Cargill sales fall; no immediate market improvement

Sales at agriculture giant Cargill fell 11 percent to $25.2 billion during its most recent quarter and the company warned that it sees no immediate improvement in its markets.

However, the privately owned Minneapolis-based company did post an 8 percent profit gain. Net income rose to $459 million in three months through February from $425 million a year earlier.

The company’s Wichita-based meat divisions were among the company’s worst performers. The company said operating earnings in its Animal Nutrition & Protein segment decreased slightly in the third quarter, mostly due to conditions in the beef industry.

The company is caught in a difficult moment in the resurgence in the U.S. beef herd and worldwide economic weakness. Earlier purchases of high-cost North American feeder cattle even as retail prices are falling, plus drought-reduced cattle supplies in Australia, constricted U.S. beef exports because of the strong dollar and lower prices for competing meats, pork and poultry have cut deeply into earnings.

The division is in the midst of re-assessing its business operations and strategy, including whether it will keep its headquarters in Wichita. It expects to announce a decision in the next three to five weeks.

Cargill’s overall sales decline also reflects the sale last year of its pork division to JBS for $1.45 billion.

Cargill’s grain processing and energy divisions have also been hurt by generally low prices worldwide.

“With agriculture and energy markets as tough as we’ve seen in a long time, we’re pleased with the gain in earnings achieved this quarter,” Cargill chairman and CEO David MacLennan said in a statement. “Barring weather events, we don’t anticipate a near-term improvement in market conditions for agriculture.”

In response, the company overall has focused on cutting costs and restructuring to weather the unfavorable conditions.

The 151-year-old company has reshaped its portfolio of businesses as well as its leadership over the past year. It broke up and spun off its Black River Asset Management investment unit, sold its U.S. pork business to Brazil’s JBS and exited steel production by selling a stake in an Ohio mill.

Cargill also bought Archer-Daniels-Midland Co.’s chocolate business and a salmon feed producer.

This story was originally published April 7, 2016 at 5:00 PM with the headline "Cargill sales fall; no immediate market improvement."