The ongoing U.S.-China trade tensions and the outbreak of African swine fever in parts of Asia led Cargill Inc. to tighten its purse strings for the second straight quarter.
Sales fell and Cargill’s operations earned less money, but the company cut costs to lift its bottom line in its fiscal third quarter, which ended Feb. 28.
“Disruptions and uncertainty in the global business environment continued to present challenges during the quarter, but our teams captured greater efficiencies across the company,” Dave MacLennan, Cargill’s chief executive, said as the results were announced Thursday.
Cargill said its net profit rose 14 percent to $566 million and its adjusted operating earnings, which the company considers a better measure of performance, rose 8 percent to $604 million. Sales fell 4 percent to $26.9 billion.
Cargill is the nation’s largest privately held company with a massive global reach. Grain trading is its hallmark business and one that depends on open market policies. Trade tensions have led to disruptions in its supply chain.
Its North American soy and canola crush operations ran at high capacity, but Cargill said the “near absence of the Chinese market for plentiful U.S. soybean stocks” eroded profits for those operations.
“The trade turbulence also negatively affected soybean crush operations in China,” the company said.
The company’s animal feed and protein business again contributed the most to its earnings as demand for red meat and eggs remained high around the world.
While the segment’s protein business beat results from the same period last year, the outbreak of African swine fever in China and other countries — and the continued oversupply of dairy products in the U.S. — pulled down its overall performance.
These challenges to the U.S. dairy market and to China’s pork supply mean there’s lower demand for Cargill’s soybean meal and other feed ingredients, the company said.
The extreme winter in the U.S. affected Cargill’s units in different ways. The road construction industry bought fewer bioindustrial products from the firm during the quarter. But it experienced higher sales of de-icing products used to treat icy and snowy roads.
Historically low ethanol prices dampened the company’s North American starches and sweeteners earnings, while lower sales and heightened operating costs in North American cocoa and chocolate curtailed the category, which was strong elsewhere.
Cargill announced earlier this month plans to acquire Smet, the Belgian supplier of chocolate and chocolate decorations, a deal reflecting the company’s move toward more premium, specialty confections. The deal is expected to close in a few months.
The Brazilian mining disaster in January that killed as many as 200 people triggered a reduction in iron ore production and exports to China, which lowered demand for Cargill’s shipping services. “Ocean shipping rates began to strengthen by quarter end, but concerns about a slowdown in global growth continued to weigh on markets,” the company said.