Cargill CFO says acquisitions will depend on fit, not finance

CHICAGO Wed Aug 7, 2013 7:32pm EDT

A logo is pictured on the building of Cargill International SA in Geneva August 4, 2009. REUTERS/Denis Balibouse

A logo is pictured on the building of Cargill International SA in Geneva August 4, 2009.

Credit: Reuters/Denis Balibouse

CHICAGO (Reuters) - Rising interest rates will have little to no effect on Cargill CARG.UL acquisitions in the coming year as the U.S. agribusiness company builds its network of supplies and customers in the global food system, Cargill Chief Financial Officer Marcel Smits said on Wednesday.

"Our view of the world is that very low interest rates lead to most people chasing for yield, and that doesn't help us in our operations," Smits said in an interview.

"It makes acquisitions expensive. We have a very strong balance sheet also relative to some of the competitors. So we're not fussed about interest rates going up a bit."

Cargill on Wednesday reported a six-fold rise in fourth quarter net earnings and nearly doubled full-year earnings to $2.31 billion, citing strength in its core grain-based and financial services.

On Monday, in its biggest acquisition, Cargill bought Australia's largest malt maker, Joe White Maltings, from Glencore Xstrata (GLEN.L) for an undisclosed sum. The deal is expected to close by year-end.

Smits declined to comment on cocoa industry speculation that Cargill may buy all or part of ADM's (ADM.N) cocoa business, which ADM in June indicated was for sale. Industry analysts have said ADM's cocoa business could be valued as high as $2 billion.

"Our cocoa business is doing well. We are building a new facility in Indonesia. We like our business. We are doing well with it. We are organically growing it," Smits said.

Cargill operates in 65 countries, employs 140,000 people and would rank No. 10 on the Fortune 500 list with fiscal 2012 revenue of $136.7 billion were it a publicly held instead of privately held company.

The company said it has $2.6 billion of agricultural, food and energy projects under construction or recently opened in 14 countries. These include poultry facilities in Efremov, Russia, China's Anhui province and in Korat, Thailand; an animal nutrition facility in South Korea; a corn processing plant in the Brazilian state of Paraná; a cocoa processing plant in Indonesia's East Java province; and a U.S. biorefinery campus in Fort Dodge, Iowa.

Smits said acquisitions have always played an important role in Cargill's growth strategy.

"We want to be disciplined in the way we do acquisitions ... You cannot say interest rates have gone up by a half percent, now let's go out and do a couple acquisitions. It's not the way works," Smits said.

"Normally we combine organic growth with acquisitions over a longer time horizon. Look back. You'll see we spent something like two-thirds on organic growth and one-third on acquisitions," he said.

"Last year we were below that one-third," Smits said. "There is no secret formula where we have it planned - above or below."

(Editing by Bob Burgdorfer)

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