Company update: Cargill Q1

//18 Oct 2011
Cargill Inc. reported a 66% slide in first-quarter profit as volatile markets limited opportunities for the world's largest agricultural commodity trader, though revenue rose by a third.
The privately held US conglomerate said four of its five business units reported lower earnings compared with a year ago as it reported its second straight quarter of decline.

Cargill said it was focused on regaining momentum in earnings after reporting a record full-year profit for fiscal 2011.

"It was a tough quarter," Cargill CEO Greg Page said in a statement. "With results down from recent levels, we're focused on regaining our earnings momentum."

Commodity markets have swung wildly in recent months as global economic uncertainty and currency fluctuations have prompted investors to move money in and out of commodities. This "risk-on, risk-off" dynamic prompted a "disciplined approach to risk-taking," the company said in a release.

The suburban Minneapolis-based company's earnings were also hit by acquisition-related expenses and costs stemming from US flooding, which increased freight costs and required it to take steps to protect the supply chain.

Flooding throughout the northern Plains, particularly along the Missouri River, was a problem throughout the summer.

Profit down
For the quarter ended Aug. 31, Cargill, whose diverse businesses range from grain merchandising to meat processing to energy trading, posted a profit of $236 million, down from $693 million a year earlier. Revenue rose 34% to $34.6 billion.

Cargill, like other US agricultural exporters, has benefited from rising food prices and the expanding middle class in emerging economies such as China and India.

Its agriculture services segment, which includes grain handling and storage, reported increased earnings in the quarter.

But earnings fell in the grain origination and processing segment and its animal protein business. The company's food ingredients segment "nearly matched" a record performance last year, the company said. Cargill doesn't disclose earnings results within each segment.

Acquisitions
Cargill recently made a series of acquisitions across Asia, North and South America, culminating in one of its largest ever takeovers--the €1.5 billion purchase of Dutch animal feed maker Provimi Group.

The company invested more than $3 billion in acquisitions and expansions in the prior fiscal year, a record for the company.