US tax change cited for lower Cargill Q3 earnings

06-Apr-2018 - Last updated on 06-Apr-2018 at 12:30 GMT

Cargill reported a 24% drop in third-quarter earnings saying it was hit by a charge of $161m related to the recent change in US tax laws. The Minnesota-based agro-giant, however, reported a strong performance for its animal nutrition, grain origination and processing divisions in its Q3.

Cargill announced financial results for Q3 and the first nine months of the year yesterday (April 5).

Net earnings for the three months to February 28 reached $495m, against the $650m achieved in the year prior. For the 9 months, income fell 4% to $2.39bn. Without the tax-related charges, Q3 earnings were in line with last year, said Cargill. Adjusted operating profits for Q3 dropped 22% to $559m.

Lisa Clemens, senior director of investor relations with Cargill, told us:“The decrease in our third-quarter is attributable to the net impact of the new US tax law,” she told FeedNavigator. “Excluding it, we are up about $6m over last year’s third quarter on a GAAP basis. On an adjusted basis, we are up about $5m.”

The GAAP results for the first nine months, without the tax charge, would have been up about 3%, she said.

“The net charge of $161m largely reflects the accrual for the transition tax on foreign accumulated earnings,” she said.

It is expected to be a one-time charge only applicable to the third quarter, added Clemens.

Segment results

Animal nutrition and protein had a solid performance for the quarter and, for the fourth consecutive quarter, that business activity has led results, Cargill reported.

“Performance in complete animal feeds, premixes, additives and micro-nutrients contributed strongly to earnings, as did beef and egg protein results in North America."

However, results for aqua feed and nutritional products and poultry were lower.

The company said it is continuing its efforts to grow its presence in specific animal nutrition and protein markets. It also is focusing on expanding digital capabilities with a minority equity investment in Cainthus.

“Cargill also introduced iQShrimp, a predictive software that uses machine learning and sensors to provide shrimp producers with real-time visibility into their operations.

“Finally, it opened a fish feed mill and a technology application center in Andhra Pradesh state, a central place for aquaculture in India. Both facilities are aimed at helping shrimp and fish farmers grow healthy seafood with improved productivity.”

In origination and processing results provided a slight improvement on the third quarter in 2017, the company said.

“After five years of very large crops, the buildup in global stocks has quieted markets, but volatility picked up late in the period, allowing for better trading opportunities,” it added.

Origination in Brazil has remained slow and oilseed processing for several regions was poor, although margins strengthened toward the end of the quarter, the company said.

The focus for the segment continues to be on efficiency, said Cargill. Investments are ongoing to improve connections of global operations and supply chains, improve trading and risk management, and provide more information and tools to farm customers.

Food ingredients and applications helped contribute to company earnings with performance gains for cocoa, chocolate and edible oils, the company said.

However, reduced ethanol prices in North American and manufacturing costs in Europe reduced results for global sweeteners and starches.