MINNEAPOLIS, Sept. 27, 2017 /PRNewswire/ -- Cargill today reported financial results for the fiscal 2018 first quarter ended Aug. 31, 2017. Key results include:
Adjusted operating earnings totaled $888 million, exceeding by 7 percent the $827 million earned in last year's strong comparative period.
Net earnings on a U.S. GAAP basis were $973 million, up 14 percent from $852 million a year ago.
Revenues totaled $27.3 billion, edging ahead of last year's $27.1 billion.
"We're off to a good start in our new fiscal year, powered by the significant work we've done over the last few years and continuing to accelerate our performance," said David MacLennan, Cargill's chairman and chief executive officer. "Even as market conditions vary across our sectors, our teams are delivering for our customers and achieving results to fuel future growth."
Segment results Animal Nutrition & Protein carried its momentum from fiscal 2017 into the new quarter, with adjusted operating earnings up significantly from last year. Protein results in North America were lifted by brisk consumer demand for beef, strong exports and more abundant cattle supplies, resulting in better utilization of processing capacity. Global poultry slightly lagged the year-ago period, as somewhat weaker results in Central America trimmed strong domestic sales and exports out of Southeast Asia. Global animal nutrition nearly reached last year's quarterly results. Gains attributable to sales of value-added feed additives and premixes were offset by market pressures in aqua feeds in Europe and swine in Vietnam.
At the start of the quarter, Cargill acquired Pollos El Bucanero, a leading producer of chicken and processed meats in Colombia. Also in the protein space, Cargill invested in San Leandro, California-based Memphis Meats. The young company is developing methods to cultivate meat directly from animal cells. Over time, cultured proteins could potentially complement conventionally produced meats as part of the equation to sustainably nourish the future. In animal nutrition, Cargill completed the purchase of Southern States Cooperative's feed business, which serves customers in the southeastern and eastern U.S. It also formed a partnership with Austria's Delacon, a leading maker of phytogenic feed additives for the animal nutrition market. Both Cargill and Delacon seek to accelerate the growth of these natural, plant-based feed additives that support animal health.
Food Ingredients & Applications was the second-largest contributor to company earnings, as continued attention to raising commercial capabilities and operating efficiencies yielded improved earnings. Cocoa and chocolate products, along with sweeteners and starches for food and other applications led results in most regions. The segment's Asia-based businesses also realized improved volumes.
Adding to its portfolio of specialty ingredients, Cargill introduced canola lecithin to the market late last year. This versatile, label-friendly emulsifier can be used by food manufacturers in a wide variety of foods and beverages. In September, the ingredient received GRAS (Generally Recognized as Safe) status from the U.S. Food and Drug Administration.
Origination & Processing was down from last year's strong quarter, as positive trading results helped buffer against a challenging environment. Soybean processing in Brazil and China, and exports from Brazil also added to earnings. Although global demand for grain and oilseeds continues to grow, rising production and building global stocks during the last four crop cycles has depressed market volatility and commodity prices. The segment is working to increase productivity in its supply chain while continuing to leverage its trading and risk management capabilities to bring additional value to customers. The startup of efficient new production lines in the segment's oilseed processing plants in Wichita, Kansas, and Fayetteville, North Carolina, furthered this objective.
The Industrial & Financial Services segment was down slightly from last year. Earnings from iron ore and steel trading in Asia, and from trade and structured finance services in emerging and developed markets offset weaker performance elsewhere in the segment. Cargill sold its petroleum business to Australia's Macquarie Group in June. In a separate transaction, its North American power and gas business was sold to Macquarie in mid-September. Also in September, Cargill agreed to sell its U.S. metals business to Japanese steel trader and distributor Metal One. Pending regulatory clearance, the transaction is expected to close by calendar year-end. Cargill remains active in energy and ferrous markets through its financial risk management and Asia-based metals businesses. The company also is involved in biofuels, bio-industrials and tankers shipping.
Supporting employees and students Cargill is taking action to strengthen workforce resilience for both today and tomorrow. A new $4 million, three-year grant from the Cargill Foundation will support Minneapolis Public Schools and local partner AchieveMpls to advance science, technology, engineering and math (STEM) education and college readiness programs. This includes funding for AchieveMpls college and career preparation centers located in 11 Minneapolis high schools that offer personalized guidance to 9,000 high schoolers annually. Cargill is the largest local corporate funder for Minneapolis Public Schools, providing more than $16 million in grants during the past decade.
The U.S. Department of Defense honored Cargill with the Freedom Award for its support of employees who serve in the National Guard and Reserve. Fifteen recipients were selected from more than 3,000 nominees this year. Cargill has a number of initiatives in place to hire and advance veterans, reservists and members of the National Guard, including having a dedicated military recruiter, a specialized business resource group for military employees and other employees who wish to participate, and flexible workplace policies to accommodate reservists.
The company also signed on to the newly launched CEO Action for Diversity, a collaboration among more than 150 CEOs who pledge to foster environments in their companies where diverse experiences and perspectives are welcomed. Additionally, member companies will implement and expand education on unconscious biases, and share best practices and missteps to help one another improve. The initiative includes CEOs from more than 50 industries and all 50 states in the U.S., representing millions of employees worldwide.
"The strength of our business rests in our people and communities," MacLennan said. "In a fast-changing world, we are doing all we can to create a workplace where employees can excel, to empower people with the skills they will need for the jobs of tomorrow, and to support the communities where we live and work."
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 from non-controlling interests and mark-to-market gains or losses on intercompany contracts between the Origination & Processing and the Food Ingredients & Applications segments. Cargill excludes the following seven 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 structure; asset impairment and restructuring charges; gains and losses on sales of businesses and other long-term assets; and earnings attributable to non-controlling interests of Cargill's asset management subsidiary. For more information, visit www.cargill.com/company/financial/index.jsp.
Cargill provides food, agriculture, financial and industrial products and services to the world. Together with farmers, customers, governments and communities, we help people thrive by applying our insights and 150 years of experience. We have 155,000 employees in 70 countries who are committed to feeding the world in a responsible way, reducing environmental impact and improving the communities where we live and work. For more information, visit Cargill.com and our News Center.