Cargill Sticks With Emerging Markets After Posting Loss

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Cargill Inc. said it’s still committed to its operations in emerging markets despite an economic slowdown in some of those countries that contributed to the agricultural-commodity producer and trader’s first quarterly loss in 14 years.

The net loss was $51 million in the three months through May, compared with net income of $376 million a year earlier, the Minneapolis-based company said Thursday in a statement. Revenue fell 22 percent to $28.4 billion.

Cargill, the biggest closely held company in the U.S., has invested in countries such as China and Brazil in recent years to capitalize on rising food demand from those nations’ burgeoning middle classes. The strategy has diversified the 150-year-old company away from its roots as grain merchant, giving it operations across 67 countries. Now, however, some of those markets are cooling or are in recession.

“We are not walking away from our commitment to emerging markets,” Chief Financial Officer Marcel Smits said in a telephone interview. “We are going to have to weather this and we are doing a lot of work improving our financial performance.”

The loss is another setback for Cargill, a week after its $7.4 billion investment arm Black River Asset Management said it was liquidating four hedge funds. Cargill isn’t meeting its target for return on equity, Smits said.

While all four of Cargill’s business units were profitable in the quarter, earnings fell at three of them. Changes to the currency policy in Venezuela -- where Cargill imports ingredients to make flour and cooking oil --- led the company to take a charge, company spokeswoman Lisa Clemens said. The company also took a writedown on business management software.

‘Emerging Need’

Cargill’s origination and processing division saw reduced crop sales from farmers in Argentina and Brazil. The animal unit suffered from higher U.S. cattle costs. Cargill agreed to sell its U.S. pork business to Brazil’s JBS SA last month, although Smits said it has “no intention” of divesting the beef operations.

Other agricultural traders are feeling pressure as well. Two of Cargill’s biggest competitors, Archer-Daniels-Midland Co. and Bunge Ltd. in the U.S., both reported lower-than-expected earnings in the past two weeks.

Despite the poor quarter, Cargill still has a long-term vision in which a greater number of consumers move into the middle class globally. Those consumers will eat more protein, and Cargill’s assets are “paired up against that emerging need,” Smits said.

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