April 15, 2009
Cargill''s profit declines 68 percent as demand weakens
Cargill Inc. posted a 68 percent decline in its fiscal third-quarter net profit, highlighting the tough environment facing global agribusiness.
The distribution and processing and fertilizer units that had buoyed the Minneapolis-based company through falling commodity prices in prior quarters both suffered year-on-year declines in the period that ended Feb. 28.
However, the world''s largest agribusiness group by revenue said its energy-trading operation was one of the few units to generate higher earnings in the quarter. Some of its food-ingredients businesses, meanwhile, refocused on selling cheaper staple products amid lower consumer spending.
Cargill, a closely-held company, is a bellwether for the global agribusiness sector, with operations in more than 60 countries and revenue of US$120 billion in its latest fiscal year. Its earnings report comes amid warnings from rivals about sluggish demand and pricing conditions, despite the confidence expressed by executives in the long-term growth of the sector.
In the latest quarter, Cargill said profit dropped to US$326 million, from US$1.03 billion a year earlier. Cargill didn''t provide quarterly revenue.
"Cargill''s earnings turned down in the third quarter, as the troubles in the global economy and financial system arrived at our company''s doorstep," Chairman and Chief Executive Greg Page said in a statement.
All five of Cargill''s business segments reported lower year-on-year profit. Earnings for the quarter and for the first nine months were down, excluding results from its 64 percent stake in fertilizer producer Mosaic Co., the company said.
Lisa Clemens, a company spokeswoman, said results across the company were mixed, though earnings had improved at its energy-trading operation. The broader financial-services and risk-management business posted a quarterly decline in profits.
Cargill''s food ingredients business has been focusing on moving up the value chain to higher margin products. Clemens said some parts of the unit were refocusing on lower-priced staples, such as ground beef.
Retailers in the US and elsewhere have reported a shift toward lower-priced private label products.
The stock prices of listed rivals like Archer-Daniels-Midland Co. and Bunge Ltd. have been flat since the beginning of the year after suffering sharp declines as commodity prices fell from record highs in mid-2008.
Tuesday, shares of ADM were down 5.1 percent to US$25.53, with Bunge -- which reports its fiscal first-quarter earnings on April 23 -- off 2.1 percent to US$56.01, both in 4 p.m. composite trading on the New York Stock Exchange.
