Cargill weathers turbulent markets to report nearly $4bn profit
The company said 2008 earnings were $3.64b from continuing operations, up $2.34b a year ago. However, a $310m gain on the sale of discontinued operations in the fourth quarter brought fiscal 2008 net earnings to $3.95b.
Full financial details were not disclosed as Cargill is a privately held company but it reported that profits in both the agriculture services and the food ingredients and applications segments were well ahead of the previous year.
A Cargill spokeswoman said that over recent years they acquired companies that are market leaders in food texturisers and specialty ingredients and have used these capabilities to become a better innovator.
She added: ‘We have been steadily investing in our food ingredient business and we are seeing the benefits today of these past investments.”
Global climate
Commenting on the company’s financial performance, Greg Page, Cargill chairman and chief executive officer, said it came in “a year of exceptionally strong commodity demand, market turbulence and price risk”.
He added: “By bringing to bear our business diversity, the full capacity of our global assets, strong risk management and a significant increase in capital deployed, we operated successfully in the most volatile agricultural and energy markets in decades.
“Despite tight stocks of many agricultural commodities, we maintained reliable supply chains for our customers and created value-adding solutions.”
Page said that growth in gross domestic product among the world’s developing economies has given millions of people the means to improve their diets, which has lifted demand for grains and oilseeds. Underpinned by high oil prices and government mandates and subsidies, global production of biofuels has also boosted demand.
At the same time world grain stocks are at 35-year lows, drawn down by weather-affected crops and slower growth in average crop yields worldwide.
The chairman said this tight dynamic sent prices and price volatility to new highs during the financial year, while elevated energy prices increased the cost of producing and transporting agricultural commodities.
However he believes that there is the means for agriculture to catch up with demand and said: “If markets are allowed to work, today’s prices can spark a supply response from farmers. A rekindling of public and private investment in agriculture and in rural infrastructure will drive productivity gains.”
Quarterly profit
Cargill reported earnings from continuing operations of $744m in the 2008 fourth quarter which ended May 31. This was up 18 percent from $628m in the same period a year ago. The $310m gain on the sale of discontinued operations brought fourth-quarter net earnings to $1.05b.
Among Cargill’s five business segments, fourth-quarter earnings were led by the origination and processing segment and the industrial segment, both of which were up substantially from the same period a year ago. Earnings in agriculture services, food ingredients and applications, and risk management and financial were all below last year’s levels.
For the full year, earnings were led by origination and processing, which increased results substantially from last year. The industrial segment, which includes Cargill’s investment in the fertilizer business, also posted “exceptionally strong earnings”. In risk management and financial earnings declined moderately from last year’s high.
Cargill revenues for the full year rose 36 percent to $120.4b, while cash flow from operations increased 77 percent to $7b.
Cargill is an international provider of food, agricultural and risk management products and services. It is one of the world’s largest privately held companies with 160,000 employees in 67 countries.
