At $471,611 an hour, Cargill posts fine quarter

  • Article by: MATT MCKINNEY , Star Tribune
  • Updated: April 15, 2008 - 10:45 AM

The company broke the $1 billion mark on profit amid global food shortages and growing energy demands.

Has it ever been better for Cargill? Not likely.

The company turned in yet another set of dazzling results on Monday, with quarterly earnings leaping 86 percent to break the $1 billion barrier for the first time.

Profit for the quarter ended Feb. 29 was $1.03 billion, a pace that earned the company $11.3 million a day. That's $471,611 an hour, for anyone who's keeping track.

The surge of profitmaking comes as global food shortages and an expanding biofuels industry has put a premium on agricultural commodities and technology -- the mainstays of Cargill's business.

Cargill CEO Greg Page noted the "striking" dimensions of today's global agriculture business in a Monday release accompanying the privately held company's limited financial statements.

"Demand for food in developing economies and for energy worldwide is boosting demand for agricultural goods, at the same time that investment monies have streamed into commodity markets," the note read.

"Relative to demand, world grain stocks today are at their lowest levels in 35 years. Prices are setting new highs and markets are extraordinarily volatile. In this environment, Cargill's team has done an exceptional job measuring and assessing price risk, and managing the large volume of grains, oilseeds and other commodities moving through our supply chains for customers globally," the note continued.

Cargill first broke the $1 billion annual earnings mark in 2003 with $1.29 billion in profits. Through the first nine months of the company's fiscal year, it has earned $2.9 billion, a 69 percent increase over the year-ago period.

"The results today are not the result of anything the company did in three months, six months or a year," said company spokeswoman Lisa Clemens, "but the cumulative effect of having invested for many years in expanding our facilities, developing new capabilities and hooking up our knowledge around the world."

The emergence of a middle class in developing nations like China and India has bolstered company profits, with Cargill riding a wave of unprecedented demand for meat and eggs from consumers across Asia and elsewhere.

And yet, in the poorest places in the world, sharply rising food prices have incited riots from Haiti to the Philippines, Cameroon to Indonesia.

Armed guards now stand watch over some Thai rice paddies. Cambodia's prime minister has ordered a limit on exports of rice out of the country to maintain domestic supplies.

The shortages have strengthened Cargill's call for free trade, Clemens said.

"Particularly at a time when grain stocks are at their lowest levels in 35 years, Cargill believes it's very important that food be allowed to move from places where there is a surplus to places where there is a need," she said.

The company said its best performance in the most recent quarter came from its origination and processing segment, which essentially buys and moves food around the world.

Four of the company's five segments reported higher earnings this quarter than a year ago, with only its risk management and financial segment reporting lower earnings.

That was a concern for DBRS, a privately owned rating agency headquartered in Toronto, which gave the company an A (high) rating, its fourth highest rating, with a negative trend due to ongoing uncertainty in the credit and mortgage markets.

"Three of four cylinders are clicking very strongly and one cylinder is a concern," said Anil Passi, senior vice president at DBRS.

Cargill's investments in the past year included a $140 million conversion of an imported corn plant in Manchester, U.K., to domestic wheat, opening new oilseed facilities in Argentina, Australia, Russia, China and the United States, construction of a second malt plant in Argentina, opening a fifth feedmill in Vietnam and acquiring a U.K. chicken processing business, Freemans of Newent.

The company has $1.3 billion in projects under construction, according to Clemens.

Matt McKinney • 612-673-7329

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