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US/China trade row depresses Cargill earnings

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Cargill blamed decreases in fourth quarter and full year earnings on a “challenging business environment,” including the ongoing US-China trade dispute and wet spring weather in the US.


The multinational agri-food business added its future focus is to become more sustainable and efficient while innovating to meet consumer demands for value added products.


Only the Industrial & Financial Services segment of Cargill’s four business divisions increased year-on-year earnings in the latest quarter.


The “deep uncertainty” surrounding the US-China trading relationship had a negative impact on Cargill’s Origination & Processing division. This dispute has “overridden global supply-and-demand fundamentals and disrupted trade flows, especially in corn and oilseeds,” noted the company.


The wet US spring weather slowed grain marketing and logistics, with softening biodiesel affecting profitability in Europe. South American earnings were affected by a crop shortfall in Paraguay and the “difficult crush environment” in Argentina.


Late start to US meat grilling season


The Animal Nutrition & Protein division, although the biggest contributor to earnings, saw performance fall for a number of reasons – spring flooding in the US midwest delaying cattle shipments and the cooler weather reducing barbeque meat demand; lower global poultry results through a mix of market and operating challenges; and a reduction in feed demand in China south east Asia as a result of pig culling to control the African swine fever outbreak in the region.


The division said domestic and export demand for beef remained strong, as did US demand for value-added egg products.

 

The quarter saw Cargill open a $50 million extension to its cooked chicken facilities in China; start constructing a premix and specialty feed for young animals plant there, as well as a premix plant in Jordan to service customers in the Middle East and North Africa.


The company has also invested in the plant-based cultured ‘meat’ business Aleph Farms, a diversification to “explore new opportunities to meet higher future demand for all forms of protein” alongside its traditional animal protein businesses.


Cocoa and chocolate up slightly


Cargill’s Food Ingredients & Applications division had mixed results with lower overall sales of starches and sweeteners and edible oils.

 

Cocoa and chocolate were marginally ahead of the previous year and salt earnings were higher.

 

Cargill recently completed its acquisition of the Belgian chocolate company Smet.

 

It has also started a $110m expansion of a corn processing facility in China’s Jilin province.


Industrial & Financial Services saw a “considerable increase” in fourth quarter earnings with iproved results across its metals, risk management and trade finance activities.


Cargill’s adjusted operating earnings were down 41% to $476 million from the record $809m at the end of the fourth quarter 2018.

 

Full year earnings were 12% under the previous year at $2.82 billion.

 

Net earnings were 67% lower to $235m ($711m) for the quarter and dropped 17% to $2.56bn for the twelve months.


Fourth-quarter and full-year revenues were both 1% lower at $29.9bn and $113.5bn.


“Throughout the year, we faced a very challenging global business environment that slowed earnings. Still, we improved performance in several food and financial businesses and significantly reduced costs companywide,” said Dave MacLennan, Cargill’s chairman and chief executive.


“We want to accelerate growth in market segments where our expertise will help us create more value with our customers.”

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