Cargill Profit Jumps on Meat Sales -- Update

By Jacob Bunge 

Cargill Inc.'s quarterly earnings jumped 33% as booming meat profits and low grain prices boosted results at the agricultural conglomerate.

Improved earnings from energy trading and road salt helped Cargill overcome currency shifts that pinched profits in its food-ingredient divisions, the company said Thursday.

"Cargill's results were led by strong performance in our global group of meat and animal nutrition businesses," said Cargill Chief Executive David MacLennan.

Profits in the third quarter ended Feb. 28 rose to $425 million, even as revenue slipped 11% to $28.4 billion.

It marked the second straight quarter of larger profits for Cargill--among the world's largest privately held companies--after three straight quarterly earnings declines. Those drops included last year's third quarter, when a power-trading loss spurred the company to overhaul risk-management practices and its energy-trading operations.

The suburban Minneapolis-based company, which processes beef, pork and turkey in the U.S. and chicken in Latin America and Asia, is the latest major meatpacker to report rising profits as growing consumer demand and bountiful grain for feed have made the meat business more lucrative. Besides raising and slaughtering animals, Cargill also is a major producer of animal feed, a unit that reported rising sales volumes over the quarter.

Rising earnings in Cargill's meat business came as the company slimmed down some U.S. operations, selling a Texas cattle feedlot and shuttering a Missouri turkey processing plant over the quarter.

Quarterly profits at rival meat firms Tyson Foods Inc. and Pilgrim's Pride Corp. topped analysts' expectations in recent months as margins on chicken remain robust and U.S. pork supplies rebounded from a virus that killed millions of young pigs over the past two years.

Meatpackers have also benefited from back-to-back bumper harvests of U.S. corn and soybeans over the past two years, which have slashed the cost of producing feed and raising livestock. Record crops also lifted Cargill's core grain-trading division, the company said Thursday, alongside strong export demand and improved U.S. logistics after railroad snarls badly hampered grain shipping in the winter of 2014.

Sales of road salt jumped over the same quarter a year ago as cities stocked up on deicing supplies following last year's harsh winter. Cargill said its energy-trading division "successfully navigated" volatile crude-oil markets and rebounded from last year's power-trading loss, though struggles in its asset management unit weighed on its overall earnings from financial services.

The U.S. dollar's rise against the euro and Brazil's real crimped profits in the company's food-ingredients division, with earnings translated back to U.S. dollars at lower rates. Currency shifts in Venezuela also prompted Cargill to revalue some food and salt businesses in that country and book a charge against those divisions' earnings.

Angela Chen contributed to this article

Write to Jacob Bunge at [e-mail]

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