| CHICAGO, March 27
CHICAGO, March 27 Cargill Inc has
shifted its focus in the energy sector with its exit from coal
and European power and gas markets, confirming a commitment to
areas where it can be more competitive.
The 149-year-old company is shutting its power and gas
trading desks in Europe 14 years after establishing the business
in Geneva, becoming the first traditional commodities firm to
step away from a sector hard-hit by falling margins.
Cargill said all of the closures were unrelated to losses in
U.S. energy markets, which one report put at more than $100
The closures follow just six months after new chief
executive David MacLennan stressed plans to expand Cargill's
energy business to include more physical trade.
"It is likely that Cargill has made these changes to help
optimize the overall profitability of its broad global portfolio
of businesses," said Judi Rossetti, a senior director for Fitch
One of the world's largest privately held corporations and
biggest commodities firms, Cargill is best known as a top grains
trader. Its revenue of $136.7 billion for fiscal 2013 would have
placed it No. 10 on the Fortune 500 list of publicly held
Investors will watch to see whether other trading firms
follow the energy strategy of Cargill, which also has closed its
carbon emissions trading and renewable energy businesses.
"We are making these decisions in order to focus our
resources where we can be most successful for our customers and
for Cargill," spokesman Pete Stoddart said.
Separately, Cargill said on Thursday that it will form a
joint sugar trading business with Brazil's Copersucar that is
likely to be the world's largest.
MacLennan said in September that he believed the company's
greatest opportunities for growth were in Brazil.
Traders said they expected the 23-year company veteran to
move employees and resources from the coal and European power
and gas businesses to other segments of Cargill's energy
Cargill may be "cleaning up parts of their energy trading
that aren't working" in preparation to move ahead with
MacLennan's strategy to expand in physical energy trading, said
Ken Morrison, a trader who worked for Cargill for 27 years.
"Just drawing from the culture there, I'd be surprised if
they were taking a U-turn so soon," he said, referring to
MacLennan's plan to expand Cargill's physical presence.
Fewer than 50 of Cargill's 140,000 employees will be
affected by the closure of the energy desks, and many will be
reassigned to other Cargill segments, according to the company.
The company will continue trading in petroleum, petrochemicals,
iron ore, steel, ocean freight and North American gas and power
"Our understanding is there are some areas that they are
probably not as competitive in as others," Standard & Poor's
analyst Chris Johnson said about Cargill. "To the extent they
exit certain businesses, it probably reflects that assessment."
Cargill's coal business was an active player across physical
and financial markets, according to its website. In January, it
reported earnings in the energy unit, which included trading in
petroleum, coal, power and gas, had declined in the second
quarter ended Nov. 30.
A spokeswoman at the time said the energy business was
"heavily dependent on trading and trading goes through different
cycles of performance."
Cargill's agricultural rivals also have sought to shed
underperforming assets, with Archers Daniels Midland Co
looking to sell its cocoa business and Bunge Ltd
reviewing options for its Brazilian sugar operations. The
companies, along with Louis Dreyfus Corp, make up a
group of firms known as the "ABCD" that dominate global
Global commodities traders may be realizing that they "can't
do everything," said Philippe de Laperouse, director of
HighQuest Partners' global food and agribusiness practice and a
former Bunge executive.
"We see in all the commodity markets that volatilities are
here to stay," he said. "Maybe there's a sense that in being
able to manage that volatility, you can only do so much."
(Additional reporting by Christine Stebbins in Chicago; editing
by Andrew Hay)