Cargill Earnings Hit by Commodity Market Disruptions

MarineLink.com
Tuesday, April 08, 2014

Cargill Inc said on Tuesday its quarterly earnings fell 28 percent, making it one of the largest companies yet to demonstrate how big commodity market disruptions this year have hurt its bottom line.

Minneapolis-based Cargill, a top global commodities trader, was hit by a triple-whammy of unexpected events, including a surge in energy prices in January, rail backlogs, and the rejection of U.S. corn shipments by China.

The problems are likely to have also hit Cargill peers such as Archer Daniels Midland Co and Bunge Ltd, which are due to report financial results in the coming weeks.

The coldest winter in 30 years catapulted regional U.S. natural gas prices to record highs, while power markets gyrated as producers struggled to keep supplies flowing to consumers. The harsh weather also snarled rail transport for products as diverse as coal, grain and ethanol.

"In North America, we had record harvests and this extreme weather, so that created a backlog," Cargill spokeswoman Lisa Clemens said about the rail disruptions. "We couldn't move grain or deliver products as fast as we would otherwise."

Cargill, one of the world's largest privately held companies, reported net earnings of $319 million for the third quarter ended Feb. 28, down from $445 million a year earlier. Revenue was $32 billion, nearly even with a year earlier.

A trading loss in U.S. power markets was related to an "unprecedented price spike" in late January, Cargill said. It added that part of the loss has been recovered but provided no details.

In February, the head of physical trading at Cargill's North American thermal energy arm left the company. Cargill was reported by an industry publication to have lost more than $100 million in U.S. energy markets.

Cargill said last month it would stop trading coal and dealing in gas and power in Europe, but denied the moves were linked to the U.S. loss.

The company's focus historically has been on grains and agricultural markets, rather than energy. ADM, Bunge, Cargill and Louis Dreyfus Corp make up the so-called ABCD firms that dominate agricultural commodities.

Rail Slows Down
Cargill said earnings for its grain sector were down from a year earlier because of costs related to China's rejection of genetically modified U.S. corn. Further, there were generally "limited opportunities" in grain trading and storage, the company said.

Grain dealers have struggled to find empty railway cars amid competition with oil shippers for track capacity.

The surprise rejections by China were notable because it is important for Cargill to accurately assess the risks associated with counterparties in its transactions, said Chris Johnson, a credit analyst at Standard & Poor's.

"The fact that there is a bit of a counterparty surprise in the corn thing, that's the one that is more of an eyebrow-raiser," he said.

Johnson said he was confident Cargill's overall loss exposure was "well contained" and that the Chinese rejections were likely not material to the company's credit rating.

Outlook for Rivals
Cargill's comments about limited opportunities for grain handling were "somewhat surprising" and offer a mixed outlook for ADM and Bunge, said Ken Zaslow, analyst at BMO Capital Markets.

Cargill said export demand for beef was strong, which is a positive sign for meat companies Tyson Foods Inc and Hormel Foods Corp, Zaslow said.

Shares of ADM were down 0.9 percent at $43.20, while Bunge shares were up 1.7 percent at $79.73. Tyson Foods shares were up 0.2 percent at $41.20, and Hormel was down 0.6 percent at $47.77.

(Reporting by Tom Polansek; Editing by Lisa Von Ahn; and Peter Galloway)

Maritime Reporter August 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Syncrude Uncertain about Plant Fire Affecting Production

The operator of Canada's largest synthetic crude project said on Saturday it is investigating the causes of an early morning fire at an upgrading plant. Firefighters extinguished the blaze,

Hurricane Ignacio Gains Strength but Expected to Bypass Hawaii

Hurricane Ignacio intensified as it blew across the Pacific on a route likely to bypass Hawaii on Saturday, said the Central Pacific Hurricane Center of the National Weather Service.

United Heavy Lift Gears up for the Asian Boom

All set to expand its footprint in the South Asian market significantly, Hamburg based, United Heavy Lift (UHL) appointed strategically placed Lexicon Overseas Pvt Ltd.

Bulk Carrier Trends

Goldenport Bleeds in Red

Goldenport Holdings Inc reported a net loss of USD14.7 million in the first six months of 2015, significantly wider than the USD1.4 million net loss a year earlier

Strong Returns for Sovcomflot

Russia’s biggest shipping company PAO Sovcomflot (SCF Group) surpassed its own expectations and went forward on both revenue and net profit in the first six months.

CSDC Profts Soar

The bulker and tanker unit of state conglomerate China Shipping Group, China Shipping Development Co (CSDC) has delivered a first half performance which saw its profit spike,

Finance

Optimistic on VLCC Market

Shipbroker Charles R. Weber is quite optimistic on the future prospects of the VLCC market for 2016 onwards.   The demand is expected to remain elevated with

Goldenport Bleeds in Red

Goldenport Holdings Inc reported a net loss of USD14.7 million in the first six months of 2015, significantly wider than the USD1.4 million net loss a year earlier

Strong Returns for Sovcomflot

Russia’s biggest shipping company PAO Sovcomflot (SCF Group) surpassed its own expectations and went forward on both revenue and net profit in the first six months.

Environmental

Obama Defends Arctic Oil Drilling

United States' President Barack Obama defends his decision to allow Royal Dutch Shell to drill for oil in the Arctic Ocean.   He insisted that there was no contradiction

Hurricane Ignacio Gains Strength but Expected to Bypass Hawaii

Hurricane Ignacio intensified as it blew across the Pacific on a route likely to bypass Hawaii on Saturday, said the Central Pacific Hurricane Center of the National Weather Service.

USCG Reopens Key West Ports After Erika Dissipates

Effective 9:30 a.m., Saturday, Capt. Jeffrey Janszen, Coast Guard Captain of the Port, reopened Key West, Florida, ports, terminals and facilities due to Tropical Storm Erika dissipating.

News

Obama Defends Arctic Oil Drilling

United States' President Barack Obama defends his decision to allow Royal Dutch Shell to drill for oil in the Arctic Ocean.   He insisted that there was no contradiction

Optimistic on VLCC Market

Shipbroker Charles R. Weber is quite optimistic on the future prospects of the VLCC market for 2016 onwards.   The demand is expected to remain elevated with

Eni Finds Giant Egyptian Offshore Gas Field

The Italian energy major Eni SpA discovered a “super giant” natural gas field offshore Egypt in what the Italian oil company said is the largest find in the Mediterranean Sea.

Intermodal

DP World H1 Earnings Jump, Mulls Iran launch

DP World may launch operations in Iran, the company's chairman said on Thursday, as the global ports operator reported a jump in half-year earnings after buying assets from its parent company.

Rolls-Royce Showcases MTU's Drive System

Winfried Hermann, Minister of Transport and Infrastructure of Germany’s federal state of Baden-Württemberg, paid a visit to Rolls-Royce Power Systems in Friedrichshafen,

Western Cape Ports Now 'smartPORTS'

The Ports of Cape Town and Saldanha became the latest to go live with Transnet National Ports Authority’s new R79 million web-based Integrated Port Management System (IPMS),

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Maritime Standards Offshore Oil Salvage Ship Electronics Ship Repair Shipbuilding / Vessel Construction Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.7320 sec (1 req/sec)