Cargill Shows Meat Is Still a Cash Cow
Cargill Shows Meat Is Still a Cash Cow
(Bloomberg) -- Cargill Inc., America’s largest closely held company, posted a gain in quarterly earnings fueled by expanding global appetite for meat.
Demand for protein such as beef, eggs and poultry helped the agricultural giant rebound from its steepest quarterly profit decline in four years. Reporting fiscal first-quarter earnings Thursday, it said protein demand rose in North America, Europe, Asia and Latin America.
That helped offset declines in its origination and processing division amid disruptions wrought by President Donald Trump’s trade war with China, which has ensnared U.S. farm goods, including soybeans. Bad weather also hindered crops.
In recent years, Cargill, Archer-Daniels-Midland Co., Bunge Ltd. and Louis Dreyfus Co. -- the quartet collectively known as the ABCDs of agricultural processing -- have worked to decrease their reliance on crop trading in a bid to move closer to end consumers.
Cargill has deepened its focus on protein, betting that the taste buds of an expanding global middle class will be drawn to meat.
Besides the trade war, the industry is wrestling with an outbreak of African swine fever in China that’s forced the country to cull much of its massive hog herd and lift imports to fill the protein gap.
“Despite pressure from African swine fever, results improved in global compound feeds as the business combined an advantageous product mix with effective cost management,” Cargill said.
Still, the Minneapolis-based firm did see improvement in its global trading business. Cargill had been navigating the trade war for the better part of a year, but wild U.S. weather caused markets to trade more on fundamentals, Cargill spokeswoman Lisa Clemens said.
Adjusted operating earnings for the quarter ended Aug. 31 rose 3% to $908 million, while revenue climbed 1%. Net income fell 10%.
In July, the company said it was reviewing plans given operational headwinds and a slowdown in earnings. Its main competitors have also taken measures to review their respective businesses.
On Wednesday, Cargill said it’s reorganizing the animal nutrition division, adding the name “health” and appointing new segment heads, as it steps up efforts to get closer to consumers. While there will be job cuts, it expects health technology growth.
To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net
To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Patrick McKiernan
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