Cargill ends its year with $2 billion in earnings

Cargill Inc. posted a solid fourth quarter to complete a comeback year, with most of its myriad businesses turning in bigger profits.

Even the company's hard-pressed North American beef business showed some improvement in the fourth quarter, though it's still struggling along with the rest of the beef industry.

Cargill on Wednesday reported net profits of $483 million for the quarter ended May 31, up from $73 million a year ago, its worst quarterly showing since 2001. In fact, the Minnetonka-based agribusiness giant's entire 2012 fiscal year was one of its worst in a decade, as the firm was pummeled by weak trading results and reduced profits in key businesses.

But for fiscal year 2013, Cargill said it earned $2.31 billion, up from $1.17 billion in fiscal 2012. Sales totaled $136.7 billion, up 2 percent from fiscal 2012. Revenue in the fourth quarter was $35.4 billion, up 4 percent from a year ago.

"Based on how the year unfolded, we felt it would be a favorable rebound, and they more or less delivered on that," said Chris Johnson, a debt analyst at Standard & Poor's.

Although Cargill has some publicly traded debt, it is one of the world's largest privately held companies, active in everything from the egg business to palm oil plantations to road salt production.

This year, nearly all of Cargill's business units were profitable, and two-thirds of them exceeded 2012's results.

"It was a good year, and we are pleased with the breadth of our performance," David MacLennan, Cargill's chief operating officer, said in an interview with the Star Tribune. "It's widely based and not concentrated in one or two areas."

Cargill's grain origination and processing segment, which includes trading and export operations, was its largest contributor to earnings for the quarter and the full year. That segment's cotton and sugar trading businesses turned around after poor showings in 2012.

Cargill's food ingredients business was a significant contributor to earnings, with particularly strong performances in sweeteners, starches and cocoa.

But that segment's meat processing business — one of North America's largest — saw earnings fall due to drought, high feed costs and a tight supply of cattle.

"It's been a very tough year for the beef industry as a whole," MacLennan said. But he also noted, "we feel a little more optimistic about that business than we did a year ago."

With the tight supply of cattle, beef processors have essentially been dealing with overcapacity. Cargill rocked the industry last winter by indefinitely idling its sprawling Plainview, Texas, beef plant, which employed 2,000 people. By taking out that capacity, Cargill has helped improve profit margins throughout the beef industry in recent months, said S&P's Johnson.

Cargill's agriculture services segment posted improved results over 2012, as the integration of Provimi — a large acquisition made last year — accelerated profits in animal feed. Earnings in Cargill's risk management and financial operations also rose considerably over the prior year.

Cargill's industrial segment, which includes its big salt business, saw fourth-quarter earnings decline, but posted somewhat higher profits for the year. The business was helped by a long, snowy winter in North America that boosted demand for road salt and de-icing products.

Cargill also noted Wednesday that it currently has $2.6 billion invested in projects under construction or recently opened, notably in the poultry business.

A chicken processing plant that will supply McDonald's opened in Russia this summer. Meanwhile, Cargill is adding more capacity at a major poultry operation in Thailand, and it is building a huge integrated chicken plant — from baby chicks to drumsticks — in China.

Mike Hughlett • 612-673-7003