Cargill improves in second quarter, while CHS first-quarter results decrease compared to 2013.
BOTH CHS Inc. and Cargill recently released quarterly reports for fiscal 2014.
Due to its Food Ingredients & Applications segment, Cargill reported a boost in net earnings to $556 million in the fiscal 2014 second quarter ended Nov. 30, 2013, up 36% from $409 million for the same time period the year before.
On the other hand, CHS reported net income of $242.2 million for the first quarter of its 2014 fiscal year, a decline of 30% from $343.7 million recorded for the year-ago period.
Despite the increase in net earnings, Cargill's first-half earnings were $1.13 billion, down 19% from $1.38 billion a year ago. The company's second-quarter revenues decreased 7% to $32.9 billion, which brought first-half revenues to $66.7 billion.
"Cargill posted a solid second quarter, with earnings improved in three of our four segments," Cargill president and chief executive officer David MacLennan said. "We also oversaw the opening of several new investments that support customers' growth and success."
The results were attributed to improved crop production in 2013, which affected supply and demand and, ultimately, caused prices for agricultural commodities to come down from their highs of the year before. All of this provided relief to Cargill's Animal Nutrition & Protein segment.
Most of Cargill's segments performed well, with only one reporting a decrease in results. Results for the Food Ingredients & Applications segment were up slightly from the year-ago period; it also was the largest contributor to second-quarter results. Demand in some product lines, such as markets for cocoa powder, improved appreciably.
Earnings in Animal Nutrition & Protein rose significantly. Improved profitability among the animal nutrition units was linked to lower input costs, good price risk management and a well-managed mix of bulk, specialty and customized animal feeds.
Agricultural Supply Chain results decreased from the year-ago period due, in part, to an industry-wide buildup in oilseed crush capacity that reduced crush volumes in certain markets, including South America. In North America, profits increased due to higher grain handling and export volumes, along with renewed demand for grain marketing products.
Earnings in the Industrial & Financial Services segment increased slightly. Although energy results were weak, the segment benefited from increased demand for ocean transport of coal and iron ore and from favorable trends in U.S. steel manufacturing and processing.
In regards to investments, Cargill completed the acquisition of Joe White Maltings in Australia and reported that several projects came on line.
Global projects included Cargill beginning construction on a sunflower seed crush plant in southwestern Russia, its first crush facility in that country. Additionally, the company purchased a minority stake in a deep-sea port terminal in Novorossiysk on the Black Sea, an investment that opens an important channel for connecting Cargill's Russian grain origination to customers in North Africa, the Middle East and beyond.
As for CHS, the decrease in earnings for the quarter ending Nov. 30, 2013, was largely attributed to reduced refining margins in the company's Energy business. Revenues for the quarter were $11.0 billion, down only slightly from $11.7 billion for the same period in fiscal 2013 primarily due to lower average selling prices for the grains and oilseeds the company handles.
While overall fiscal 2014 first-quarter results for the CHS Energy segment declined from the same period a year ago, earnings for its propane, lubricants and transportation businesses increased. The CHS propane and transportation businesses generated record earnings for the quarter due to a compressed, high-demand harvest season in much of the company's trade area. Earnings for the renewable fuel marketing business declined slightly for the quarter.
First-quarter earnings for the CHS Ag segment increased slightly over the same period a year ago (Table). This was primarily due to higher margins and service income at local retail operations.
Earnings also increased for the company's grain marketing business, which achieved strong logistics performance.
CHS processing and food ingredients operations experienced an earnings increase compared to the same period the previous year, primarily related to its soybean crushing and refining businesses.