Cargill Reports Q4 and Fiscal 2008 Earnings

US – Cargill reported earnings from continuing operations of $744 million in the 2008 fourth quarter ended May 31, up 18 percent from $628 million in the same period a year ago. A $310 million gain on the sale of discontinued operations brought fourth-quarter net earnings to $1.05 billion.
calendar icon 20 August 2008
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For the full fiscal year, Cargill earned $3.64 billion from continuing operations, a 55 per cent increase from $2.34 billion a year ago. The $310 million gain on the sale of discontinued operations in the fourth quarter brought fiscal 2008 net earnings to $3.95 billion.

Revenues for the full year rose 36 per cent to $120.4 billion. Cash flow from operations increased 77 per cent to $7 billion.

"Cargill posted a record financial performance in a year of exceptionally strong commodity demand, market turbulence and price risk," said Greg Page, Cargill chairman and chief executive officer. "By bringing to bear our business diversity, the full capacity of our global assets, strong risk management and a significant increase in capital deployed, we operated successfully in the most volatile agricultural and energy markets in decades. Despite tight stocks of many agricultural commodities, we maintained reliable supply chains for our customers and created value-adding solutions."

'Earnings in agriculture services, food ingredients and applications, and risk management and financial were below the year-ago levels for the three segments'

Mr Page said Cargill's investment in the fertilizer industry also contributed significantly to company results. Since 2006, global demand for crop nutrients has surged in response to the world’s increased need for higher crop yields to meet rising demand for food and agricultural commodities.

Among Cargill's five business segments, fourth-quarter earnings were led by the origination and processing segment and the industrial segment, both of which were up substantially from the same period a year ago. Earnings in agriculture services, food ingredients and applications, and risk management and financial were below the year-ago levels for the three segments.

For the full year, earnings were led by origination and processing, which increased results substantially from last year's level. The industrial segment, which includes Cargill's investment in the fertilizer business, also posted exceptionally strong earnings. Both the agriculture services and the food ingredients and applications segments were well ahead of last year. Earnings in risk management and financial declined moderately from last year's high, though outstanding performances in several areas reflected the segment's diversification.

Mr Page underscored the importance of Cargill's attention to maintaining a strong balance sheet. "Over the past two years, it has required on average an additional $15.5 billion in total assets to run the company. Given the persistent turbulence in credit markets, Cargill's adherence to disciplined financial management was a significant element of our performance."

In assessing economic forces at work in the world, Mr Page noted that growth in gross domestic product among the world's developing economies has averaged more than 6 per cent a year since 2000. Although this expansion is projected by the International Monetary Fund and others to slow somewhat in 2008 and 2009, it has given millions of people the means to improve their diets, which has lifted demand for grains and oilseeds. Underpinned by high oil prices and government mandates and subsidies, global production of biofuels also has boosted demand. Yet world grain stocks sit at 35-year lows, drawn down by weather-affected crops and slower growth in average crop yields worldwide. The tight dynamic sent prices and price volatility in fiscal 2008 to new highs and elevated energy prices increased the cost of producing and transporting agricultural commodities.

Mr Page said the world has the means to give agriculture the chance to catch up with demand. "If markets are allowed to work, today's prices can spark a supply response from farmers. A rekindling of public and private investment in agriculture and in rural infrastructure will drive productivity gains."

Cargill continues to invest in global food and agriculture, including in developing countries worldwide where more than half of its 160,000 employees live and work. "Cargill people play valuable roles in helping improve the quality of local agriculture, in providing farmers with access to world markets, and in managing basic and value-adding food-processing facilities," said Mr Page. "This generates income and investment flows in rural communities and, of key significance today, allows food commodities to move from places of surplus to places of need."

Mr Page emphasized the importance of innovation in food, agriculture and risk management. "We are finding new ways to connect with customers, non-governmental organizations and academic institutions so that together we can nourish new ideas and possibilities in the complexity that is today's global economy."

In its report on Cargill's financial results, The StarPhoenix based in Saskatoon, Canada, says that in fiscal year 2008, Cargill spent $2.5 billion on acquisition and capital expenditures, which included buying a grain export terminal and elevator network in Canada, buying a Hungarian grain company and acquiring two poultry processors.

Further Reading

- You can view the full report by clicking here.
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