07 January 2019 | News
Animal Nutrition & Protein was the largest contributor to Cargill’s adjusted operating earnings, with results just below last year’s strong comparative quarter
Cargill has recently reported results for the fiscal 2019 second quarter and first half ended Nov. 30, 2018. Key measures include:
Dave MacLennan, Cargill’s chairman and chief executive officer said, “Our teams executed in a world of uncertainty to bring the best solutions to our customers and the consumers they serve.”
MacLennan referenced Cargill’s ability to adjust rapidly to changing market conditions throughout the quarter and deliver safe, reliable and sustainably produced foods to their destinations.
“Now, we are pushing to ready our businesses for the future with continuous improvement, financial discipline and a disruptive mindset”, he added.
Animal Nutrition & Protein was the largest contributor to Cargill’s adjusted operating earnings, with results just below last year’s strong comparative quarter. Performance in North American protein moved higher, as robust demand for beef and large supplies of fed cattle boosted beef production and sales to domestic and export markets.
Demand for egg products also drove protein earnings. Continued political instability in Central America and market challenges in Southeast Asia reduced results in the segment’s global poultry business. Sales volumes for salmon and shrimp feeds in the North Sea region and Mexico, respectively, were up, but animal nutrition earnings trailed the prior year due to adverse market conditions in several regions. This included lower hog volumes in China and Vietnam, and unfavorable dairy and poultry economics in the U.S.
Cargill expanded in Colombia with the acquisition of Campollo, one of the country’s leading makers of chicken and protein products. The deal complements the purchase of Colombia-based Pollos El Bucanero last fiscal year and advances the segment’s strategy to serve growing protein demand in emerging markets with world-class poultry products.
Food Ingredients & Applications decreased on mixed results across the segment. Starches and sweeteners earnings decreased on historically low ethanol prices in North America and higher energy and raw material costs in Europe.
Lower sales volume and higher operating costs in North America trimmed otherwise strong cocoa and chocolate performance in other regions. Good positioning helped lift edible oils above last year. Bioindustrial posted a solid gain, while salt earnings edged ahead as higher road salt production costs were offset by increased results in food and water quality.
The segment announced Avansya, a new joint venture with Royal DSM that will produce zero-calorie sweetness solutions through fermentation. These products, such as steviol glycosides Reb M and Reb D, will give food and beverage companies a more scalable, sustainable and cost-effective alternative to extracting them from stevia plants. Avansya will market these products under the EverSweet™ brand. Subject to regulatory approvals, the venture is expected to launch in the first quarter of calendar 2019.
Origination & Processing earnings rose as the segment leveraged its global network to keep products moving while navigating volatile agricultural markets disrupted by trade turbulence. Oilseed processing stayed strong in North America and Europe, bolstered by growing protein consumption that drove global demand for soybean meal for livestock feeds. Grain exports from the U.S. and Canada, and biodiesel production in Europe also contributed to the strong quarter. Better-than-anticipated crops in Argentina supported a gain for the segment in South America.
Cargill announced two new projects to further digitalize the agricultural supply chain to the benefit of farmers and end users. With Archer Daniels Midland, Cargill agreed to form Grainbridge, a technology joint venture that intends to provide support to North American farmers on grain marketing decisions, e-commerce and account management software. The venture will consolidate information on production and grain marketing into a single digital platform for farmers at no cost to them. Cargill also announced a collaboration with ADM, Bunge and Louis Dreyfus to investigate ways to standardize and digitalize global agricultural shipping transactions, leveraging technology to the benefit of the entire industry. This will reduce time- and resource-intensive processes, lowering costs and increasing transparency for customers in supply chains. In late December, COFCO International joined the initiative. The companies are seeking broad-based industry participation to promote global access and adoption.
Industrial & Financial Services trailed the year-ago quarter, due in part to broader weakness in financial markets that negatively affected Cargill’s investments in managed funds. The ocean transportation business lagged last year as freight markets declined sharply in response to weakening macroeconomic sentiment, the uncertain effects of trade conflict on commodity flows, and the hesitance of third-party charterers to contract vessels ahead of the implementation of new international rules on sulphur dioxide emissions. Elsewhere, the segment’s metals and risk management businesses posted increased earnings for the period.
Recognizing Asia Pacific’s growth, Cargill is convening expertise to help secure a positive future for food and agriculture in the region. Recently, Cargill brought together the shared insights of senior managers in Asia’s food industry to understand the challenges of nourishing a regional urban population set to reach nearly 2.5 billion by 2030. These insights are being shared in an ongoing series of reports published by the Economist Intelligence Unit.
And in November, 30 Cargill Global Scholars from China, India and Indonesia visited the company’s headquarters in Minneapolis to collaborate with peers from other regions and receive mentoring from senior executives. These university students are studying in food- and agriculture-related fields and will one day be leaders.