Animal nutrition, feed grains boost Cargill Q4, annual results

13-Jul-2018 - Last updated on 13-Jul-2018 at 07:44 GMT

Improved returns for animal nutrition, protein and in grain sales and trade helped Cargill see improved year-over-year results and an earnings bump in the fourth quarter.

The Minnesota-based agri-giant released details of its fourth-quarter results and full-year returns on Thursday [July 12].

Overall, the company saw $3.2bn in adjusted operating earnings for its 2018 fiscal year, which ended May 31. Earnings were up 6% from the $3.04bn in adjusted earnings reported in 2017.

For the fourth quarter, adjusted operating earnings were $809m, the company said. The results were a 76% increase from the $460m reported in 2017.

Net earnings for the year were $3.1bn, up 9% from the previous year, Cargill said. Revenues increased by 5% to $114.7bn.

Earnings for the fourth quarter last year were $347m, which improved to $711m, Cargill said. Revenues also grew – by 7% - to $30.4bn.

The financial performance is a demonstration of the company’s effort to redefine how it operates, it said.

“Our strong results show we are creating the connections the world needs for vibrant food and agriculture both today and tomorrow,” said David MacLennan, chairman and CEO with Cargill. “Cargill has always moved food from where it is produced to where it is needed. Today, we are pioneering new capabilities and partnerships to invest for the future.”

Results for both adjusted and net earnings for the year included a reduction of $86m stemming from the US Tax Cuts and Jobs Act, the company said. However, that drop was less than the $161m the company initially predicted in its third-quarter results.

Segment highlights

Within the company, the animal nutrition and protein and origination and processing segment results helped boost earnings for the quarter and the year, Cargill said.

The animal nutrition and protein segment was the main contributor to the improved adjusted operating earnings for both the final quarter and the full year, the company said. Part of the strength for the results came from an increase in domestic and export demand for protein products including North American beef and value-added eggs.

However, there was a “moderate” drop in returns for poultry products in the global market attributed, in part, to a gap in supply and demand in Thailand.

Sales growth for feed additives, premixes for customized animal nutrition and micronutrients also boosted company earnings.

Cargill said that it is continuing to invest in animal nutrition and digital technology companies. Throughout the year, it acquired Diamond V and invested in Austria-based Delacon – both companies with product lines addressing animal health through plant-based or fermented feed additives.

“Both are part of our ongoing focus on reshaping our business portfolio for long-term growth, including investments and partnerships in differentiating capabilities and technologies,” Lisa Clemens, senior director of investor relations with Cargill, told us.

Additionally, Cargill purchased a Brazilian company that makes cattle mineral feeds, Integral Animal Nutrition, and the US-based Southern States Cooperative animal feed business, invested in Dublin-based Cainthus – a startup focused on animal facial recognition technology – and added feed mills in Asia along with opening technical application centers for aqua nutrition in India and Vietnam.

Results for origination and processing supported overall company earnings improving on results from the full year and fourth quarter in 2017, the company said. Large supplies and low market volatility of oilseeds and feed grains initially muted the segment, but conditions changed toward the end of the fiscal year.

Dry weather in Argentina and other elements improved prices and allowed for segment gains for origination, processes and trading in several areas, the company said.

However, the company does have ongoing concerns regarding trade tensions, Cargill said in a statement provided to us. “A trade conflict between the US and China, the world’s two largest economies, will lead to serious consequences for economic growth, including the loss of sales and jobs here at home.”

“Already, there has been a significant slowdown in producer sales of soybeans, as the more than 300,000 US soybean farmers hold back their stocks due to the decrease in soybean futures and cash prices, which are down almost $2 per bushel (about 18%) from late May. The economic turmoil and uncertainties resulting from tariffs are harming US farmers, as trade concerns have played a major role in this price drop.”