Cargill sees Q1 bump with animal protein improvements, animal nutrition drops
Cargill is seeing a positive start to its new fiscal year, with good results coming in part from returns in the animal protein segment.
Overall, the company reported total revenues of $27.3bn for the period, which were slightly above the $27.1bn reported in the same period the previous year. The Minnesota-based company released details regarding its first quarter for fiscal year 2018 on Wednesday. The first quarter ended August 31.
Additionally, the adjusted operated earnings were $888m, an increase of 7% from the same period the previous year, said Cargill. Results from the earlier quarter were $827m.
Net earnings on a US GAAP basis also improved, rising 14% from $852m to $973m, the company said.
The first quarter offered a good start to the fiscal year, David MacLennan, chairman and CEO at Cargill, said in a release. “Even as market conditions vary across our sectors, our teams are delivering for our customers and achieving results to fuel future growth,” he added.
Within the animal nutrition and protein segment results were slightly more mixed, Cargill reported.
Overall, the segment of the company continued the strong returns seen in 2017 and saw adjusted operating earnings improve from last year, the company said.
Protein returns improved in North America based on a demand for beef, strong exports and good supplies, the company said. Poultry sales lagged slightly from the year-ago quarter with weakened results in South American sales tempering stronger domestic sales and exports from Southeast Asia.
However, results for global animal nutrition were behind the results for the first quarter of 2017, the company said. Although there was some improvement in the sale of value-added feed additives and premixes, that boost was offset by pressure on aqua feed in Europe and swine feed in Vietnam.
When asked about expectation for the rest of 2018, the company said that it does not offer forward-looking guidance on any one business.
“On a consolidated basis, we are up against a big comparable in fiscal 17 earnings, so we know we have our work cut out for us in fiscal 2018,” added Lisa Clemens, senior director of investor relations with Cargill.
Additionally, the company has made several investments in animal nutrition companies by acquiring the feed business from Southern States Cooperative, a process completed earlier in the month, and establishing a partnership with the phytogenic feed additives producer Delacon.
Both actions are anticipated to be important for Cargill’s growth in animal nutrition, said Clemens.
“The purchase of Southern States Cooperative’s animal feed business fits well with our growth strategy for the southeast and eastern regions of the US,” she told us. “In addition to valuable assets (seven feed mills, and a broad portfolio of products and brands in equine, dairy and beef cattle, poultry and swine), they have strong relationships with customers and a reputation for service.”â€‹
The partnership with Delacon is expected to allow for growth in the natural, plant-based feed additives area, she said. “They align with the values of many customers and consumers,” she added of phytogenic products.
In origination and processing, the company’s results dropped from a strong first quarter last year, it reported. But positive trading results acted as a “buffer” in the segment along with soybean processing in Brazil and China and exports from Brazil.
There has been an increasing global demand for oilseeds and grain, but growing production and global stocks have reduced commodity process and market volatility, the company said.
“We are careful not to make projections as to how markets may move,” said Clemens. “The current dynamic of global grain supplies outpacing the growth in demand has been in play for about four crop cycles.”â€‹
Efforts are being made to improve productivity in the supply chain for the segment and bring additional value to customers, Cargill said. New and efficient production lines have been started for several oilseed processing plants as part of this focus.
“Our job is to make the most of the market conditions in which we operate,” said Clemens. “And, importantly, to increasingly use the real-time information and insights from our physical footprint to enhance our trading teams’ abilities to make better decisions.”â€‹