Cargill sees benefits from animal nutrition and protein in Q4, full-year results

By Aerin Einstein-Curtis

- Last updated on GMT

© iStock
© iStock

Related tags Animal nutrition Generally accepted accounting principles

Fourth quarter and full-year results for Cargill have grown based, in part, on earnings from the animal nutrition and protein segment.

The Minnesota-based company released details on its fourth quarter and fiscal year on Thursday. The financial period covered ended May 31.

For the fiscal year, the company saw earnings increase for all four business segments, including animal nutrition and protein, said Cargill.

Adjusted operating earnings were $3.04bn, an increase of 85% from the prior fiscal year, the company reported. In the 2016 fiscal year earnings were $1.64bn.

Net earnings, on a US GAAP basis, for the recently concluded year increased 19% to $2.84bn, the company said. Overall revenues for the year improved by 2% to $109.7bn based on sales of grain, oilseeds and metals.

The results come at the end of the second year of the company’s ongoing transformation, Cargill said.

The company has set several strategic goals and practices to drive its financial performance including focusing on becoming a leader in providing nutrition in a “safe, responsible and sustainable way,”​ it said. Other practices include establishing differentiated capabilities for future growth like sustainable supply chains along with digitization and analytics; and investing $1bn in strategic acquisitions, joint ventures and expanded or new facilities while divesting $700m in non-strategic assets.

Animal nutrition, protein and feed ingredient details

Overall, the animal nutrition and protein segment was the major contributor to positive results for the fourth quarter and full-year, said Cargill. Results for the segment grew significantly from last year, with exceptional performance noted in global protein.

Results for the animal nutrition portion of the segment also had an increase in earnings for the fourth quarter, based on favorable trading and cost reductions made, the company said. Full-year results for the animal nutrition sector came in slightly better than the prior year.

However, the nutrition sector had to offset environmental and market conditions that reduced feed demand in some countries, the company said.

Additional information about how the segment preformed compared to the past year and quarter are not being released, as the company does not provide segment numbers, said Lisa Clemens, senior director of investor relations with Cargill.

Specifics on the cost control measures taken also are not being released at this time. “Those included the impact of avian influenza on markets in Poland, Korea and Russia; lower hog prices in Vietnam; competitive pressure in China and Russia, and difficult economics for US dairy producers,”​ she told us regarding the environmental and market conditions that factored into feed and nutrition demand.   

Additionally, Cargill opened a fish health innovation center in Chile and feed mills in China, India and Indonesia, the company said. It also sold four cattle feed yards in the US.

In the origination and processing segment, the company had a profit instead of the fourth-quarter loss recorded last year, Cargill said. Farmers in South America have been slower to sell, which extended export options of US producers and improved profitability.

Full year segment earnings also exceeded the previous year as there was strong demand for feed ingredients from an expanding global livestock population, the company said.  

The company sold two oilseed processing facilities in France and the Netherlands, it reported. And increased crush volume at an oilseed plant in Brazil and opened, with local partners, an oilseeds processing plant and port site in northern China.

Fourth-quarter details

Overall, the fourth quarter in 2016 offered a $19m adjusted operating loss to the company, Cargill said. However, the recently completed quarter had adjusted operating earnings of $460m.

Similarly, net earnings increased from $15m last year to $347m this year, the company said.

“The past two years have seen significant work to improve performance and position the company for growth,” ​said David MacLennan, Cargill’s chairman and CEO, in a release. “The structural improvements we’ve made, as well as favorable conditions in some markets, have yielded strong results.”

The company is pleased with the underlying progress, he said. “By building a more integrated, focused and agile Cargill, we are creating the momentum for growth and success for our customers and partners,”​ he added.

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