Dive Brief:
- Cargill reported fiscal third-quarter adjusted operating earnings of $476 million, a 13% increase over $421 million in the same period last year. That increase was primarily attributed to the food ingredients and applications segment and its continuing commitment to "strengthen commercial and operational execution," according to a news release.
- Quarterly revenue fell 11% to $25.2 billion due to lower commodity prices, currency headwinds, and Cargill's sale of its pork business to JBS in the second quarter.
- Cargill chairman and CEO David MacLennan said he didn't expect much of a turnaround in the near future for the currently tough agricultural market due to large global stockpiles and low crop prices. "In these kinds of cycles, and we've been through them before, we focus on the levers under our control.”
Dive Insight:
Cargill's revenue decline was no surprise, as these numbers tend to fall for agribusinesses like Cargill when commodity prices are low. However, this also means these companies' input costs are lower, which is how Cargill can still turn a profit despite smaller revenues, Reuters reported.
While Cargill can't control global stockpiles or commodity costs, the company has shifted its focus to the internal improvements it can control. This has meant streamlining the organization as a whole and increasing efficiency in plant operations and throughout its supply chain. The sell-off of Cargill's pork assets was one aspect of that, but Cargill also bought ADM's chocolate business and a salmon feed producer last year. In November, Cargill announced consolidation of its upper management.
Earlier this week, an appeals court upheld a verdict that ordered Greater Omaha Packing Co. to pay Cargill $9 million. This was due to Greater Omaha's role in a beef recall associated with an E. coli outbreak in 2007. Greater Omaha supplied the contaminated beef to Cargill's grinding plant in Butler, WI. Cargill had to pay $25.3 million in personal injury settlements following the recall.