Cargill reports fiscal 2018 fourth-quarter and full-year results
Company achieves sizable gains, powered by greater integration worldwide
MINNEAPOLIS – Cargill today reported $3.2 billion in adjusted operating earnings for the 2018 fiscal year, one of its best performances. The fourth quarter also was very strong. The company’s improved financial results over the past two years are the outcome of significant efforts by its teams to redefine how Cargill operates. The organization runs today with greater agility and stronger integration to serve customers’ rapidly changing needs.
Key results for the quarter and fiscal year ended May 31, 2018,* include:
- Adjusted operating earnings totaled $809 million, a 76 percent jump from $460 million a year ago.
- Net earnings on a U.S. GAAP basis were $711 million, more than double last year’s $347 million.
- Revenues increased 7 percent to $30.4 billion.
- Adjusted operating earnings reached $3.2 billion, up 6 percent from last year’s strong comparative of $3.04 billion.
- Net earnings equaled $3.1 billion, a 9 percent increase and the third straight year of improved performance on a U.S. GAAP basis.
- Both adjusted and net earnings included a provisional net charge of $86 million related to the U.S. Tax Cuts and Jobs Act enacted in December 2017. This represents a decrease from the estimate provided in the company’s third-quarter release.
- Revenues grew 5 percent to $114.7 billion.
- Cash flow from operations increased 11 percent to $5.22 billion.
“Our strong results show we are creating the connections the world needs for vibrant food and agriculture both today and tomorrow,” said David MacLennan, Cargill’s chairman and chief executive officer. “Cargill has always moved food from where it is produced to where it is needed. Today, we are pioneering new capabilities and partnerships to invest for the future. We are innovating alongside our customers to develop healthy, delicious products made the way consumers want. We are working with farmers and others to implement sustainable agricultural practices. And we are standing up for inclusive global trade that lets food move freely.”
Animal Nutrition & Protein surpassed last year’s strong results, making the segment the largest contributor to Cargill’s adjusted operating earnings in the fourth quarter and the full year. The protein business delivered an exceptional performance, fueled by rising domestic and export demand for North American beef and steady expansion in value-added egg products. Global growth in feed additives, micronutrients and premixes for customized animal nutrition also boosted earnings for the year. Excess supplies of chicken relative to domestic demand in Thailand contributed to a moderate decrease in global poultry results in both periods.
During the year, the segment invested significantly to serve growing demand for protein. It acquired Pollos El Bucanero, a leading retail-branded poultry business in Colombia. It formed U.K.-based Avara Foods, a fresh poultry joint venture, and opened a major poultry processing plant in the Philippines with Jollibee Foods. In the U.S., the segment expanded facilities for fresh ground beef, and cooked meat and eggs.
In animal nutrition, Cargill acquired U.S.-based Diamond V and invested in Austria-based Delacon; they are the respective leaders in improving animal health through fermentation- and plant-based feed additives. The segment purchased Integral Animal Nutrition, a Brazilian producer of cattle mineral feeds. In the U.S., it bought Pro-Pet, a private-label pet food maker, and the animal feed business of Southern States Cooperative. Across Asia, it added to its existing network of feed mills and opened technical application centers supporting aqua nutrition in India and Vietnam. It also invested in Dublin-based Cainthus, an animal facial recognition startup, and broadened its farm management software offerings; both will give farmers a digital boost to their productivity and profitability.
Earnings in Food Ingredients & Applications rose for the third consecutive year, with outstanding performance in cocoa and chocolate, gains in Asia-based ingredients and global edible oils, and steady earnings across global starches and sweeteners. The segment’s sustained attention to operating efficiency and commercial excellence also contributed to the year’s growth. Lower ethanol prices and higher plant maintenance expenses in a few product lines contributed to a small decrease in profitability during the fourth quarter. Increased sales volume in salts for food and water softening was more than offset in both periods by lower sales prices for road salt and higher freight costs.
Segment growth initiatives in fiscal 2018 included a joint venture with Minneapolis-based Puris to serve rising demand for plant-based proteins. Cargill also brought several new ingredients to market, including a high oleic canola oil with the lowest-ever level of saturated fat; EverSweet™ zero-calorie sweetener; and the SimPure™ line of high-performing native starches. It also added low-sodium processing capacity to its salt plant in New York. In Brazil, the company launched Liza® Origens soy cooking oil, which carries its innovative Triple S (Sustainably Sourced & Supplied) certification. In the fourth quarter, Cargill purchased an additional 40 percent equity stake in Glucovil Argentina, bringing its ownership in the starches and sweeteners joint venture to 70 percent.
Origination & Processing exceeded last year’s quarterly and annual results, putting up its best fourth quarter in seven years. For most of fiscal 2018, rising demand for grains and oilseeds was muted by big crops, building stocks and low market volatility. Toward year-end, this changed, as drought in Argentina and other market forces began to influence global flows of corn, soybeans and related products. With markets moving and prices coming off lows, the segment improved origination, processing and trading results in key geographies.
Through investments in technology, the segment is better connecting its global operations and supply chains, strengthening its trading and analytical edge, and bringing greater insight to customers. During the year, it broke ground on a new biodiesel facility in Kansas, and expanded and modernized several oilseed processing plants in Brazil and the U.S. As fiscal 2019 began, it formed a joint venture to meet increasing demand for soybean meal and oil in Egypt.
Industrial & Financial Services finished the fiscal year slightly below the prior year, with lower returns from fund investments and a softer fourth quarter overall. Cargill’s risk management and trade finance activities, which were added to the segment at the start of the fiscal year, jointly posted higher earnings in both periods. Trading results in metals rose appreciably for the year, supported by the segment’s focus on market insights and analytics. Cargill’s energy and U.S. steel processing businesses were sold in the first seven months, completing the segment reorganization.
Reporting broad-based progress
On Aug. 7, Cargill will release its annual report for fiscal year 2018. The report details how Cargill is strengthening global food and agriculture in ways that position the company, its customers and other partners for sustainable, long-term success. It includes examples of how Cargill is advancing world-class capabilities in digitalization and analytics, risk management, sustainable supply chains, and more.
As an illustration of this type of work, during the fourth quarter the company launched a three-year project with Nestlé Purina and The Nature Conservancy that will use technology to improve the sustainability of the beef supply chain. Smart weather sensors in fields of row crops will enable farmers to make more informed irrigation decisions. This will correspondingly improve the water use of beef supply chains, as cattle consume feed made from these crops. The project will take place in the U.S. state of Nebraska – an important area for food production – but will seek to develop methods that are broadly scalable. Nebraska was selected because it has the largest share of irrigated acres in the U.S. and the second-largest cattle population.
“At the center of everything we do is our purpose: to nourish the world in a safe, responsible and sustainable way,” MacLennan said. “With our diverse set of partners, we are activating tomorrow’s solutions across food, agriculture and nutrition.”
*This earnings release is published prior to the completion of Cargill’s fiscal 2018 audit; results shown are unaudited.
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Explanation of non-GAAP financial measure
Cargill reports financial results in accordance with U.S. generally accepted accounting principles (GAAP). The company additionally reports adjusted operating earnings, a non-GAAP financial measure that management believes provides additional insight into the underlying financial performance of ongoing operations. In calculating adjusted operating earnings, Cargill includes earnings and losses attributable to non-controlling interests in consolidated companies, with the exception of those from its asset management business. Mark-to-market gains and losses on intercompany contracts between the Origination & Processing and the Food Ingredients & Applications segments also are included. Cargill excludes the following six items: timing differences related to inventory, derivatives and hedging; last-in, first-out (LIFO) inventory adjustments; amortization of intangible assets; gains and losses on changes in investment structures; asset impairment and restructuring charges; and gains and losses on disposals of businesses and other long-term assets. For more information, visit https://www.cargill.com/about/financial-information.
Cargill helps the world’s food system work for you. We connect farmers with markets, customers with ingredients and families with daily essentials—from the foods they eat to the floors they walk on. Our 160,000-plus team members around the world innovate with purpose, empowering our partners and communities as we work to nourish the world in a safe, responsible, sustainable way.
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