Agri giant's Q1 results show solid performance for animal nutrition and meat division

Cargill on alert for return of PEDv, but impact of virus 'less detrimental than anticipated'

By Jane Byrne contact

- Last updated on GMT

Cargill on alert for return of PEDv, but impact of virus 'less detrimental than anticipated'

Related tags: Cargill, Meat

Cargill has not had any new cases of porcine epidemic diarrhea virus (PEDv) within its pig operations since March this year, but the agri-giant is not throwing caution to the wind as a result.

“We are monitoring the situation closely because PEDv is expected to re-emerge with the onset of cold, damp weather, but we are ensuring that effective biosecurity measures are in place,”​ Lisa Clemens, a Cargill spokesperson, told feednavigator. 

In announcing its first quarter financial earnings for 2015, the company said the expected shortage in hogs caused by the virus was less detrimental to Cargill than anticipated, although it noted a significant impact for the overall industry. 

“Last year, as it became apparent there would be a widespread outbreak in the US, Cargill worked closely across its supply chain to minimize the impact to the business.

Additionally, heavier hog weights helped offset lower hog harvest counts,”​ said Clemens.

Meat and animal nutrition sectors are ‘solid ‘

On Tuesday, Cargill reported net earnings of $425 million in its 2015 first quarter - down 26% from $571m in the same period a year ago. It said revenues in the first three months totaled $33.3 billion, a 2% slide from last year’s $33.8bn.

The animal nutrition and meat division showed “solid operating”​ performance.

On the nutrition side the company reported superior sales volumes but slightly lower earnings on the same period 12 months earlier, with last year’s first quarter seeing additional revenue arising out of the sale of Cargill’s Swiss flour milling business, Penthalaz, to Groupe Minoteries.

“When the milling operation was sold a year ago, there was a gain on sale. However, if you were to back out the gain, earnings in the current first quarter would have been higher than a year ago, due to higher sales volume,”​ said Clemens.

She said one reason for the buoyancy in the meat segment was the fact that “the decrease in agricultural commodity prices [corn and soybeans] that occurred over the summer months also translated into lower feeding costs, and, in addition, consumer demand for meat products has stayed strong.”

Cargill said its beef processing activities in Australia benefited from ample cattle supplies and strong export demand.

The group also reported good performance for its chicken and turkey operations in Central America, Europe, Thailand and the US, with Clemens saying this achievement was “largely tied to the ongoing efforts of these businesses to improve their operating efficiencies.”

During the quarter, the company closed its beef harvest facility in Milwaukee, saying at the time that the move was an outcome of the tight cattle supply brought about by producers retaining cattle for herd expansion. The US beef cattle herd is at its lowest level since 1951. 

Cargill will also close its 'underutilized' corn milling facility in Tennessee in January, but the facility’s corn oil refinery will continue to operate as a stand-alone unit.

Grain commodities

Cargill’s origination and processing division was the largest contributor to first-quarter earnings, with results slightly below the year-ago level. 

The company said the world commodity markets for corn, soybeans and wheat were characterized by falling prices, reduced price volatility, lower soybean crush volumes and limited farmer selling in some countries. Grain shipments in Canada, said the commodities trader, remained brisk due to the large carryover from the country’s record 2013 crops.

Commenting on the financial results, Cargill CEO, David MacLennan, said:

“Although Cargill’s first quarter was not as strong as last year, we had several areas of good performance and are optimistic about the opportunities ahead​.

This year’s big crops, not just in North America but across agricultural production areas worldwide, will enhance food security after several years of weather disruptions. Our company is well positioned to connect these new supplies to growing demand​."

 

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