Cargill reports earnings rise on back of acquisitions

By Anthony Fletcher

- Last updated on GMT

Related tags: Cargill, New orleans, Hurricane katrina

Having largely escaped the wrath of Hurricane Katrina and
vigorously strengthened its position in the pectin, lecithin and
flavor sectors, Cargill has reported a two percent rise in first
quarter 2006 net earnings.

The company made $504 million for the first quarter ended 31 August, up 2 percent from a year ago.

"We are pleased with Cargill's strong start to the new fiscal year,"​ said Warren Staley, Cargill chairman and chief executive officer. "Given the volatility in many of the markets in which we participate, it was a solid beginning to what promises to be a challenging year."

The solid results come on the back of a number of recent acquisitions. Cargill's agreement for example to purchase Degussa Food Ingredients, a business unit of global specialty chemicals company Degussa, was announced on 9 September.

The Degussa unit supplies flavors, texturants and bioactive units under its performance materials division. Flavoring systems target the food, dairy and beverage markets while the texturant arm supplies formulations based on hydrocolloids, blends and lecithins.

Of particular note, the acquisition includes Degussa's strong pectin position, and so fits snugly next to Cargill's recent purchase of pectin supplier Citrico.

For Cargill, the agreed US$670 million Degussa deal represents a cornerstone investment. The acquisition should enable the ambitious US firm - which posted sales of $71 billion last year - to carve out a stronger position as a one-stop supplier for food ingredients.

The completion of the acquisition is pending regulatory review.

Cargill's first-quarter earnings were also positively influenced by the strength of its risk management and financial operations. Other large contributors included the origination and processing segment, which connects users and producers of grains, oilseeds, sugar and other commodities, and its animal nutrition, poultry processing and corn-based sweeteners businesses, all of which operate worldwide.

Staley also claimed that Cargill's facilities in the Louisiana Gulf came through Hurricane Katrina, which made landfall three days before the company's first quarter ended, and Rita, almost four weeks later, in relatively good shape.

"Our team took preparatory steps before each storm struck and worked around-the-clock afterward to account for everyone's safety, get our facilities up and running and re-establish service to customers both offshore and up the river,"​ he said.

Cargill is a part of the ongoing efforts by grain exporters, allied industries and many federal, state and local government entities to restore operations in the lower Mississippi River and Center Gulf region. The company is also managing closely its exposure to costs for refined oil products and natural gas.

Cargill is the largest private firm in the US with over 120,000 employees.

Related topics: North America, Grains, Manufacturers

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