Cargill reports 88% drop in Q2 earnings

US agribusiness company Cargill has suffered its worst quarter since 2001, posting a slump of 88% to $100m in Q2 2011 net earnings, compared with $832m year-on-year, due to volatility in global commodity markets and decline in sugar prices.

Cargill chairman and CEO Greg Page said the quarter that ended 30 November 2011 was significantly below expectations, particularly in contrast with last year when the company posted its strongest quarter ever.

However, the earnings prospects for the remainder of the fiscal year are expected to be positive, Page added. The Minnesota-based company experienced a 17% rise in revenues to $33bn, compared with last year’s $28.5bn.

Segment-wise, the food ingredients and applications unit was the leading contributor to the second-quarter earnings, with the unit’s food ingredient businesses almost equalling last year’s record performance.

The meat business saw one of the weakest quarters due to shrinkage in US fed cattle supplies, poor beef margins and the third largest meat recall in the US: in 2011, 36Mlbs of turkey were recalled and its Arkansas plant was temporarily shut down.

Earnings in the agriculture services segment were significant, but lower compared with the previous year, and the industrial segment was marginally below the year-ago level, partly due to higher freight costs.

Earnings in the origination and processing segment were below last year’s results as a result of challenging commodity markets and losses in sugar trading, while the results of the non-food category (risk management and finance) were mixed.

The company has recently been actively working to reduce its costs and simplify its work processes. Last month, Cargill announced that it would cut down 1.5% of its 138,000 employees over the next six months to reduce costs, and close its Iowa soyabean crush plant in February due to industry overcapacity.

Meanwhile, during the quarter the company also completed the acquisition of Provimi, a leading global animal nutrition company, for $2bn.

Caption: Cargill, which suffered its worst quarter since 2001, has been actively working to reduce its costs and expects its earnings for the remainder of the fiscal year to be positive. (Image courtesy of Cargill.)