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Cargill wraps up fiscal 2018 on strong note

Animal Nutrition & Protein segment was largest contributor to Cargill's operating earnings in fourth quarter and full year.

Cargill reported financial results for its 2018 fiscal year, calling it one of the company's best performances, with $3.2 billion in adjusted operating earnings. The fourth quarter also was very strong, according to the July 12 news release.

Cargill said its improved financial results over the past two years are the outcome of significant efforts by its teams to redefine how the company operates, running with greater agility and stronger integration now to serve customers' rapidly changing needs.

For the fourth quarter ended May 31, 2018, Cargill said key results include:

  • Adjusted operating earnings totaled $809 million, a 76% jump from $460 million a year ago.
  • Net earnings on a U.S. generally accepted accounting principles (GAAP) basis were $711 million, more than double last year's $347 million.
  • Revenues increased 7% to $30.4 billion.

For the 2018 fiscal year, Cargill noted:

  • Adjusted operating earnings reached $3.2 billion, up 6% from last year's strong comparative of $3.04 billion.
  • Net earnings equaled $3.1 billion, a 9% increase and the third straight year of improved performance on a U.S. GAAP basis.
  • Both adjusted and net earnings included a provisional net charge of $86 million related to the U.S. Tax Cuts & Jobs Act enacted in December 2017. This represents a decrease from the estimate provided in the company's third-quarter release.
  • Revenues grew 5% to $114.7 billion.
  • Cash flow from operations increased 11% to $5.22 billion.

"Our strong results show we are creating the connections the world needs for vibrant food and agriculture both today and tomorrow," Cargill chairman and chief executive officer David MacLennan said. "Cargill has always moved food from where it is produced to where it is needed. Today, we are pioneering new capabilities and partnerships to invest for the future. We are innovating alongside our customers to develop healthy, delicious products made the way consumers want. We are working with farmers and others to implement sustainable agricultural practices, and we are standing up for inclusive global trade that lets food move freely."

Segment results

Cargill's Animal Nutrition & Protein segment surpassed last year's strong results, making the segment the largest contributor to adjusted operating earnings in the fourth quarter and the full year.

The protein business delivered an exceptional performance, fueled by rising domestic and export demand for North American beef and steady expansion in value-added egg products, according to the announcement. Global growth in feed additives, micronutrients and premixes for customized animal nutrition also boosted earnings for the year.

Excess supplies of chicken relative to domestic demand in Thailand contributed to a moderate decrease in global poultry results in both periods.

During the year, the segment invested significantly to serve growing demand for protein: It acquired Pollos El Bucanero, a leading retail-branded poultry business in Colombia. It formed U.K.-based Avara Foods, a fresh poultry joint venture, and opened a major poultry processing plant in the Philippines with Jollibee Foods. In the U.S., the segment expanded facilities for fresh ground beef and cooked meat and eggs.

In animal nutrition, Cargill acquired U.S.-based Diamond V and invested in Austria-based Delacon -- both respective leaders in improving animal health through fermentation- and plant-based feed additives. The segment purchased Integral Animal Nutrition, a Brazilian producer of cattle mineral feeds. In the U.S., it bought Pro-Pet, a private-label pet food maker, and the animal feed business of Southern States Cooperative.

Across Asia, it added to its existing network of feed mills and opened technical application centers supporting aqua nutrition in India and Vietnam. It also invested in Dublin, Ireland-based Cainthus, an animal facial recognition start-up, and broadened its farm management software offerings; both will give farmers a digital boost to their productivity and profitability.

Earnings in the Food Ingredients & Applications segment rose for the third consecutive year, with outstanding performance in cocoa and chocolate, gains in Asia-based ingredients and global edible oils and steady earnings across global starches and sweeteners. The segment's sustained attention to operating efficiency and commercial excellence also contributed to the year's growth, the company explained.

Lower ethanol prices and higher plant maintenance expenses in a few product lines contributed to a small decrease in profitability during the fourth quarter. In both periods, increased sales volume in salts for food and water softening was more than offset by lower sales prices for road salt and higher freight costs.

Segment growth initiatives in fiscal 2018 included a joint venture with Minneapolis, Minn.-based Puris to serve rising demand for plant-based proteins. Cargill also brought several new ingredients to market, including a high-oleic canola oil with the lowest level of saturated fat; EverSweet zero-calorie sweetener, and the SimPure line of high-performing native starches. It also added low-sodium processing capacity to its salt plant in New York. In Brazil, the company launched Liza Origens soy cooking oil. Cargill purchased an additional 40% equity stake in Glucovil Argentina in the fourth quarter, bringing its ownership in the starches and sweeteners joint venture to 70%.

Origination & Processing performance exceeded last year's quarterly and annual results, putting up its best fourth quarter in seven years. For most of fiscal 2018, rising demand for grains and oilseeds was muted by big crops, building stocks and low market volatility. This changed toward year-end, as drought in Argentina and other market forces began to influence global flows of corn, soybeans and related products, the news release noted. With markets moving and prices coming off lows, this segment improved origination, processing and trading results in key geographies.

Through investments in technology, the segment is better connecting its global operations and supply chains, strengthening its trading and analytical edge and bringing greater insight to customers. During the year, it broke ground on a new biodiesel facility in Kansas and expanded and modernized several oilseed processing plants in Brazil and the U.S. As fiscal 2019 began, it formed a joint venture to meet increasing demand for soybean meal and oil in Egypt.

Industrial & Financial Services finished the fiscal year slightly below the prior year, with lower returns from fund investments and a softer fourth quarter overall. Cargill's risk management and trade finance activities, which were added to the segment at the start of the fiscal year, jointly posted higher earnings in both periods. Trading results in metals rose appreciably for the year, supported by the segment's focus on market insights and analytics. Cargill's energy and U.S. steel processing businesses were sold in the first seven months, completing the segment reorganization.

Cargill has 155,000 employees across 70 countries and serves customers in more than 125 countries. It works to connect farmers with markets, customers with ingredients and people and animals with the food they need to thrive.

TAGS: Business
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