Star Tribune | By Joy Powell | August 14, 2002
Agribusiness giant Cargill Inc. on Tuesday reported 2002 profits rose 131 percent to $827 million as most of its food and ingredient businesses recovered from a disappointing fiscal 2001.
Revenue for the year rose 3 percent to $50.8 billion for Minnetonka-based Cargill, the nation's largest agribusiness.
Fourth-quarter net income for the year ending May 31 was $144 million, compared with an $87 million loss for that period a year ago.
"We're obviously pleased with the results," Robert Lumpkins, vice chairman and chief financial officer, said in an interview Tuesday. "We think that we have repositioned the company and have an energized team that is making good things happen."
Profits came in Cargill businesses ranging from food and meat to an international network for processing and distributing oil seeds, grain, sugar and other commodities.
"Cargill's earnings improvement was broad-based, with two-thirds of our 90 business units delivering stronger results than a year ago," said Warren Staley, chairman and chief executive officer.
"Contributors include the majority of our food and meat businesses in Europe and North America -- ingredients such as sweeteners, edible oils, malt and cocoa, as well as egg, pork and poultry products."
Cargill operates in 59 countries with 97,000 employees worldwide -- 4,785 of them in Minnesota.
Moving toward its goal of becoming the leader in nourishing the world by 2010, Cargill continues to acquire businesses and enter alliances in the food, ingredient and animal nutrition companies.
Its biggest purchase came this year when Cargill bought a 97 percent interest in France-based Cerestar, a leading maker of specialty starches and sweeteners for food, beverages, pharmaceuticals, paper, detergent and feedstocks. The deal was valued at about $1.1 billion including assumed debt.
On Tuesday Cargill also announced plans to buy an animal feed and flour milling company in Switzerland. In January, Cargill finalized a joint venture with CHS Cooperatives in Inver Grove Heights to form Horizon Milling, the leading U.S. flour miller.
Meanwhile, Cargill continued divesting itself of nonfood-related industries, such as a division that Cargill's North Star Steel sold in July.
Cargill's animal nutrition business expanded its international reach with the purchase of St. Louis-based Agribrands International last year. Agribrands had feed mills and marketing operations throughout Asia, Western and Eastern Europe and Latin America.
Expanding in fertilizer
In May, Cargill announced its intent to buy a Florida-based phosphate fertilizer plant and about 15,000 acres of land containing phosphate reserves.
Lumpkins said Cargill is expanding in the fertilizer industry because it's "an important part of the agri-food chain to help farmers grow more food."
Cargill saw lower earnings in some areas, such as its meat division, which sells to food manufacturers, retailers and food service companies. Last September, beef demand fell with a slowing U.S. economy, market volatility and the discovery of mad-cow disease in Japan -- the top export market for U.S. beef, said Lisa Clemens, a Cargill spokeswoman.
The Sept. 11 attacks also caused a temporary dropoff in beef demand from high-end restaurants, institutions and airlines. But beef earnings, while slower than a year earlier, remained fairly steady.
Overall, Lumpkins said, Cargill's strong performance was diversified and geographically balanced. It reflects progress made on Cargill's new strategy to provide customer solutions in the agriculture and food chain, he said.
Cargill's U.S. and Canadian farm services business, for example, provides tools to help farmers manage risk, Lumpkins said. Those services include forward contracts, in which farmers lock in prices for a year or two ahead and earn a few cents more a bushel, plus premiums.
Now, with the government's announcement Monday that bad weather is cutting into crop yields and reserves are tightening, market prices are rising. While that's good news for many farmers, those with locked-in contracts might not share the extra profits.
Dennis Inman of Cargill's AgHorizons said locking in prices has paid handsomely for farmers in the past several years, however.
"When using our products as a means to diversify their overall risk," Inman said, "we wouldn't encourage any of our customers to lock up all of their production in an individual [contract]."
Looking ahead, grain merchants and processors such as Cargill might see their input costs rise as commodity prices rise. So might costs for feeding cattle in Cargill's Caprock feedlots in Texas and Kansas.
Recently, Cargill acquired patent protection for products that add value to basic commodities such as corn and soybeans. For example, Cargill acquired rights to a method for refining soybean oil for use as an insulator in electric transformers. Cargill bought the patents from an Iowa municipal utility.
And in a joint venture, Cargill Dow developed proprietary technology at a Blair, Neb., plant that opened this year to produce plastic from corn.
-- Joy Powell is at
>jpowell@startribune.com.Star Tribune:
