Cargill reports 42% decline Q3 net earnings

American agribusiness firm Cargill has reported that its net earnings declined by 42% to $445m for the third quarter of 2013, compared with $766m in the same period of 2012 due to severe drought in the US, which affected the company’s meat processing margins and grain-handling businesses.

The company’s revenues in the quarter ended 28 February 2013 increased 1% to $32.2bn.

Cargill chairman and chief executive officer Greg Page said that the company’s earnings were below last year’s record third quarter.

"In North America, our meat processing businesses were pressured by the drought-related high cost of feed ingredients."

"Even though many of our global food ingredients businesses experienced higher input costs, they nearly matched their strong performance in last year’s third quarter," Page added.

Segment-wise, the company’s agriculture services division earnings declined primarily due to the prolonged impact of the last year’s drought-reduced crops in North America.

Earnings in the food ingredients and applications segment declined compared with Q3 2012 due to Venezuelan currency devaluation.

However, the segment’s performance reflected value-creating customer solutions, good risk management and attention to costs, according to Cargill.

The animal nutrition business results were affected by Venezuela’s currency devaluation in February, difficult economic conditions in meat and dairy production in several regions, high feeding costs, tight cattle supplies and an oversupplied turkey market.

Due to tight meat supplies Cargill closed a beef processing plant in Plainview, Texas in February, a move which led to the loss of 2,000 jobs.

Although the export demand for US soy beans and meal was strong during the quarter due to limited pre-harvest supplies in South America, factors such as weather delays and logistical challenges substantially reduced soybean and soybean product exports.

Cargill’s industrial segment, which supplies salt and steel products and services, reported a rise in earnings during Q3 and sales volumes of road deicing products increased.

The risk management and financial segment reported a marginal decline in profits compared with Q3 2012.

For the nine months, the company’s earnings totalled $1.83bn, up 66% from $1.1bn in the previous year, while revenues totalled $101.2bn.

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Image: Cargill’s Q3 net earnings were hit by severe drought in the US, which affected the company’s meat processing margins and grain-handling businesses. Photo courtesy of Cargill, Incorporated.