* 1st-qtr earnings $975 million vs $236 million a year ago
* All five business segments up
* Impact of U.S. drought still unfolding
By Christine Stebbins
Oct 11 Cargill Inc said on Thursday
quarterly earnings more than quadrupled from a year ago
following its worst quarter in two decades and the agribusiness
giant expressed confidence it will handle continuing fallout
from historic droughts in the United States and elsewhere.
Minneapolis-based Cargill, one of the world's largest
privately held corporations and a bellwether of world commodity
markets, said net earnings totaled $975 million for the first
quarter of fiscal 2013, ended Aug. 31, compared with $236
million a year ago.
Profit rebounded from $73 million for the March-May quarter,
the company's lowest quarterly earnings since 1991.
"We are cautiously optimistic about the rest of the year,"
said Cargill spokesman Mark Klein. "We're pleased with the
improvement in the first quarter. We expect challenges ahead.
But we think we are in a good position to help customers manage
tighter supplies and volatility in markets."
Standard & Poor's analyst Chris Johnson, who downgraded
Cargill's outlook to "negative" in August, said a rebound had
been expected but last year's unusually weak quarter meant the
company still faced stiff hurdles.
"When you compare this quarter to last year, you are going
to have a good rebound. That was the majority of the positive
momentum," Johnson said. "One quarter doesn't necessarily
indicate that they have fully come back."
Cargill reported weak results in three of the four quarters
in fiscal 2012, citing volatile commodity markets and soft world
economic growth, even before the drought began hurting crops and
livestock across the United States, the largest exporter of
corn, soybeans and wheat.
Revenue for the first quarter dipped to $33.8 billion from
$34.6 billion a year earlier, the company said in a statement.
Revenue was $34 billion in the prior quarter.
Cargill Chief Executive Greg Page in a statement attributed
the improved performance to the company's broad reach into most
major areas of the world's food production systems.
Cargill operates as both an agricultural supplier and
consumer - a leading crop processor and exporter, a maker of
livestock feeds as well as a livestock feeder, a manufacturer of
meats and cocoa and ethanol, a global commodity trader, and a
risk manager in world financial markets.
So the company can tap its advantages up and down the food
supply chain, as well as its shipping, banking and hedging
expertise in dozens of markets.
"By investing steadily, we've been able to significantly
boost the breadth and depth of the products and services we
offer our customers," Page said. "And that has strengthened the
balance, diversification and resilience we strive for in our
Page warned, however, that the full effects of drought and
other weather-related damage to U.S. and world crops were still
working through the supply chain and would challenge food
processors, livestock feeders and exporters in the months ahead.
The company said it expects more "atypical" trade flows as
the weather has altered the normal distribution of raw materials
around the world, pushing more international buyers to non-U.S.
"Cargill's North American grain handling volumes for exports
are anticipated to be lower than pre-drought expectations, and
it may be a challenging year for the company's animal protein
businesses globally," it said.
The U.S. Agriculture Department on Thursday said that U.S.
corn stockpiles will fall to the lowest level in 17 years before
the next harvest - a bare three weeks supply. U.S. soybean
stocks will be the lowest in eight years.
USDA also cut its estimate for Australia's wheat crop by 12
percent due to drought, a reminder of the challenges Cargill
faces in finding grain to fill its giant export pipelines for
Asia, Europe and the Middle East. Russia and notably the Black
Sea region have also been hit hard by drought.
COST-CUTTING, STRONGER GLOBAL MARKETS PAY OFF
Cargill's top competitors in world grain markets, like ADM
and Bunge, have also been pressured in the last
year by volatile markets.
ADM said in February it was cutting 1,200 jobs worldwide to
reduce costs. Bunge is slowly recovering from hits to its sugar,
fertilizer and biofuels businesses. Both are due to report
quarterly earnings in coming weeks.
Cargill is much larger and more diversified than those
companies, with 142,000 people in 65 countries.
On Aug. 15, Standard and Poor's revised its outlook for
Cargill to negative from stable, citing doubts about a 2013
earnings rebound. But S&P reaffirmed Cargill's strong credit
"They still have a couple headwinds," S&P analyst Johnson
said on Thursday. "The biggest headwind, which is the main
driver for our negative outlook, is their animal nutrition, beef
business and other animal protein businesses are still weak
given the drought. The other headwind is that the drought will
mean less volume out of North America to either handle or
process but that's probably not as big of an impact as beef."
Cargill said its latest quarterly results were balanced,
with improved earnings across all five business segments --
agricultural services, food ingredients, food and crop
processing, risk management and an industrial sector that
includes metals, salt and other commodities.
There were no significant losses in any one business unit
and results were aided by efforts in the past 12 months to lower
costs, streamline work flows and reassess capital spending. Page
said Cargill spent $8.1 billion on supply-chain investments in
the last two years.
The company's big risk management and fund investment
businesses, closely watched by analysts, also posted positive
results. Cargill's operations in the euro zone in particular
have been hit by turmoil in the region's currency and domestic
markets, analysts say.
"Risk management and financial sector, like the other four,
improved," said Cargill's Klein. "The sector was aided in part
by strengthening global financial markets."