April 10, 2012 / 2:20 PM / 6 years ago

UPDATE 2-Cargill earnings bounce back led by food sector

* Q3 earnings $766 million, vs $763 million last year

* Revenues $31.9 billion, up 5 percent

* Food segment leads results

By Christine Stebbins

April 10 (Reuters) - U.S. agribusiness giant Cargill Inc reported a rebound in earnings after its worst quarter in a decade, led by record profits in its global food ingredient businesses and stronger results in energy trading.

Minneapolis-based Cargill, one of the world’s largest privately held corporations, reported $766 million in earnings from continuing operations for the fiscal third quarter ended Feb. 29, just ahead of $763 million a year earlier.

Revenue rose 5 percent to $31.9 billion.

Third-quarter results represent a bounce back after Cargill’s second quarter profits fell 88 percent to $100 million -- the worst quarterly performance since 2001, as earnings were hurt by investments made in equity markets and by distressed assets amid the European debt crisis.

“Cargill’s earnings strengthened in the third quarter, totaling more than twice that earned in the first six months of the fiscal year,” Cargill’s chief executive Greg Page said in a statement. “Although it continues to be an unsettled year for the global economy, we did a better job navigating the uncertainty.”

Despite the third-quarter rebound, profits were still below year-ago levels in four of Cargill’s five main business units. But there were “much stronger” results in the company’s energy businesses, the company said, which kept its big risk-management and financial unit slightly below the year-ago results.

Cargill and rivals such as Archer Daniels Midland Co and Bunge were hit late last year by volatile prices, with commodity markets often gyrating on news of the European debt crisis rather than the fundamental factors like food supply and demand.

But it said the recent quarter saw a marked improvement.

“The grain and oilseed trading and processing businesses put their combined insight to good advantage in analyzing and managing the ongoing instability and risk in the global economic and geopolitical environment,” Cargill said in its release.

“The segment established favorable trading positions in most parts of the business, even though the slowdown in U.S. grain exports, the buildup in global oilseed processing capacity and geopolitical tensions made for challenging market conditions.”

In December the company announced it was cutting 2,000 of its employees globally, or 1.5 percent of its workforce, citing a weak global economy. Cargill told Reuters on Tuesday it was on track to have layoffs completed by May 31.

Standard & Poor’s analyst Chris Johnson said the results showed some stabilization which he expected. Commenting on Cargill’s job cuts: “There really isn’t enough time for there to be a meaningfully impact showing yet on earnings.”


Third-quarter earnings got a big boost from Cargill’s massive food segment. Cargill’s food ingredient businesses, which include sweetners, starches, and soy and wheat flour, posted record profits, the company said.

The company’s global meat businesses, which have been hit by some recalls in the past year, also improved from the second quarter. But meat profits overall were “still well below” the year-ago record level due to a cyclical downturn in the North American beef business, the company said.

“You have this mix of cyclical trends coming together -- a declining cattle herd, record high cattle prices, high feed costs, the drought in Texas and slower demand as many people are coming out of a slow period economically,” Lisa Clemens, Cargill spokeswoman, told Reuters. “It’s been tough area from a supply and demand curve.”

The company’s industrial unit earnings were also below a year ago, hurt by sharply lower demand for deicing salt products given an exceptionally mild winter across North America.

Earnings in its agricultural services were hit by a drop in North American farm services income.

Cargill, which operates in 65 countries, is a leading U.S. grain exporter, food processor, energy trader and biofuels producer. If Cargill were a publicly listed company, its 2011 sales of $119.5 billion would have ranked No. 13 on the Fortune 500 list of largest U.S. companies.

The company said it continues to expand its global processing and handling footprint. During the quarter Cargill broke ground in Brazil on a second big corn wet milling facility there; began enlarging its Tacoma, Washington, grain export joint venture with U.S. farm co-op CHS ; and continued construction of its third corn sweetener plant in China.

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