Cargill reports third-quarter fiscal 2016 earnings

MINNEAPOLIS, April 7, 2016 /PRNewswire/ -- Cargill today reported financial results for the fiscal 2016 third quarter and first nine months ended Feb. 29, 2016. Key measures include:

• Adjusted operating earnings rose 13 percent to $476 million in the third quarter, compared with $421 million in the year-ago period.
• Nine-month adjusted operating earnings decreased 2 percent to $1.66 billion.
• Net earnings on a U.S. GAAP basis equaled $459 million in the third quarter and $2.36 billion in the first nine months. This compares with $425 million and $1.63 billion in the respective periods a year ago.  
• The variance between adjusted and net earnings in the nine-month period included gains on the second-quarter sales of the U.S. pork business and Cargill's interest in the North Star BlueScope Steel joint venture, and a charge related to a change in accounting treatment for Venezuela.
• Third-quarter revenues decreased 11 percent to $25.2 billion, reflecting lower commodity prices, the strength of the U.S. dollar against other currencies, and the sale of Cargill's pork business in the second quarter. Revenues in the first nine months totaled $80 billion.

"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," said David MacLennan, Cargill's chairman and chief executive officer. MacLennan said that prices and volatility in agricultural commodities remain low, as a series of big harvests have built global stocks. "Barring weather events, we don't anticipate a near-term improvement in market conditions for agriculture. In these kinds of cycles, and we've been through them before, we focus on the levers under our control."

MacLennan said Cargill is creating a more streamlined organization, competitive business portfolio and greater efficiency in how it runs plants, manages supply chains and markets products and services. "The work we've undertaken this year is positioning us to better serve the changing needs of our customers and fulfill our purpose to nourish the world's people."

Third-quarter segment performance:
The Food Ingredients & Applications segment was the largest contributor to adjusted operating earnings in the third quarter, with results up appreciably from a weak comparative period. The segment's ongoing efforts to strengthen commercial and operational execution lifted earnings broadly across edible oils, malt, starches and sweeteners, and texturizers. A warm winter in North America kept road salt and deicing products below the year-ago level, but salt for food applications posted strong results.

Adjusted operating earnings in Origination & Processing increased moderately from last year, even as the segment contended with large global stocks, weak prices and low volatility in agricultural commodity markets. Within the segment, grain handling and oilseed processing in the Americas were up on a combined basis, with an additional contribution from world trading operations. While U.S. producers' sales of corn slowed due to low prices, Argentina's re-entry into agricultural export markets under its new administration boosted corn shipments from that country.

Adjusted operating earnings in Animal Nutrition & Protein decreased slightly in the third quarter, mostly due to conditions in the beef industry. Prior purchases of high-cost feeder cattle in North America, drought-reduced cattle supplies in Australia, decreased U.S. beef exports due to the strong U.S. dollar, and less expensive pork and poultry choices at retail all worked to hold results below the prior year. Earnings rose in animal nutrition, led by operations in the U.S. and Vietnam. Additional strong performance in U.S. turkey and value-added proteins boosted segment earnings close to the year-ago level.

Market conditions weighed on adjusted operating results in Industrial & Financial Services, with the segment recording a quarterly loss. Excess shipping capacity sent ocean freight rates to historic lows. Crude oil markets were oversupplied relative to demand, curbing results in petroleum. The slowdown in steel demand had the same effect on the metals supply chain. The segment turned a profit in natural gas and power in North America even as a warm winter and high industry production levels boosted gas storage and kept prices low.

Cargill subsidiary Black River Asset Management completed the spinout of its core businesses into three independent, employee-owned asset management firms. Cargill is in the process of closing Black River.

Explanation of non-GAAP financial measure
Cargill reports financial results in accordance with U.S. generally accepted accounting principles (GAAP). Effective fiscal 2016, the company also reports adjusted operating earnings, a non-GAAP financial measure that management believes provides additional insight into the underlying financial performance of the company's ongoing operations. In calculating adjusted operating earnings, Cargill excludes the following items: timing differences related to inventory, derivatives and hedging; last-in-first-out (LIFO) inventory adjustments; amortization of intangible assets; gains and losses on changes in investment structure; asset impairment and restructuring charges; and gains and losses on sales of businesses and other long-term assets. For more information, visit www.cargill.com/company/financial/index.jsp.

Cargill provides food, agriculture, financial and industrial products and services to the world. Together with farmers, customers, governments and communities, we help people thrive by applying our insights and 150 years of experience. We have 149,000 employees in 70 countries who are committed to feeding the world in a responsible way, reducing environmental impact and improving the communities where we live and work. For more information, visit Cargill.com and our News Center.

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