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Cargill profit boosted by rising meat demand

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Oscar Rousseau

By Oscar Rousseau+


President of Cargill Protein Latin America, Xavier Vargas, was key to Colombian takeover
President of Cargill Protein Latin America, Xavier Vargas, was key to Colombian takeover

Agricultural commodities trader Cargill pulled in some of its best financial results in years, as strong demand for protein lifted earnings.

Net profit increased by 19% year-on-year to $2.84bn in the fiscal year to 31 May 2017, suggesting two years of structural change are paying off at one of the largest privately held companies in the US.

Earnings were up across Cargill’s four segments - meat, food ingredients, grain and oilseeds, and financial services – with animal protein contributing the most to profit upturn across the full year and fourth quarter.
Strong consumer demand for retail-ready beef in North America, in the fourth quarter particularly, drove earnings, although Cargill said all meat segments were “lifted by exceptional performance in global protein”.

Growing exports of cooked chicken to Southeast Asia, rising fresh chicken sales in Europe and better-than-expected performance in China saw Cargill’s poultry division post a year-on-year rise in annual earnings.

Lower costs mitigated the impact of unspecified “environmental and market conditions” that dampened animal feed demand in several countries. But combined with an upturn in fourth quarter trading, Cargill’s animal nutrition earnings were slightly ahead of last year.

Restructure paying off

Cargill’s companywide adjusted operating earnings hit over $3bn, up 85% from the year before and the improved returns come as Cargill reshapes its entire portfolio.

The past two years have seen significant work to improve performance and position the company for growth,” said David MacLennan, Cargill’s CEO.

The structural improvements we’ve made, as well as favourable conditions in some markets, have yielded strong results. Although the environment continuously changes, we feel good about our underlying progress. By building a more integrated, focused and agile Cargill, we are creating the momentum for growth and success for our customers and partners.

In just over a year, Cargill has exited the feedlot industry by selling its cattle farms as it aims to invest more energy and resources into meat processing.

This saw the business acquire one of Colombia’s top poultry processors, Pollos El Bucanero , which supplies chicken to retail and foodservice clients.

Foodservice is emerging another key area for the firm: it acquired cooked meats supplier Five Star Customs Food for an undisclosed sum in June 2016 and spent $111m converting its fresh meats factory in Nebraska to a cooked meats facility to supply foodservice customers, such as Taco Bell.

To drive financial performance in fiscal 2018, Cargill said it will explore capabilities in data and analytics to build sustainable supply chains in the 70 countries it operates within.

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