Cargill Inc.'s fiscal second-quarter earnings quadrupled,
rebounding from a weak prior-year quarter on strong global grain
trading results and improved oilseed processing margins.
Cargill, one of the world's largest privately held companies,
operates businesses ranging from grain handling and meat processing
to energy trading. It had struggled throughout the 2012 fiscal year
to maintain profits amid volatile markets, in which prices often
swung based on global economic concerns, rather than supply and
demand fundamentals. But the company said "more fundamentally
driven markets" helped earnings in the second quarter, particularly
in its grain origination and processing segment.
The suburban Minneapolis company has also cut costs in the past
year, after announcing in December 2011 it would cut 2,000 jobs, or
1.5% of its global workforce.
The "cost discipline," along with other changes, "are paying off
in the current marketing year," Cargill Chief Executive Greg Page
said.
The company reported earnings of $409 million for the quarter
ended Nov. 30, up from $100 million a year ago. After struggling
throughout the 2012 fiscal year, the company has seen profits
rebound in two consecutive quarters.
The company doesn't break out individual results, but said
profits climbed in four of its five segments. The exception was its
food ingredients and applications segment, in which earnings fell
slightly.
The biggest contributor to Cargill's increased earnings was the
origination and processing segment. Cargill, like others in the
industry, have enjoyed better margins for soybean processing around
the world.
Cargill also said its animal protein business swung to a profit
in the quarter as margins in the beef industry improved, although
it said results were "tempered" by high feed costs. A historic
drought across the Midwest has pushed grain prices to historically
high levels.
The company's global meatpacking, grain processing and food
business is viewed as an industry bellwether.
The company also said its risk management and financial segment
swung to a profit thanks to "stronger financial markets and
improved investor sentiment."
Fitch Ratings last month reaffirmed a negative credit rating
outlook, which it had implemented in late 2011 as the company's
earnings fell. Fitch said last month that "it is too soon to
ascertain the sustainability of Cargill's nascent earnings
recovery."
The company did not mention the ongoing U.S. drought in its
earnings press release, but last year said that it could provide a
short-term boost to profits as it is able to ship grain from its
operations in South America.
Write to Ian Berry at ian.berry@dowjones.com
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