Cargill, Incorporated

  • Overview

Cargill may be private, but it's highly visible. The agribusiness giant, the largest private corporation in the US, has operations in some 65 countries. It has five business units -- Agriculture Services (customized farm services and products); Food Ingredients and Applications (food and beverage ingredients, and meat and poultry products); Industrial; Origination and Processing (commodity origination, processing, marketing and distribution); Risk Management and Financial (risk management and financial solutions); and Industrial (salt, steel, and fertilizer). Cargill's customers include food, beverage, industrial, pharmaceutical, and personal care product makers, as well as farmers and food service providers.

Operations

Cargill comprises 69 businesses units across its five business segments. The company offers a plethora of diversified operations and products, including grain, cotton, sugar, petroleum, and financial trading; food processing; futures brokering; health and pharmaceutical products; animal feed and crop protection; and industrial products such as biofuels, oils and lubricants, starches, salt, and fertilizer for crop and livestock farmers. Indeed, Cargill is one of the leading grain producers in the US, and its Excel unit (part of Cargill Meat Solutions) is a top US meatpacker. Cargill is also a major US supplier to McDonald's, providing the burger behemoth with eggs, oils, sauces, and beef products.

Geographic Reach

Minnesota-based Cargill has operations in 65 countries across six continents. North America is the company's largest market, accounting for 37% of sales and other revenues. The Asia-Pacific Region accounts for nearly a quarter of sales, and Europe nearly a fifth. Latin America accounts for 14% of sales, while Africa and the Middle East make up the remainder.

Financial Performance

The agribusiness giant rang up $136.6 billion in sales and other revenues in fiscal 2013 (ended May), a 2% increase over the prior year. (The modest sales gain in fiscal 2013 followed two consecutive years of double-digit sales growth for the company.) Earnings from continuing operations nearly doubled to $2.3 billion in fiscal 2013 from about $1.2 billion the previous year. While privately-held Cargill does not report results for its individual businesses, 60 of the company's 69 business units were profitable; more than two-thirds exceeded the prior year's earnings, and 12 were at record levels. The agricultural supply chain was the largest contributor to earnings, with an improved performance in grain handling, trading and oilseed processing, and turnarounds in cotton and sugar. Drought-affected crops depressed results in US farm services.

Strategy

Cargill is diversifying its products portfolio and reaching new geographic markets through a combination of acquisitions and joint ventures. Indeed, Cargill in fiscal 2013 invested $3.4 billion (down from more than $4 billion the year before) in its businesses: with the largest share directed toward a global round of new and expanded facilities. Notably, Cargill began operations at a poultry complex in China's Anhai province; another poultry plant in Russia; and additional capacity in Thailand. China was the site of several investments in liquid sweeteners and specialty fats. Cargill also began construction of a feed mill in South Korea.

Also in 2013, Cargill formed a joint flour-milling venture with ConAgra and farmer-owned cooperative CHS. The three partners are combining their flour-milling operations to form Ardent Mills, the largest flour miller in North America, with annual sales of more than $4 billion. Cargill owns 44% of the venture.

Typically, acquisitions make up about a third of Cargill's growth, but ultralow interest rates and lofty valuations suppressed the company's appetite for acquisitions in fiscal 2013.

Mergers, Acquisitions and Divestments

In July 2013 Cargill acquired Siamakme Aquatic Feeds Co., Ltd., a shrimp feed manufacturer in Thailand, to expand its aquaculture business. The purchase added to Cargill's existing shrimp feed production capabilities Latin America, India, and Asia.

In July 2012, Cargill sold its global juice cold blends and compounds business to WILD Flavors GmbH. In December it sold its cultures and businesses to Royal DSM.

In November 2011, Cargill bulked up its global animal nutrition business by acquiring Dutch animal feed supplier Provimi from private-equity firm Permira for $2.1 billion (among its largest acquisitions ever). Provimi has operations in more than 25 countries and offers an assortment of premixes, additives, and ingredients. Prior to the Provimi deal, Cargill acquired Raggio di Sole Mangimi, an Italy-based livestock feed company catering to professional and rural ranchers in that country. Other recent purchases include Central American poultry and meat processor Corporación Pipasa, and German cocoa and chocolate company Schwartauer Werke GmbH & Co. KG Kakao Verarbeitung Berlin (aka KVB).

Ownership

Cargill is 88% owned by the Cargill family, the descendants of founder W.W. Cargill who started the business in 1865 as a small grain storage company.

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