Cargill’s fiscal third-quarter net income, which the company said was hurt by higher feed costs for its meat processing businesses, fell 42 percent, according to the quarterly report released on April 9.
For the quarter ended February 28, the agribusiness company earned $445 million, down from $766 million in the same period in 2012. Revenue edged up 1 percent to $32.2 billion.
“Cargill’s earnings were below last year’s record third quarter,” said Greg Page, Cargill chairman and CEO. “The current quarter demonstrated the balance that comes from Cargill’s diversified portfolio. In North America, our meat processing businesses were pressured by the drought-related high cost of feed ingredients. Even though many of our global food ingredients businesses experienced higher input costs, they nearly matched their strong performance in last year’s third quarter.”
Among Cargill’s five business segments, earnings in agriculture services were down largely due to the prolonged impact of 2012’s drought-reduced crops in North America. Animal nutrition results were affected by Venezuela’s currency devaluation in February and by difficult economic conditions in meat and dairy production in several regions. Third-quarter earnings in origination and processing were below 2012, with mixed results across regions. Export demand for U.S. soybeans and meal was strong all quarter due to limited pre-harvest supplies in South America. Brazil’s harvest began in February, but weather delays and logistical challenges significantly reduced soybean and soybean product exports below expectations.
Earnings in the food ingredients and applications segment were below the year-earlier period. Performance in food ingredients reflected value-creating customer solutions, good risk management and attention to costs, although the Venezuelan currency devaluation was a factor in holding results below the year-ago level, according to the company. The animal protein businesses were negatively affected in North America by high feeding costs, tight cattle supplies and an oversupplied turkey market. Cargill’s beef processing plant in Plainview, Texas, was idled in February because of the tight cattle supply brought about by years of drought in Texas and Southern Plains states. A related, one-time charge to earnings was taken. Nine-month results in global animal protein were ahead of 2012 numbers.
The risk management and financial segment was moderately below 2012’s third quarter. Asset management activities performed well, though not as briskly as last year when financial markets rallied in response to easing in the European debt crisis. Results in energy trailed the year-ago period.
Cargill’s industrial segment posted increased third-quarter earnings. Sales volumes of road deicing products were higher than last year, though production volumes decreased due to the mild North American winter in 2011–2012, which left storage facilities still holding inventory as the new season began.