Cargill’s net profit rises 5 percent, reports “slightly lower” adjusted profit for food ingredients business

01 Oct 2018 --- Cargill’s net profit rose 5 percent during the summer months, but its adjusted earnings were flat as only one of its four business units reported a gain. The only one of the privately held company’s business units to show a gain this summer was Origination & Processing, which includes the trading of grains and other commodities.

Cargill has reported results for the first quarter of fiscal 2019, which ended Aug. 31, 2018. Adjusted operating earnings totaled $883 million, nearly matching the $888 million earned in last year’s strong comparative period. Net earnings on a US GAAP basis were $1.02 billion, up 5 percent from $973 million in the prior-year period. Revenues rose 5 percent to $28.7 billion.

“Our customers are choosing Cargill more and more often because we provide them the confidence they need to win in a fast-changing world,” said David MacLennan, Cargill’s chairman and chief executive officer. “We give them an edge by connecting them to our team’s expertise, unique capabilities and global network. Whether it’s sustainably sourced foods and feeds digitally driven insights, or supply chain risk management, we will continue innovating to provide an integrated set of solutions that meet their needs.”

Food Ingredients & Applications delivered slightly lower earnings against a strong comparative period. The segment posted gains in cocoa, chocolate, edible oils and malt, while earnings in starches, sweeteners and texturizers were affected by lower ethanol prices and trading results in North America and currency devaluations in emerging markets. The segment’s salt business fell below last year’s level due to higher road salt production costs and freight rates. The segment formed a new bioindustrial group focused on meeting the growing demand for sustainably made and sourced products serving the consumer and industrial segments.

Adjusted operating earnings in Animal Nutrition & Protein were just below last year’s strong opening quarter, lifted by another good performance in North American protein. Domestic and international demand for beef remained strong, as did foodservice demand for value-added egg products. In contrast, the U.S. turkey meat market continued to be weighed down by excess supply relative to demand. Despite improved performance in China and Europe, a mix of challenges in Central America and Southeast Asia reduced results in the segment’s global poultry business. Earnings in animal nutrition lagged the prior year due to varying combinations of higher input costs, lower sales volumes and pricing pressures in different countries. This was partially offset by gains in Latin America for micronutrients, premixes and feed additives.

Origination & Processing earnings were up appreciably from a weak comparative period. Global demand was strong and markets volatile, as weather events in key crop-growing regions and rising economic uncertainty brought the segment’s sourcing, trading, analytical and logistical skills to the fore. Regionally, Asia Pacific improved performance with good trading and oilseed processing results, while North America and Europe realized solid oilseed processing results in canola, soybeans and biodiesel.

Industrial & Financial Services trailed the prior year due to lower returns from Cargill’s asset management activities. The decrease was partially offset by good performance in trade finance and commodity risk management, where teams helped customers steer through the volatility that returned to global commodities markets. The ocean transportation business demonstrated leadership in decarbonizing the shipping industry by committing to reduce its carbon dioxide output per cargo-ton-mile by 15 percent by the end of 2020. To help achieve this goal, it launched a “CO2 Challenge” that will seek to uncover and scale new technologies to lower ships’ emissions. Entrepreneurs and technologists will be selected to participate in this project in the coming months.

Cargill recently revealed plans to invest US$150 million to construct an HM pectin production facility in Brazil. The intended project is part of a comprehensive plan to strengthen Cargill’s full pectin footprint, including improvements to its existing three plants in Europe (Germany, France and Italy) and adding a new plant in Brazil to take advantage of local resources.

In an interview to be published in the October/November issue of The World of Food Ingredients, Julian Chase, CEO, Cargill Starches, Sweeteners and Texturizing spoke about some of the company’s recent expansion plans.

“We are very excited about pectin and HM pectin in this case. It’s a growing market, especially when it comes to beverages and the increasing demand for label-friendly ingredients. If you look at Cargill’s wider strategies of sweeteners and texturizers, we are focused on three main pillars: sweeteners, texturizers and protein specialties,” he says. 

“So we see pectin as a key ingredient and our network in Europe will continue to strengthen. But reaching field supply in Brazil and Latin America is key for us – to have another global source. Pectin has a great clean label image to meet the trends of a global market. It’s a familiar ingredient for people that is derived from citrus. It’s part of our strategy to be an industry leader. Having a state-of-the-art plant in Brazil strengthens our global network and global offering,” he adds.

In terms of other expansion plans for this business, he notes that they are looking for a mixture of organic and non-organic growth. 

“As well as announcing our intentions in Brazil, we have changed our Germany plant to switch from corns to wheat, which helps us deliver in vegetable protein and industrial starches. We have launched our EverSweet products – we have a full line of stevia solutions and fermented stevia – these will play together. We also have ongoing R&D projects and some things on which we are going to build. We have an active M&A board. We are looking at smaller companies that can serve as platform technologies or solutions to help us build on what we are missing around protein, sweeteners and texturizer. We are always active and looking for partnerships and acquisitions,” he concludes.

By Robin Wyers