Agribusiness giant Cargill said on April 15 that quarterly profit fell 68 per cent, hurt by the weak global economy and troubles in the financial sector.
Cargill, one of the world’s largest private corporations, said it had earned $326 million in the third quarter ended Feb. 28, down from $1.03 billion a year earlier.
The Minneapol is-based company, whose holdings include grain milling, meat production, and fertilizer, said all five of its business segments had lower earnings.
Although performance within the segments was mixed, many businesses experienced weaker demand and lower sales volumes, as well as fewer trading opportunities as markets fluctuated within narrower ranges.
“Cargill’s earnings turned down in the third quarter, as the troubles in the global economy and financial system arrived at our company’s doorstep,” chief executive Greg Page said in a statement. “When conditions reversed course in mid-2008, we began preparing for tougher times ahead.”
Cargill cut expenses, decreased debt and curtailed some spending, Page added.
Still, profit was pressured by the current climate. Minneapolis-based Cargill earned $326 million in the third quarter ended Feb. 28, down from $1.03 billion a year earlier.
It did not provide revenue or give detailed results of its various business units.
The company, whose holdings include grain milling, food and meat production, and fertilizer, said its risk management and financial unit was hardest hit due to the turmoil in the global banking system and financial markets.
“Our financial businesses are involved in trading and investing in the financial markets and those markets were in great disarray,” said spokeswoman Lisa Clemens.
FINANCIAL WORRIES AFFECT BUYING
Consumers worldwide appear to be buying more value-oriented foods and shifting away from luxury and convenience foods.
“The major driver right now is that consumers are very cautious in this uncertain environment and that is really what is dampening demand,” said Clemens. “We are seeing the shift from luxurious or convenience goods to food products that offer more value for the money.”
Cargill’s energy businesses, which are part of the risk management and financial segment, collectively made more money than a year ago, said Clemens.
Much of the impact on Cargill’s global grain exports business related to crop production rather than consumers’ inability to access credit.
A large global wheat supply has foreign buyers shifting to wheat from corn, while U. S. soybean exports have increased because of a smaller crop and trade interruptions in South America.
“What we are seeing is the makeup of U. S. grain exports has changed from nine months ago, but the downturn in the global economy is not the driver behind that change. U. S. corn exports are down, soybean exports are up and wheat is largely unchanged,” said Clemens.