The Minnesota-based company suffered an 88% decrease in profit in the second quarter ended November 30, with earnings of only $100m, down from $832m in the same period a year ago. This is the third consecutive drop for Cargill, and earnings from continuing operations in the first six months were down to $336m, compared with $1.53bn in the first six months of last year.
Cargill’s food and applications segement, which was strengthened by recent aquisitions in Brazil and Europe, was the largest contributor to its second quarter earnings. However, its global meat businesses saw a big drop in earnings compared to last year, with the exception of recent animal protein aquisition in Central America.
Greg Page, Cargill chairman and chief exectuive officer said that the second quarter was “significantly below expectations”. He blamed the loss on challenging trading conditions, a drop in sugar prices and the fact that the company’s meat businesses experienced “one of their weakest quarters”.
However, Cargill spokeswoman Lisa Clemens said: “Our global group of meat businesses had a weak quarter compared with last year, when they posted their best quarter ever. So the comparison is a part of the story.” This time last year, the company’s meat businesses contributed to Cargill's total net earnings of $1.49bn, up from $489m in the same period in 2010.
She added: “Much of the difficulty was centered in North America, where the shrinkage in US fed cattle supplies, exacerbated further by the Texas drought, pressured margins in beef. That is part of being in a cyclical industry.
“Within the group, performance also varied, for example, our poultry and processed meats business in Central America had a very good quarter.”
Looking ahead, Page said that Cargill is working to reduce costs and simplify work processes across the company. “Cargill has been through difficult cycles before, made changes and emerged stronger for it. We are confident that the actions we are taking to create a more agile enterprise will better position us in the current economic environment.”
He added that he was confident in the business’s ability to survive and said it would continue to reinvest in assets such as Provimi, a leading global animal nutrition company, which it recently aquired for an enterprise value of $2bn.
It remains clear exactly how the business plans to boost its meat businesses, as the company said it would not give any detail on actions to be taken by individual business units.