Cargill reported net earnings of $425 million in the fiscal 2015 first quarter ended Aug. 31, down 26 percent from $571 million in the year-ago period. Revenues in the first three months totaled $33.3 billion, a 2 percent change from last year's $33.8 billion.
"Although Cargill's first quarter was not as strong as last year, we had several areas of good performance and are optimistic about the opportunities ahead," said David MacLennan, Cargill's president and chief executive officer. "This year's big crops, not just in North America but across agricultural production areas worldwide, will enhance food security after several years of weather disruptions. Our company is well positioned to connect these new supplies to growing demand."
MacLennan noted the first quarter was marked by a great deal of geopolitical uncertainty, and that Cargill's regional teams did an excellent job serving customers while managing the impact. He also said Cargill made good progress on efforts underway to improve the company's efficiency and accelerate the pace of technology and process improvements.
Among Cargill's business segments, Origination & Processing was the largest contributor to first-quarter earnings, with results slightly below the year-ago level. Global commodity markets for corn, soybeans and wheat were characterized by falling prices, reduced price volatility, lower soybean crush volumes and limited farmer selling in some countries. Grain shipments in Canada remained brisk due to the large carryover from the country's record 2013 crops.
Food Ingredients & Applications earnings decreased moderately from last year, with many food ingredient businesses experiencing softer volumes often tied to sluggish economic conditions in a number of countries. On the upside, strong demand for corn-based ethanol lifted Cargill's corn processing results in North America.
Segment results for Animal Nutrition & Protein rose moderately in the first quarter. The segment's animal nutrition operations performed well, with higher sales volumes but slightly lower earnings due to a gain on the sale of a milling business in last year's first quarter.
The segment's animal protein businesses jointly delivered a strong performance. Beef processing in Australia benefited from ample cattle supplies and strong export demand. In North America, lower input costs bolstered cattle feeding results; on the processing side of the business, cattle costs were very high during most of the period but consumer demand for beef stayed strong. The expected shortage of hogs caused by the porcine epidemic diarrhea virus (PEDv) was less detrimental to Cargill's U.S. pork operations than anticipated, allowing for a good first quarter. Cargill's chicken and turkey operations in Central America, Europe, Thailand and the U.S., also realized higher earnings on a combined basis.
Earnings in Industrial & Financial Services decreased moderately from last year's first quarter. Within the segment, results were mixed. Performance in energy rebounded, driven by the decision in the preceding quarter to focus on crude oil and petroleum products, and North American power and natural gas. Trading results in ocean shipping were reduced by an erratic Capesize vessel market. Performance in metals also fell, with tightening credit markets in China diminishing demand and prices for iron ore and steel.
During the quarter, the company closed its beef harvest facility in Milwaukee, an outcome of the tight cattle supply brought about by producers retaining cattle for herd expansion. The U.S. beef cattle herd is at its lowest level since 1951. The ground beef plant at the site remains open to meet customer needs. Cargill will close its Memphis, Tennessee, corn milling facility, effective January 2015. Located away from the Corn Belt, the plant is underutilized. Its corn oil refinery will remain open and operate as a stand-alone facility.
Cargill moved forward a number of projects that will help it better serve customers. It completed the formation of a new, global sugar trading joint venture with Brazil's Copersucar. Named Alvean, the venture began originating, marketing and trading raw and white sugar Oct. 1. Cargill acquired Turya?, a Turkish fats and oils company, which diversifies the company's food ingredients presence in that country. It also purchased a salt production facility in Hersey, Michigan, that will manufacture water softener salt and salt products used in agriculture. Cargill opened its newly expanded and remodeled Food Innovation Center in Plymouth, Minnesota, where the company's food scientists work side-by-side with food and beverage manufacturers and foodservice customers to help them innovate and bring new products to market.
In early September, Cargill reached agreement to buy Archer Daniels Midland's chocolate business, which includes six processing facilities in the U.S., Canada and Western Europe, and a number of chocolate brands. Subject to regulatory clearance, the acquisition is expected to be completed in the first half of calendar 2015.