By Christine Stebbins
CHICAGO (Reuters) - U.S. agribusiness giant Cargill <CARG.UL> on Wednesday reported a six-fold rise in fourth quarter net earnings and nearly doubled full-year earnings, citing strength in its core grain-based and financial services.
Minneapolis-based Cargill, one of the world's largest privately held corporations and a top commodities trader, reported $483 million in earnings for the fourth quarter ended May 31, up from $73 million a year earlier when the company was hurt by volatile commodity markets and reported its worst quarter in more than 20 years.
For the full year, Cargill, the largest grain exporter from the United States - the world's top grain export nation - earned $2.31 billion compared to $1.17 billion a year ago, when the company was squeezed by soft economies and volatile markets.
"For us it's a matter of being positioned globally with our infrastructure and our assets," David MacLennan, Cargill's chief operating officer, said in an interview. "Because of the drought in North America supplies were down, prices were up. But there were record harvests in Brazil and Argentina in soybeans and corn."
Quarterly revenues rose 4 percent to $35.4 billion while full-year revenues totaled $136.7 billion, up 2 percent from last year's $133.9 billion. If Cargill was a publicly held company, those revenues would place it at No. 10 on the Fortune 500 list, between Valero Energy and Ford Motor Co.
While most of Cargill's units were profitable, earnings at its animal protein business were down from last year, largely hurt by high feed costs and the tightest U.S. cattle supply in 60 years.
"It was a tough year for North American beef and pork," MacLennan said, citing soaring feed costs and the idling of Cargill's huge beef plant in Plainview, Texas, in January. "With less capacity and lower feed costs on the horizon means it has shown some signs of improvement."
Standard & Poor's ratings analyst Chris Johnson said Cargill's performance marked a significant rebound from a year ago and S&P is reviewing whether Cargill should be in line for a debt rating upgrade to stable from its current negative outlook.
"At the end of the day they are largely meeting our expectations," said Johnson, noting he had been waiting for Cargill's beef segment to show signs of improvement, which it did in the fourth quarter.
BREADTH PAYS DIVIDENDS
Cargill's commodity trading rivals Archer Daniels Midland <ADM.N> and Bunge <BG.N> in the last two weeks have reported disappointing earnings for the quarter ended June 30, tied to short supplies of corn and soybeans due to the historic U.S. drought last summer. Crops have recovered this year and a bumper harvest is expected to start in September.
"As far as 2014 - it looks good but weather patterns could change but it doesn't appear to be setting up for the same drama and volatility as last year," MacLennan said.
Among Cargill's five major business areas, the origination and processing segment was the largest contributor to earnings in both the fourth quarter and full year, the company said in a statement.
"The segment drew on Cargill's global footprint and strengths in market analysis, logistics and risk management to overcome the supply challenges caused by weather disruptions and tight stocks, serving customers reliably. The segment also realized turnarounds in cotton and sugar from the prior year," it said.
Earnings in the risk management and financial segment rose considerably from the year before.
Cargill's big food ingredients business, which supplies hundreds of products to food and beverage makers, also saw improved results after last year's record earnings, the company said. "Performance was particularly strong in sweeteners, starches and cocoa in several countries," it said.
Energy businesses, which include trading in petroleum, coal, power, and gas, declined.
"It was just a below standard year," said MacLennan.
Marcel Smits, Cargill's chief financial officer, declined to comment on a Reuters report that the company is in the running to buy all or part of ADM's big cocoa business, but said: "Our cocoa business is doing well. We are building a new facility in Indonesia. We like our business, we are doing well with it. We are organically growing it."
Cargill's size and scope continued to expand in the 65 countries where it operates and employs 140,000 people. The company said it currently has $2.6 billion of major agricultural, food and energy projects under construction or recently opened in 14 countries around the world. That includes a large poultry complex that will process 60 million chickens a year in Anhui province, China.
If the sale of U.S. pork producer, Smithfield Foods <SFD.N>, to Chinese firm Shuanghui International goes through it has the potential to boost Cargill's meat business as well, MacLennan said. Cargill has consumer brands ranging from Honeysuckle turkey to Good Nature pork and Sterling Silver premium meats.
"To the extent that it opens the Chinese market more than it already is for imports of pork or beef or chicken that's something that we would be pleased to see," he said.
MacLennan said that Cargill's proposed joint venture with ConAgra Foods <CHSCP.O> and CHS Inc <CHSCP.O> to form a giant flour milling company, whose terms are now being reviewed by the Department of Justice, is on track.
"We are optimistic it will close this calendar year," he said. "We are cooperating fully with DOJ on the review."
Cargill, a major producer of ethanol from corn, was not expecting any lasting disruption on the U.S. industry from imports of sugar-based ethanol from Brazil, he added.
"The dynamics will change with lower corn prices," MacLennan said.
(Reporting by Christine Stebbins; Editing by Lisa Von Ahn, Chris Reese and Gunna Dickson and Andrew Hay)