Cargill Inc.'s operating results improved over the winter even while commodity price pressure grew, but its bottom line was stung by the impact of the new federal tax law.
The Minnetonka-based agribusiness on Thursday reported a 24 percent drop in net profit to $495 million for its third fiscal quarter that ended in Feb. 28. Adjusted operating earnings, which more closely measure ongoing operations, fell 22 percent to $559 million.
Both were reduced by about $161 million as the company adjusted to the U.S. Tax Cuts and Jobs Act. While the new law reduced Cargill's overall tax rate, it created added expenses for Cargill in the transition tax on foreign accumulated earnings — cash the company said it uses to run its overseas plants and operations.
Excluding the one-time charge, Cargill's profit would have been up about 1 percent. Sales rose 2 percent to nearly $28 billion. "Our steady results from operations demonstrate that our strategic direction is the right one," David MacLennan, Cargill's chief executive, said in a statement.
Given the recent, extended period of sluggish agriculture markets, and a strong comparative year last year, the company is pleased with the results, said Lisa Clemens, senior director of investor relations.
Cargill is the largest private company in the United States by revenue. As a private company, it is not required to disclose as many details about its financial performance as publicly traded companies.
Cargill's animal nutrition and protein unit led the company's results for the fourth consecutive quarter, posting a strong increase in adjusted operating earnings. North American beef and eggs, as well as animal feeds globally, were the strongest contributors to earnings. Its fish feed, chicken and turkey businesses dipped from a year ago, partly due to lower pricing in some regions.
The company's food-ingredients unit was the second-largest contributor to earnings, but decreased overall due to lower ethanol prices in North America and higher manufacturing costs in Europe that dampened the performance of its sweeteners and starches. This winter's snowstorms bolstered road salt volume sales, which was offset by higher trucking costs and lower prices. The segment's bright spots were cocoa, chocolate and edible oils, which posted gains.
