Cargill profit up by 66% in ‘strong’ quarter

By Oscar Rousseau contact

- Last updated on GMT

Cargill's solid net profit results reflect its efficiency improvements, commented one expert
Cargill's solid net profit results reflect its efficiency improvements, commented one expert

Related tags: Cargill, Generally accepted accounting principles

Global agri-food corporation Cargill has reported a formidable 66% rise in net profit for the first quarter of the fiscal year.

Cargill chalked up profits of $852m for the first quarter to 31 August. This was a significant increase on the $512m reported by the business a year ago and was supported by lower beef prices due to higher cattle supplies and growing beef demand.

Cargill’s burgeoning meat division was the main driver of growth for the commodities trader. While beef will rightly take most of the plaudits, its global poultry and egg operations delivered increased earnings too, and animal nutrition enjoyed sales growth in Asia and North America. 

We posted a strong start to the new fiscal year,​” said David MacLennan, Cargill’s chairman and CEO in a financial statement. “We’ve been charting a new path to higher performance, and it’s rewarding to see the many changes we’ve made resulting in gains across much of the company.​”
MacLennan noted Cargill’s recent acquisitions have significantly optimised the company’s plant efficiency and cost structure. Cargill completed the takeover of Texas-based cooked protein firm Five Star Custom Foods​ in June for an undisclosed sum. To streamline its beef division Cargill also announced plans to offload two feedlots to Friona Industries​ in a deal to help the business redeploy tens of millions of dollars in other investments.

“These actions are making us more competitive and equipping us to serve a broadening range of customer needs,​” added MacLennan.

One such investment is the roll-out of an antibiotic-free product line Honest Turkey​, expected to hit the shelves in the US this month. This line expands Cargill’s commitment to scale back antibiotic use in turkey, amidst calls for the meat industry to cut routine antibiotic use over antimicrobial resistance fears.

Cargill and non-profit organisation Heifer International have also entered into a partnership in Qingshen, south-west China, to provide 100 family-owned poultry farms, mostly led by women, with chicks, business training and nutritional and veterinary guidance. The business said it hoped the effort would improve food security and the livelihood of local farmers in China.

What the analysts said

The latest trading update from Cargill could be described as robust, with the firm announcing an all-round solid set of results,​” said David Cheetham, market analyst at XTB. “The large increases in both adjusted operating earnings and net earnings reflect sound improvements in efficiency, with revenue broadly flat on the same period last year. The burgeoning profit margins will please stakeholders as the aim to optimise plant efficiency, supply chains and cost structure is clearly working. With the firm’s business operations already vast, the strategy to focus on improving the bottom line rather than expanding the top seems prudent and leaves the company in a far more competitive position going forward.

One note of caution, however, may come regarding the completeness of the release, as the firm only announces selected financial figures and isn’t required to report as fuller set of numbers as its publicly traded peers. This isn’t to suggest the firm is hiding any weaknesses, but the inclusion of adjusted operating earnings – which isn’t a GAAP measure – highlights the scope available to portray results in a way that suits them.​”

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