U.S. agribusiness giant Cargill Inc reported a third consecutive slump in quarterly earnings on Tuesday, as one of the world's largest commodity traders took a beating from volatility in financial markets.
Minneapolis-based Cargill, a family-owned enterprise with a century-long history of dominating global grain markets, reported $100 million in earnings from continuing operations for its second quarter ended Nov. 30, down 88 percent from $832 million a year earlier and the worst quarter since 2001.
Revenues rose 17 percent to $33.3 billion from $28.5 billion.
For the second time, the company singled out its trading operations as dragging down stronger earnings in its food and agricultural services divisions. It said Europe's debt crisis had walloped equity and distressed-asset trades in its hedge fund division.
The company, which has announced plans to lay off 1.5 percent of its staff and seen its top sugar trader leave, is suffering alongside other commodity veterans including Goldman Sachs and Asia-based Noble Group that have struggled to profit amid a year of exceptional volatility.
"The second quarter was significantly below expectations, especially in contrast to last year when we posted our strongest quarter ever," Cargill Chief Executive Greg Page said in a statement. He said the company was working to cut costs and simplify work processes.
"Our food ingredients and agriculture services businesses generated solid earnings. At the same time, our commodity-based trading and asset management businesses faced significant challenges," Page said.
Concentrated on agricultural markets, particularly grains and oilseeds, Cargill's commodity trading operation is one of the world's largest. Last year, however, the firm appeared to rein in some of its desks, reorganizing coal and power/gas and quitting steel.
Cargill said its risk management and financial segment was hardest hit due to investments made in equity markets and distressed assets. That was an apparent reference to Black River, the hedge fund it operates with a global staff of 90.
"We were negatively affected by the stress in world financial markets, particularly with what was happening in October," Cargill spokeswoman Lisa Clemens said.
"It was a period when the markets were gyrating up and down sharply - coming from the debt crisis, from the exposure risk carried by the European banks, worries where the fallout would come. All of that made a difficult period for that business."