Cargill sees strong quarter, full year financial results
Earnings across all four business segments were up
Cargill reported strong financial results for the fourth quarter and fiscal year ended May 31, 2017.
In the second year of an ongoing transformation, Cargill raised earnings across all four business segments in both periods. It also advanced the capabilities, expertise and partnerships needed to be the leader in nourishing the world in the years ahead.
For the fiscal year, adjusted operating earnings reached $3.04 billion, up 85 percent from $1.64 billion in the prior fiscal year. Net earnings on a U.S. GAAP basis were $2.84 billion, a 19 percent increase year-on-year. Revenues grew 2 percent to $109.7 billion on higher sales of grain, oilseeds and metals. Cash flow from operations climbed 38 percent to $4.69 billion.
For the fourth quarter, adjusted operating earnings were $460 million in the fourth quarter, in sharp contrast to last year’s $19 million adjusted operating loss. Net earnings were $347 million, compared with $15 million in the year-ago period. Revenues rose 4 percent to $28.3 billion.
“The past two years have seen significant work to improve performance and position the company for growth,” said David MacLennan, Cargill’s chairman and CEO. “The structural improvements we’ve made, as well as favorable conditions in some markets, have yielded strong results. Although the environment continuously changes, we feel good about our underlying progress. By building a more integrated, focused and agile Cargill, we are creating the momentum for growth and success for our customers and partners.”
MacLennan noted that Cargill and its customers now operate in environments of much greater complexity. Mixed macroeconomic trends have left customers – from consumer branded and foodservice companies to farmers – looking for a partner with the expertise, reliability and forward-looking perspective that Cargill provides. “We want to be their most trusted partner in agriculture, food and nutrition. We’re in a stronger position today to deliver the solutions our customers seek.”
Animal Nutrition & Protein was the largest contributor to adjusted operating earnings in the fourth quarter and full year. Segment results were up significantly from last year, lifted by exceptional performance in global protein, especially in the first half.
In North America, the protein business continued to experience strong consumer demand in the fourth quarter for beef at retail and for egg products from foodservice customers. Export demand for beef also was brisk. Poultry posted higher earnings for the year, with increased exports of cooked chicken from Southeast Asia, higher fresh chicken sales in Europe and improved performance in China.
Animal nutrition, which makes up the rest of the segment, saw earnings rise in the fourth quarter, as favorable trading and cost reductions offset the impact of environmental and market conditions that tempered feed demand in several countries. Full-year results in animal nutrition came in just above the prior year.
In animal nutrition, Cargill opened an innovation center in Chile dedicated to fish health and added feed mills in China, India and Indonesia. In protein, Cargill sold four cattle feed yards in the U.S. and an egg processing facility in Canada. It purchased Five Star Custom Foods in Fort Worth, Texas, which specializes in cooked protein products. It also converted a major facility in Columbus, Nebraska, from fresh to cooked meats. The company formed poultry joint ventures with leading food companies in Indonesia and the Philippines, and began expanding its own poultry processing capacity in Thailand. At the start of fiscal 2018, Cargill acquired Pollos El Bucanero, one of Colombia’s leading producers of chicken and processed meat products.
Origination & Processing turned around last year’s fourth-quarter loss with a profit in the current period. Slow farmer selling in South America extended U.S. export opportunities, which kept profitability in North America ahead of last year’s fourth quarter. For the full fiscal year, segment earnings exceeded the prior period as record U.S. crops were met with brisk demand from global growth in livestock production. Global trading performance added to segment results, even though opportunities were limited by low volatility in many commodity markets.
Over the course of the year, Cargill sold its U.S. crop inputs business, two oilseed processing facilities in France and the Netherlands, and its 40 percent share in a flour milling joint venture in Australia. It expanded crush volume at its oilseed plant in Três Lagoas, Brazil. In the fourth quarter, Cargill and local partners opened a large oilseeds processing plant and port facility in northern China in Hebei Province.