August 9, 2011 / 1:46 PM / 8 years ago

UPDATE 3-Cargill quarterly earnings dip on trading results

* March-May volatile energy and financial markets weigh

* Cargill Q4 revenue rose 32 percent

* Full-year earnings $2.69 billion, up 35 percent

* Full-year revenues $119.5 billion, up 18 percent (Adds byline, CFO comments, background)

By Christine Stebbins

CHICAGO, Aug 9 (Reuters) - Giant U.S. agribusiness and trading firm Cargill Inc [CARG.UL] said earnings fell 7 percent in its fiscal fourth quarter, hit by volatile energy markets and weaker risk management and food ingredient results.

Minneapolis-based Cargill, one of the world’s largest privately held corporations, reported $404 million in earnings from continuing operations in the quarter ended on May 31, compared with $435 million a year earlier.

But Cargill, a top U.S. grain exporter, biofuels producer, food processor and energy trader, also reported fourth-quarter revenue rose 32 percent to $34.8 billion.

“The past year presented a challenging operating environment,” Cargill CEO Greg Page said in a statement. “From weather-related supply shocks in food commodities, grain export restrictions and rising energy prices to the uneven global economic recovery, looming sovereign debts and deficits, political unrest and natural disasters — the uncertainty led to volatile prices across a range of raw materials.”

For the quarter, earnings fell in risk management and food ingredient businesses but rose in Cargill’s grain origination and processing, agricultural services, and industrial sectors.

Year results in four of five basic business units rose.

“Results declined in risk management and financial for the quarter and the year due to lower earnings among the energy businesses,” Cargill said in detailing its results.

“The energy trading piece — volatility was pretty much against them at that point,” Cargill Chief Financial Officer Sergio Rial told Reuters in an interview, saying Cargill’s traders “were not well positioned during that quarter.”

The whipsaw action in oil prices during the quarter, including a $10 plunge in crude oil on May 5 and a relentless widening of the spread between U.S. crude and European Brent, hurt earnings at several other market titans from Goldman Sachs (GS.N) to BP (BP.P) to oil trader Phibro, analysts have said.

“It’s a’s one-off,” Rial said of the energy trading, “It’s still 7 percent down but we don’t find that to be of significance to justify any structural change. You do have quarters where trading results are not what you expect.”


Full fiscal year revenues rose to $119.5 billion, up 18 percent from $101.3 billion the prior year. Cash flow from operations was $4.6 billion compared with $3.3 billion a year earlier, underscoring Cargill’s fundamental strengths.

Full-year earnings from continuing operations totaled $2.69 billion, a 35 percent jump from a year before.

Rial said Cargill’s recent decision to recall 36 million lbs of fresh and frozen ground turkey products tied to an outbreak of an antibiotic-resistant Salmonella strain that has sickened 77 people and resulted in one death in California was a top priority for the company.

Rial said financial impact of the turkey recall “should not be material” to earnings, but “we take this case very seriously. Food safety is very important for our meat business.”

Cargill said it recorded an additional $359 million in the fourth quarter from discontinued operations, income attributable to Cargill’s former majority investment in fertilizer maker Mosaic Co (MOS.N).

The company also recognized a one-time accounting gain of $11.49 billion on the May 25 distribution of its Mosaic shares, which were exchanged for Cargill stock and Cargill debt.

Cargill said in January it would spin off its 64 percent stake in Mosaic to maintain its private company status while enabling Cargill family trusts to diversify their holdings.


In fiscal 2011, Cargill also said it invested more than $3 billion in acquisitions and new or expanded facilities.

The company acquired AWB’s commodity management business in Australia, Unilever’s condiments business in Brazil, Indonesian starch and sweetener maker PT Sorini Agro Asia Corporindo Tbk, Royal Nedalco’s potable alcohol operations in Europe, a Chinese port facility, a Canadian grain facility and a U.S. corn wet mill ethanol facility.

Among its plant expansions are animal feed mills in Russia and Vietnam, poultry processing operations in Thailand, a sweetener facility in China and food innovation centers in Brazil and the U.S.

Reporting by Christine Stebbins, editing by Dave Zimmerman, Gerald E. McCormick and Gunna Dickson

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