Fitch Affirms Cargill Inc.'s IDRs at 'A/F1'; Outlook Negative

  Fitch Affirms Cargill Inc.'s IDRs at 'A/F1'; Outlook Negative

Business Wire

CHICAGO -- December 17, 2012

Fitch Ratings has affirmed the ratings of Cargill, Incorporated (Cargill) and
its subsidiaries as follows:

Cargill

--Long-term Issuer Default Rating (IDR) at 'A';

--Senior unsecured notes at 'A';

--Credit facility at 'A';

--Short-term IDR at 'F1';

--Commercial paper at 'F1'.

Cargill Ltd.

--Short-term IDR at 'F1';

--Commercial paper at 'F1'.

Cargill Global Funding PLC

--Long-term IDR at 'A';

--Credit facility at 'A';

--Short-term IDR at 'F1';

--Commercial paper at 'F1'.

Cargill Asia Pacific Treasury Ltd

--Long-term IDR at 'A';

--Short-term IDR at 'F1';

--Credit facility at 'A';

--Commercial paper at 'F1'.

The Rating Outlook remains Negative.

The Negative Outlook reflects that it is too soon to ascertain the
sustainability of Cargill's nascent earnings recovery. Fitch will monitor
Cargill's earnings and cash flow for the remainder of fiscal 2013 to better
assess future potential volatility and the appropriate amount of total debt to
maintain current ratings. Cargill's net earnings rebounded strongly in the
fiscal first quarter of 2013 ended Aug. 31, 2012, increasing 313% to $975
million, from a very weak $236 million in the prior year period. Each of the
company's five business segments showed improvement. Although the U.S. drought
impact is likely to provide near-term headwinds, including lower North
American grain handling volumes and challenges in animal protein businesses,
there may be some earnings offset from other businesses.

Fitch revised Cargill's Outlook to Negative on Dec. 20, 2011, after the weak
fiscal first quarter 2012 performance mentioned above. Cargill went on to
report a 56% decrease in fiscal 2012 net earnings from continuing operations
to $1.18 billion, from record high earnings the previous year. Cargill's
disappointing fiscal 2012 earnings, combined with the divestiture of the
company's $19 billion equity stake in The Mosaic Company (Mosaic) in May 2011,
resulted in a weaker credit profile and a material increase in gross leverage
versus historical levels. Cargill fiscal 2012 earnings were hurt by reduced
profits in U.S. beef, global soybean processing and asset management, as well
as losses in cotton and sugar.

Cargill's ratings continue to reflect its competitive position as the largest
agricultural company based in the U.S. and one of the biggest privately owned
companies in the world. Its operations span every major country and almost
every agricultural commodity. Key agricultural operations include oilseeds
processing, corn milling, meat processing, and animal nutrition. The ratings
incorporate Cargill's extensive geographic and product line diversification,
which should lessen operating earnings volatility during most years. However,
recent earnings volatility is high for the current rating level.

The ratings also factor in Cargill's liquidity, which is enhanced by readily
marketable inventory (RMI) and a substantial amount of cash. Balancing out
Cargill's credit strengths is the company's exposure to financial businesses
that provide earnings diversification but have high earnings volatility. In
addition, the company is susceptible to periodic negative free cash flow (FCF)
when commodity prices rise and working capital increases.

Cargill had total consolidated debt of $15.1 billion at Aug. 31, 2012.
Liquidity is ample with $4 billion cash and short-term investments, as well as
$6.25 billion of undrawn committed credit facilities, including $5 billion
that serves as back-up liquidity for its commercial paper program. Cargill
continues to be in compliance with its minimum net worth covenant on its
credit facilities. The company's long-term debt maturities consist of $1.5
billion remaining in fiscal 2013, $776 million in 2014, and $836 million in
2015. Fitch believes Cargill is likely to refinance those maturities, but
would view it positively if Cargill permanently repaid a material amount of
upcoming maturities with cash.

In addition to evaluating traditional credit measures, Fitch's analysis of
agricultural commodity processors takes into consideration leverage ratios
that exclude debt used to finance RMI. This inventory is highly liquid and
generally hedged. Similarly, interest expense on debt used to finance RMI is
reclassified as cost of goods sold. With the RMI adjustments, Cargill's
leverage (total debt to operating EBITDA) was 1.1x for the LTM ended Aug. 31,
2012, and EBITDA to gross interest expense was 12.3x. On an unadjusted basis,
consolidated total debt to operating EBITDA was 2.8x and EBITDA/interest was
6.5x. Unadjusted leverage has improved since fiscal 2012, but is still
slightly high for the rating level given recent earnings volatility.

What Could Trigger a Rating Action

Future developments, that may individually or collectively lead to a negative
rating action include:

--Lack of sustainability of Cargill's earnings recovery in fiscal 2013,
without material and permanent debt reduction.

--Fitch's determination that given recent earnings volatility and elevated
commodity prices, Cargill's total debt and unadjusted leverage over a
multi-year period remain too high for the rating level.

--Large, debt-financed acquisition(s) and/or extraordinarily high increases in
capital expenditures.

Future developments, that may potentially lead to a positive rating action
include:

--A substantial decrease in leverage in fiscal 2013 from fiscal 2012 due to
significant, sustainable earnings improvement on an annual basis and/or
permanent debt reduction, along with the maintenance of high liquidity, could
result in a Stable Outlook.

Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2012).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

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Contact:

Fitch Ratings
Primary Analyst
Judi M. Rossetti, CPA/CFA, +1-312-368-2077
Senior Director
Fitch, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Carla Norfleet Taylor, CFA, +1-312-368-3195
Director
or
Committee Chairperson
Mark Oline, +1-312-368-2073
Managing Director
or
Media Relations
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com
 
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