Cargill’s “good start” to fiscal 2018 buoyed by proteins and food ingredients
02 Oct 2017 --- Cargill has reported encouraging financial results for the fiscal 2018 first quarter ending August 31, 2017. Key results include total revenues of US$27.3 billion, a little way ahead of last year’s US$27.1 billion, and encouraging performances in the fields of protein and human and animal nutrition.
Adjusted operating earnings totaled US$888 million, exceeding by 7 percent the $827 million earned in last year’s comparative period. Net earnings on a US Generally Accepted Accounting Principles (GAAP) basis were US$973 million, up 14 percent from US$852 million a year ago.
“We’re off to a good start in our new fiscal year, powered by the significant work we’ve done over the last few years and continuing to accelerate our performance,” says David MacLennan, Cargill’s chairman and chief executive officer. “Even as market conditions vary across our sectors, our teams are delivering for our customers and achieving results to fuel future growth.”
Protein and nutrition for animals stars
Animal Nutrition & Protein carried its momentum from fiscal 2017 into the new quarter, Cargill reports, with adjusted operating earnings up significantly from last year. Protein results in North America were lifted by brisk consumer demand for beef, strong exports and more abundant cattle supplies, resulting in better utilization of processing capacity.
Global poultry slightly lagged over the year-ago period, as somewhat weaker results in Central America contrasted with strong domestic sales and exports out of Southeast Asia. Global animal nutrition nearly reached last year’s quarterly results. Cargill adds that gains attributable to sales of value-added feed additives and premixes were offset by market pressures in aquafeeds in Europe and swine in Vietnam.
Food Ingredients & Applications was the second-largest contributor to company earnings, as continued attention to raising commercial capabilities and operating efficiencies yielded improved earnings. Cocoa and chocolate products, along with sweeteners and starches for food and other applications, led results in most regions. The segment’s Asia-based businesses also realized improved volumes.
Adding to its portfolio of specialty ingredients, Cargill also introduced canola lecithin to the market late last year. The emulsifier can be used by food manufacturers in a wide variety of foods and beverages, Cargill notes. In September, the ingredient received GRAS (Generally Recognized as Safe) status from the US Food and Drug Administration.
Origination & Processing was down from last year’s strong quarter, as positive trading results helped buffer against a challenging environment. Soybean processing in Brazil and China also added to earnings, along with exports from Brazil.
Although global demand for grain and oilseeds continues to grow, rising production and building global stocks during the last four crop cycles has depressed market volatility and commodity prices, according to Cargill. The segment is working to increase productivity in its supply chain while continuing to leverage its trading and risk management capabilities to bring additional value to customers. The startup of efficient new production lines in the segment’s oilseed processing plants in Wichita, Kansas, US and Fayetteville, North Carolina, US is said to have furthered this objective.
Acquisitions show potential
At the start of the quarter, Cargill acquired Pollos El Bucanero, a leading producer of chicken and processed meats in Colombia. Cargill also invested in San Leandro, California, US-based Memphis Meats in the protein space. The young company is developing methods to cultivate meat directly from animal cells. Over time, cultured proteins could potentially complement conventionally produced meats as part of the equation to sustainably nourish the future, Cargill reports.
In animal nutrition, Cargill completed the purchase of Southern States Cooperative’s feed business, which serves customers in the southeastern and eastern US. It also formed a partnership with Austria’s Delacon, a leading maker of phytogenic feed additives for the animal nutrition market. Both Cargill and Delacon seek to accelerate the growth of these “natural, plant-based feed additives that support animal health.”
