Cargill Profits Boosted By Commodity Prices, Makes German Cocoa Investment

Cargill announced that it is expanding its cocoa and chocolate business in Europe through the acquisition of the business of Schwartauer Werke GmbH & Co. KG Kakao Verarbeitung Berlin, (KVB), an integrated chocolate company based in Germany.

1/13/2011 --- Cargill has reported net earnings of $1.49 billion in the fiscal 2011 second quarter ended Nov. 30, compared with $489 million in the same period a year ago. Excluding earnings from its majority investment in The Mosaic Company, Cargill earned $832 million, nearly double last year's $420 million.

In the first six months, Cargill earned $2.37 billion, up from $1.01 billion a year ago. Excluding Mosaic, Cargill's first-half earnings were $1.53 billion, a 74 percent increase from $878 million a year ago.

Consolidated revenues in the second quarter rose 16 percent to $31.1 billion, bringing the total through the first half to $58.9 billion.

"Cargill generated strong results across the breadth of our businesses," said Greg Page, Cargill chairman and chief executive officer. "The diversity and balance built into the mix provides the company with a great deal of resilience. By tapping the connectivity among our businesses, we also put more knowledge and insight to work on behalf of customers. Increasingly, they look to Cargill for innovation that supports their growth objectives."

Four of Cargill's five business segments posted increased earnings in the second quarter. Results were led by the origination and processing segment, which developed an early and accurate read on the first quarter's weather events and subsequent shifts in trade flows and supply-and-demand dynamics. This enabled the segment to serve import-dependent customers with grain rerouted from alternate origins while handling substantial volatility across agricultural commodity markets.

Second-quarter earnings also rose in agricultural services, aided by the bigger grain handling volumes made possible by the large North American harvest.

Results in food ingredients were mixed, with some units benefited by better volumes and gains from risk management activities and others pressured by higher raw material costs. On a combined basis, segment earnings increased moderately from the second quarter a year ago.

Industrial results were lifted by the increase in earnings from Cargill's majority investment in The Mosaic Company. Earnings decreased in the risk management and financial segment, reflecting sluggish demand in range-bound energy markets.

Meanwhile Cargill announced that it is expanding its cocoa and chocolate business in Europe through the acquisition of the business of Schwartauer Werke GmbH & Co. KG Kakao Verarbeitung Berlin, (KVB), an integrated chocolate company based in Germany. The price of the acquisition was not disclosed.

KVB has two production plants, both in Berlin, Germany. The two plants have a capacity of over 75,000 tonnes of chocolate per year and employ around 180 people.  Upon completion of the deal, after clearance from the regulatory authorities, KVB and its employees will become part of Cargill’s global network of cocoa and chocolate businesses, and benefit from the greater scale of the integrated operation.

“This acquisition marks a significant step in Cargill’s chocolate growth strategy in Europe and our ability to better serve our existing and future customers” commented Jos de Loor, head of Cargill’s cocoa and chocolate business. “The acquisition will strengthen Cargill’s position in Germany, the largest chocolate market in Europe, and create opportunities to expand our chocolate business into new markets.”

In terms of increasing Cargill’s foothold in the German chocolate market de Loor told FoodIngredientsFirst, “The issue is not about market share but quality of product and service available to customers across the chocolate markets. This acquisition will increase our overall market share but not to any market dominant level in any one of the sectors.”

KVB’s two Berlin plants will complement Cargill’s existing German cocoa and chocolate facilities in Klein Schierstedt and Hamburg. Once integrated into Cargill, the business and its customers will fully benefit from Cargill’s deep knowledge in cocoa and chocolate and its broad expertise in food ingredients and technologies.

Combining KVB’s expertise with Cargill’s consistently high standards in chocolate, its  access to high quality beans at origin, and its ability to manage ingredient price risks will stimulate further growth.

De Loor said: “The integration of the KVB chocolate assets and people into Cargill will strengthen our ability to deliver efficient and innovative solutions for our customers. We plan to invest significantly in KVB’s facilities to create a superior chocolate house that will enable us to offer customers greater choice, higher quality and extended market reach.”

Hermann Hauertmann, CEO of KVB commented “This transaction provides the basis for continued growth of KVB, both in Germany as well as internationally. The global network of Cargill opens up new opportunities in terms of supply chain and optimized cost structures to the benefit of our customers. We are confident that our people and our operations will deliver significant value to Cargill’s existing Cocoa and Chocolate business and look forward to develop innovative quality products for our valued customers.”

Completion of the acquisition is expected in the first part of 2011.

During the second quarter, Cargill agreed to acquire Unilever's shelf-stable condiments business in Brazil. The purchase includes leading brands in tomato sauce and paste, and a processing facility in the state of Goiás. The acquisition, which is expected to be completed in the first quarter of calendar 2011, would add to Cargill's stable of well-known brands of cooking oils, mayonnaise, olive oils, olives and pasta sold today in Brazilian supermarkets.

In December, the company announced agreements related to two additional acquisitions:

Cargill agreed to acquire a majority share position in PT Sorini Agro Asia Corporindo Tbk. Based in Indonesia, the company produces a wide range of starch and starch-based products used in food, beverage, cosmetic, personal care and pharmaceutical applications. The acquisition, which is expected to be completed in the first quarter of calendar 2011, would be an anchor for the future growth of Cargill’s food ingredients business in Asia, particularly in Indonesia and Southeast Asia.

Cargill reached an agreement with Calgary-based Agrium to acquire its AWB commodity management business. The business fits well with Cargill’s existing operations in Australia. It should help us meet growing food demand in Asia Pacific and around the world and allow us more opportunity to help Australian producers manage their grain marketing price risk and expand their access to global markets. Subject to various approvals, Cargill aims to complete the transaction in the first half of calendar 2011.