Cargill Inc., the agricultural giant that’s the largest private company in the US, saw profit slow in the nine months through February as volatility in global grain markets eased and domestic meatpacking margins collapsed.
(Bloomberg) — Cargill Inc., the agricultural giant that’s the largest private company in the US, saw profit slow in the nine months through February as volatility in global grain markets eased and domestic meatpacking margins collapsed.
After posting record net income of $6.7 billion in the year ended May 31, earnings over the following nine months were $3.2 billion, putting the company on course for a less profitable year, according to a presentation to bondholders seen by Bloomberg News. Revenue for the first nine months of the current fiscal year was $133.5 billion, compared with $165 billion for the preceding full year.
A Cargill spokesperson said the company doesn’t comment on earnings.
The company, owned by members of the founding Cargill and MacMillian families, employs about 155,000 people across 70 countries and trades commodities including wheat, soybeans and cocoa. It’s one of the largest beef processors in the US and last year bought Sanderson Farms Inc., the third-biggest chicken producer in the US, for about $4.5 billion in a joint venture with Continental Grain Co.
Margins for meatpackers like Cargill that slaughter cattle and sell the beef to restaurants and supermarkets have slumped in recent months. Drought has forced ranchers to cut herds, pushing up cattle prices, while hard-pressed consumers also shying away from buying expensive cuts.
At the same time, the unprecedented swings in wheat and corn markets that followed Russia’s invasion of Ukraine have eased, potentially reducing opportunities for Cargill’s grain trading division, which buys from farmers and sells to consumers around the world.
Still, even though profits are setting a slower pace, the first nine months of the current fiscal year have already outstripped full—year earnings in 2018, 2019 and 2020. The company, founded by William Wallace Cargill in 1865, has a policy of paying out 20% of earnings in dividends and retaining the rest for investment in the business.
Minnesota-based Cargill is the C in the so-called ABCDs, the group of four merchants that historically have dominated the world of crop trading — the other firms are Archer-Daniels-Midland Co., Bunge Ltd. and Louis Dreyfus Co.
Cargill is wrapping up investor calls with bond investors on Friday for new seven-year euro notes, according to people familiar with the matter. It’s set to be the company’s first public sale in Europe’s common currency since 2014, when it issued €500 million ($552 million) that matured in February.
“This is essentially a refinance of their February maturity,” said Johnathan Owen, a portfolio manager at TwentyFour Asset Management in London. “The market was very volatile during that period so it likely made sense to hold off.”
Investors in the new notes will need to consider the risk that at some stage between now and 2030, when they’re set to mature, European Union regulation may require the company to provide supply-chain data that proves zero-deforestation, according to a research note published Friday by the Anthropocene Fixed Income Institute.
BNP Paribas SA, Banco Santander SA and Standard Chartered Bank are working on the sale, which could also be followed by a dollar-denominated bond, the same source said.
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