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 Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter February 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Philippines Mulls Bilateral Sea Talks with China

The Philippines may consider two-way talks with China to resolve a territorial dispute in the South China Sea but only if it wins its case with Beijing at an arbitration tribunal in The Hague,

Adani Ports Income Up by 15%

Adani Ports and Special Economic Zone Limited (“APSEZ”), India’s largest port developer and part of Adani Group, today announced the financial results for the quarter

Shipping Corporation Q3 Profit Surges

The Shipping Corporation of India (SCI) declared its unaudited financial results for the quarter ended 31st December 2015 posting a net profit of Rs. 59.66 crores as against a net profit of Rs.

Finance

Philippines Mulls Bilateral Sea Talks with China

The Philippines may consider two-way talks with China to resolve a territorial dispute in the South China Sea but only if it wins its case with Beijing at an arbitration tribunal in The Hague,

Adani Ports Income Up by 15%

Adani Ports and Special Economic Zone Limited (“APSEZ”), India’s largest port developer and part of Adani Group, today announced the financial results for the quarter

Shipping Corporation Q3 Profit Surges

The Shipping Corporation of India (SCI) declared its unaudited financial results for the quarter ended 31st December 2015 posting a net profit of Rs. 59.66 crores as against a net profit of Rs.

Environmental

Helsinki, Tyumen State Universities to form Arctic station

Within the framework of the international project Reeh, Tyumen State University in cooperation with the University of Helsinki are planning to create a unique Arctic observation stations.

Ice Condition 3 for Delaware Bay

The Captain of the Port (COTP), Delaware Bay is notifying mariners that Ice Condition 3 has been set for the Port which includes the Delaware Bay and River, the C&D Canal,

Update on Seagull Mobile apps for Crew

The Seagull mobile app for crew training status is set to revolutionise the way seafarers track their training records and receive critical safety alerts, by making

News

Owner Fined for 'Dangerously Unsafe' Vessel

The owner of a harbor tanker has been fined £3,000 with more than £7,000 costs after pleading guilty to a charge of operating a vessel for being dangerously unsafe.

N.America's First LNG Marine Fuel Terminal Opens

Harvey Gulf announced the opening of the first marine LNG fueling terminal in North America. Less than a year after the delivery of the M/V Harvey Energy, America’s first LNG-powered vessel,

Baltic Index Rises for First Time in 2016

The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry bulk commodities, rose for the first time this year on Friday, helped by higher rates for panamax vessels.

Intermodal

Port of Hamburg Reports Bulk Cargo Jump in 2015

The Port of Hamburg reports higher bulk cargo throughput and strong growth in rail and inland waterway seaport-hinterland traffic in 2015 – downturn in container handling.

Maersk CEO Looks to Increase Market Share

A.P. Moller-Maersk's chief executive said its container shipping arm Maersk Line probably gained market share in the second half of 2015 after losing some in the first half of the year.

Maersk Writes Down Oil Assets

Writedown pushes company into red in fourth quarter; 2016 profit to fall short of previous year. Denmark's A.P. Moller-Maersk tumbled to a loss of $2.5 billion

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Naval Architecture Navigation Pipelines Pod Propulsion Salvage Ship Simulators Shipbuilding / Vessel Construction Sonar
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: 0.1306 sec (8 req/sec)