A worldwide glut of corn and soybean supplies put pressure on Cargill Inc.'s second-quarter profit, but robust sales growth and continued improvements in the market for beef signal a strong second half to its fiscal year.
Net earnings for the Minnetonka-based company dropped 6 percent to $924 million in the quarter that ended Nov. 30, as oversupply of these key crops led to lower prices and fewer trading opportunities. The company said it also saw declines in its global poultry business.
Operating earnings, which company executives said provides a clearer indication of performance, fell 8 percent to $948 million. Revenue rose 8 percent to $29.2 billion, driven by an increase in the sales volume of metals, grains and oilseeds.
Cargill CEO David MacLennan said the company's efforts to better integrate its operations are helping to even out varying conditions across its global markets.
During the quarter, the agribusiness giant announced more than $1 billion of acquisitions, joint ventures and investments in facilities in the U.S., Brazil, South Africa and the United Kingdom. The company attributed the spending to rising demand for meat and efforts to improve animal health and food sustainability.
"Thanks to results of our recent strong performance, we are reinvesting in ways that enable our teams to achieve more for our customers and lead to growth," MacLennan said in a statement.
The company's animal nutrition and protein segment remained its largest contributor to profits, narrowly exceeding last year's strong second quarter. Retail demand remains strong for beef, and turkey sales were strong through the Thanksgiving holiday, Cargill reported.
Separately, Cargill said earlier this week it will purchase Pro-Pet, which produces the premium dog food brand Black Gold along with other private label and co-manufactured pet foods. The deal with the Ohio-based company makes Cargill the only national supplier of both animal feed and pet food offerings among its competitors in the agricultural retail space, according to the company.
Terms were not disclosed.
Pro-Pet already has a presence in Minnesota, with one of its three manufacturing facilities in Owatonna. Cargill said the acquisition will allow it to increase production and be closer to existing agricultural retail customers. The company currently operates 50 animal feed production and distribution facilities across the nation.
Cargill also said it will spend $146 million on a cooked-meat facility in Nashville that it bought last year. The investment will double the current output of pizza toppings at the plant and pay for a new pepperoni production plant that should come online by mid-2019.
Cargill also made a number of moves to build on its expanding push into natural feed ingredients aimed at boosting animal health.
In December, the company completed the purchase of Diamond V, an Iowa-based company that develops natural yeasts and other food additives that improve digestion and the immune system of animals. The deal builds on a partnership with Delacon, an Austrian-based maker of plant-based feed additives, as well as the purchase of Brazilian-based Integral Animal Nutrition, which makes vitamin and mineral supplements to mix with cattle feed.
Cargill in September announced a joint venture with one of the largest food companies in the United Kingdom, the family-owned Faccenda Foods, which sells chicken, turkey and duck to food retailers and food service companies. That deal is expected to close in the current quarter.
Jackie Crosby • 612-673-7335 Twitter: @JackieCrosby
