By Javier Blas, Commodities Editor
Cargill, the world?s largest trader of agricultural commodities, has suffered its worst quarter in more than a decade, reporting a 88 per cent drop in net income.
The Minnesota-based company, with businesses from corn syrup to financial derivatives, said it earned $100m in its fiscal second quarter to the end of November, down from $832m in the same period the previous year. The quarterly profit was the lowest since the end of 2001.
Last month, the trading house, the largest privately owned company in the US by revenues, announced it would shed 2,000 staff. In a statement yesterday Greg Page, chief executive, said the company was ?actively? reducing costs.
?Our commodity-based trading and asset management businesses faced significant challenges,? he said, adding that ?commodity and financial markets were driven more by political uncertainties than by underlying supply and demand?.
Mr Page singled out a ?poor? performance in sugar, traditionally one of Cargill?s strongest areas, and it later confirmed it lost money in sugar during the second quarter. Last month, Cargillreplaced Jonathan Drake, the head of its sugar business, the most senior departure yet in the wake of the job cuts. Mr Drake, who joined Cargill in 1985, left in early December.
The big drop in profitability in the second quarter comes after an already lacklustre first quarter and leaves Cargill?s first-half net profit at just $336m, down 78 per cent from $1.53bn in the same period of its last fiscal year.
Mr Page said the cost- cutting process made him optimistic about the company?s earnings prospects for the rest of the year. ?Cargill has been through difficult cycles before, made changes and emerged stronger for it.?
However, credit analysts are worried about its financial performance. Fitch, the rating agency, last month cut its outlook on Cargill from stable to negative, warning that the company ?may continue to face earnings pressure?.
?Cargill?s operating performance during the remainder of 2012 and earnings expectations for 2013 will be important factors in determining whether the company has an appropriate level of debt for the current rating level,? Fitch said. Cargill?s debt maturities are concentrated in fiscal 2013 when more than $2bn matures.
The lacklustre performance signals an abrupt halt to the five years between 2006 and 2011 when Cargill?s profitability hit record highs.
? The Financial Times Limited 2012