Cargill's third-quarter earnings increase 30%

by World Grain Staff
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MINNEAPOLIS, MINNESOTA, U.S. — Cargill reported on April 13 earnings of $763 million from continuing operations in the fiscal 2011 third quarter ended Feb. 28, up 30% from $588 million in the same period a year ago.

The company recorded $342 million attributable to its majority investment in The Mosaic Company — income now classified as earnings from discontinued operations following the two companies' Jan. 18, announced agreement and upcoming closing of a split-off and orderly distribution of Cargill's 64% ownership stake in Mosaic. Earnings from discontinued operations in the year-ago period were $310 million, of which $141 million was attributable to Mosaic. Cargill's third-quarter net earnings totaled $1.11 billion, up 23% from $898 million in the prior year.

In the first nine months, earnings from continuing operations were $2.29 billion, a 47% increase from a year ago. The addition of $1.19 billion in earnings from discontinued operations brought Cargill's nine-month net income to $3.48 billion compared with $1.91 billion in the year-ago period.

Consolidated revenues excluding Mosaic rose 21% to $30.5 billion in the third quarter, bringing the total through the first nine months to $84.7 billion.

"Cargill posted solid earnings in a period of volatile commodity markets and geopolitical change," said Greg Page, Cargill chairman and chief executive officer. "All of us in agriculture are living with high levels of price volatility, in which small changes in the quantity of production are having dramatic impacts on price. Cargill's ability to focus on the factors of supply and demand, while gauging external events that can uproot market fundamentals temporarily, is critical to the risk management services we provide to our customers and to our own financial performance."

Four of Cargill's five business segments increased earnings in the third quarter. Results were led by the origination and processing segment, which used its global sourcing and risk management capabilities to fulfill customers' supply needs in spite of market disruptions.

Food ingredients and applications, a segment that connects 40 food ingredient and meat businesses, increased earnings moderately. Many business units relied on operational efficiencies and price risk management to make up for higher input costs. Results in the risk management and financial segment improved from a year ago, reflecting better performance in stronger financial markets and in risk-sensitive energy markets. Industrial earnings also strengthened seasonally. Although earnings were down slightly, the agriculture services segment benefited from farm customers' demand for grain marketing and price risk management services.

Cargill completed three previously announced acquisitions: The company purchased a majority stake in PT Sorini Agro Asia Corporindo Tbk, an Indonesian-based maker of starch-based products for food, beverage and other applications. It bought Unilever's shelf-stable, branded condiments business in Brazil. Cargill acquired Royal Nedalco's alcohol operations from Dutch parent company Royal Cosun. Nedalco makes high-quality alcohols for use in spirits, foods, pharmaceuticals and other products.

Cargill announced an agreement to acquire the German chocolate business of Schwartauer Werke GmbH & Co. KG Kakao Verarbeitung Berlin. Known as KVB, the company's chocolate expertise complements Cargill's strength in cocoa and confectionery. The purchase is expected to close in the second quarter of calendar 2011.

Cargill and Mosaic jointly announced a transaction that would result in the orderly distribution of Cargill's 64% ownership position in Mosaic, the publicly held fertilizer company, to Cargill's shareholders and debt holders. The transaction is expected to close in the second quarter of calendar 2011.
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