Cargill reported its best quarterly earnings for seven years – but only thanks to gains from the sales of pork and steel interests, with operating profits falling at each of its four business divisions.
The 150-year old group, one of the world's largest privately-held companies, reported earnings up 77% to $1.39bn for the September-to-November quarter, despite a drop of 10% to $27.3bn in revenues, amid a climate of weaker commodity prices.
The profits growth reflected proceeds from the sales by Cargill of its US pork business to Brazilian meat giant JBS for $1.45bn, and of a 50% stake in North Star Bluescope Steel to Australia-based joint venture partner Bluescope.
Adjusted operating earnings for the quarter, at $574m, were down nearly 13% year on year, with results falling in all four main divisions – animal nutrition and protein, origination and processing, food ingredients, and industrial and financial services.
While Cargill does not divulge details of divisional results, it said that adjusted operating earnings at industrial and financial services "declined significantly", a reflection of "the liquidation of certain hedge funds at an asset management subsidiary".
Cargill in September revealed it was ditching most of its hedge fund operations, spinning-off to employees three fund businesses in its Black River Asset Management arm, while folding agriculture and energy funds into the main group.
Black River Asset Management had $7.4bn under management as of June.
Profits declined "moderately" in the high-profile origination and processing division, despite improvements in soybean crushing margins, helped by low prices of the oilseed, and "good risk management" by traders amid "falling agricultural commodity markets.
"Earnings trailed the year-ago period due to normalised grain-handling levels in Canada after two very large crop years," Cargill said, also noting "weaker performance in cotton, soft seed crush and sugar".
Meanwhile, weak emerging market currencies undermined profits at the food ingredients arm, while adjusted profits in the feed and livestock division fell "slightly" thanks to weakened feedlot margins, hurt by tumbling fattened cattle prices, and by a slowdown in Australian supplies.
"Difficult economic conditions in North American cattle feeding, and the long-anticipated decrease in Australia's cattle supplies, curbed earnings in global beef," the group said.
However, David MacLennan, the Cargill chairman and chief executive, termed the results "solid", with their decline reflecting comparison with a strong performance in the same period of 2014.
"We saw performance gains in key global businesses, including animal nutrition, grain and oilseed processing, most of our poultry operations, and several food ingredients categories," he said.
He also flagged the fillip to Cargill's chocolate operations from the $440m purchase in August of assets from rival ag trader Archer Daniels Midland.
The shake-up in Cargill's structure follows the announcement last summer of the group's first quarterly loss in 14 years, blamed on technology and Venezuela setbacks.
The group also in November rejigged its management structure, in a move which announced the retirements of vice chairmen Paul Conway and Emery Koenig, and slimmed a two-tier leadership team into a single one.
Earlier this week, Cargill appointed Gert-Jan van den Akker, who rejoined the group last month, as president of its Swiss trading business.
By Mike Verdin