst since 2001.
Revenue rose 6 percent to $35.2 billion.
It was Cargill's second straight quarter of strong earnings after weak results in fiscal 2012 prompted Standard & Poor's to downgrade the company's outlook to negative.
But in a reflection of persistent market volatility, Cargill's second-quarter earnings were half of the $975 million the company posted in the June-August quarter. Revenues, however, continued to grow from the $33.8 billion of the prior quarter.
"Second quarter net earnings showed significant improvement versus the year-ago period, which was unusually weak. However, earnings were down sequentially versus a very strong first quarter," said Judi Rossetti, an analyst for Fitch Ratings.
"Earnings volatility is likely to continue, particularly due to low commodity supplies and shipping concerns related to the U.S. drought and high raw material and feed costs in U.S. beef processing," she said, noting that Fitch is unlikely to make a rating change based on Wednesday's report.
Fitch's current outlook for Cargill is "negative."
Smaller rivals like Archer Daniels Midland and Bunge faced similar pressures but have also emerged from a period of poor earnings amid volatile commodity markets.
Cargill's chief executive said the company would be more restrained toward acquisitions in 2013, focusing on its large capital investment to grow the company's earnings.
"We have a record $2.4 billion of large projects under construction in 13 countries," CEO Greg Page said in a statement. "As these facilities come on line, they strengthen Cargill's supply chain, risk management and innovation capabilities."
Earnings rose in four of five Cargill business segments, with its grain processing and origination division posting the strongest results. Cargill's ability to hedge, source and ship grain and oilseeds gave it a competitive advantage as the drought roiled the markets.
Food ingredients and applications was the only segment down from a year ago as weak economies continued to affect margins as well as demand among Cargill's customers. Excess capacity in the North American ethanol market also pressured margins and returns.
But Cargill's animal protein business posted a profit versus a year-ago loss. Though results were tempered by higher livestock feeding costs, its meat businesses benefited from improved volumes and margins.
Fallout from the drought - including fears of another drought this summer - will continue to be a wild card for Cargill and other agribusinesses.
The United States is traditionally the largest exporter of wheat, corn and soybeans, and large companies like Cargill handle most of the tonnage for those shipments. The 2012 drought pushed corn prices to historic highs before profit-taking set in.
"We see the impact of the drought as still playing out. What happens over the next six months will be important," Cargill's Clemens said. "By the time we hit March, April, May, that's going to be a low period for U.S. exports and that's related to the drought-reduced crop."
The U.S. Department of Agriculture is forecasting corn exports will fall to a 38-year low.
Cargill is a bellwether for the world agricultural economy. If it were a public company it would rank No. 13 on the Fortune list of the largest U.S. companies for 2011.