Net earnings down 12 percent, revenues up 2 percent
Cargill reported net earnings of $424 million in the fiscal 2014 fourth quarter ended May 31, down 12 percent from $483 million in the year-ago period. Fourth-quarter revenues rose 2 percent to $36.2 billion.
For the full fiscal year, Cargill earned $1.87 billion, a 19 percent decrease from $2.31 billion in the prior year. Revenues declined 1 percent to $134.9 billion. Cash flow from operations totaled $3.77 billion, down 12 percent from $4.27 billion in fiscal 2013.
“Cargill plays an important role in helping to feed a growing world, and that inspires us to continuously improve performance,” said David MacLennan, Cargill’s president and CEO. “Though we look back on a year in which overall earnings fell short of expectations, we realized stronger operating results in several businesses including a turnaround in our global beef operations. We also made good progress on moves designed to sharpen efficiency and support profitable growth in fiscal 2015 and beyond.”
Fourth-quarter, full-year financial summary
Among Cargill’s four segments, earnings rose significantly in Animal Nutrition & Protein in the fourth quarter and full year. Results in animal nutrition were up for the full year, reflecting the positive impact of recent years’ acquisitions and a product and service mix that met the diverse needs of customers. Fourth-quarter earnings were below the year-ago level due to a loss resulting from adjustments to the balance sheet to account for Venezuela’s effective currency exchange rates. Performance in animal protein was led by the beef business, which was boosted by increased operating efficiency, good cattle feeding results in North America and brisk exports of Australian beef. U.S. pork operations rose on improved live production and processing efficiency, and steady demand. Poultry operations in Central America, Europe and Thailand posted higher earnings in both periods on a combined basis.
Food Ingredients & Applications earnings decreased in the fourth quarter and fiscal 2014 after four consecutive years of record performance. Sweeteners and starches in North America and Europe, and cocoa and chocolate in Europe led segment performance. Results overall reflected weaker economic conditions in some countries and the negative impact of the change in Venezuela’s effective currency exchange rates.
Origination & Processing results were slightly below last year’s fourth quarter. Full-year earnings decreased moderately from fiscal 2013, reflecting in part the impact of China’s rejection of certain U.S. corn shipments, as reported in the third quarter. Fourth-quarter performance was led by supply chains in South America; full-year results were led by supply chains in Brazil, Europe and North America. U.S. farm services continued to experience limited handling and storage opportunities stemming from the last year’s drought and higher costs related to railcar shortages.
In Industrial & Financial Services, earnings rose in global ocean transportation and the U.S.-based steelmaking joint venture, but segment results declined overall in both periods due to poor performance in energy.
MacLennan said Cargill is making changes to better leverage and connect its operational efficiency, business capabilities and market insights. With respect to processes and technology, this includes accelerating the deployment of enterprise resource planning technology from SAP. Cargill also has begun implementing a multiyear, shared-services approach to providing functional services to business units globally.
Selective changes were made to Cargill’s portfolio, including this year’s successful formation of Ardent Mills, a flour milling joint venture now poised to lead in innovative flour and grain products and services in North America. In its food segment, the company sold a highly specialized texturizing compounds business. In energy, it ceased trading in coal and European power and gas markets.
Cargill continues to invest in acquisitions, and new and expanded facilities that connect markets and support customers’ growth in emerging and developed markets. “Cargill has a record $3.3 billion of major food and agricultural facilities under construction today in 13 countries,” MacLennan said. “As these facilities come on line, they enhance Cargill’s delivery of value-creating solutions to our food, agricultural and other customers.”
MacLennan noted that Cargill will celebrate its 150th year in business in 2015. “Our company has a long history of doing business ethically and safely, nurturing top talent, managing risk, learning from setbacks and breaking new ground. It makes us optimistic about our ability to excel, to help customers thrive and to be the global leader in nourishing people.”