Rising to the moment
Cargill achieved strong results this fiscal year. The changes we made across our company prepared us to make the most of the opportunities in our markets and to deliver unmatched solutions in agriculture, food and nutrition. As these markets rapidly evolve, customers and other partners value the expertise, reliability and forward-looking perspective that Cargill provides.
No matter the environment, our focus is to expand earnings so we can invest for continued growth. Opportunities to build world-class businesses, solve challenges, and lead on some of the most important issues of the day are attracting a new generation of talent with diverse skills and experiences to our company. We are proud of the momentum we have generated this year and look forward to continued progress as we help build the food system of the future.
We reached $3.04 billion in adjusted operating earnings in fiscal 2017, an 85 percent increase year-on-year with gains across all four business segments. Net earnings on a U.S. GAAP basis rose 19 percent to $2.84 billion. Revenues grew 2 percent to $109.7 billion on higher sales of grain, oilseeds and metals. Cash flow from operations climbed 38 percent to $4.69 billion.
These broad-based gains were accomplished in a period of mixed macroeconomic trends for agriculture. A fourth consecutive year of strong crop yields worldwide led to large surpluses, low commodity prices and little volatility. Despite solid demand and robust movement of crops along supply chains, stocks continued to build at both origin and destination.
Animal Nutrition & Protein was the largest contributor to Cargill’s adjusted operating earnings, with results lifted by exceptional performance in global protein. Results were buoyed by customer-focused strategies with a shift toward value-added products. Renewed consumer demand for beef also created favorable market conditions in North America. Animal nutrition earnings came in just above the prior year, as feed demand in many countries was buffeted by a mix of environmental and market factors.
We had a year of growth, forming poultry joint ventures with leading food companies in Indonesia and the Philippines, and expanding our own operations in Thailand. In the U.S., we purchased a specialty business in cooked meats and converted one of our own plants to respond to market growth. We sold four cattle feed yards, which freed up working capital. In animal nutrition, we opened an innovation center in Chile dedicated to fish health, as well as feed mills in China, India and Indonesia.
Food Ingredients & Applications saw earnings rise moderately. A keen focus on strengthening commercial capabilities and operating efficiencies raised performance, especially in our global cocoa, and corn- and wheat-based product portfolios. We opened food innovation centers in Minneapolis and Shanghai. In Brazil and the U.S., we acquired two businesses that expand our offerings in plant-based bio-industrials.
Earnings in Origination & Processing exceeded the year-ago level, as record U.S. crops were met with brisk demand stemming from global growth in livestock production and reduced South American competition for exports. Our origination, crush and export assets in North America operated at high capacity in the first half, with good export volumes continuing into the second half. Global trading performance added to segment results, even though opportunities were limited by low volatility in many commodity markets.
We sold our U.S. crop inputs business, two oilseeds plants in Europe and our share in a flour milling joint venture in Australia. We invested in data, analytics and trading technologies. At year-end, we joined with local partners to open a major oilseeds processing plant and port facility in northern China.
Earnings rebounded in Industrial & Financial Services, driven by increased returns from asset management investments, excellent trading and customer-centered merchandising in North American natural gas and power markets, and improved market conditions in ocean shipping. In separate transactions early in the new fiscal year, we sold our petroleum business and agreed to sell our natural gas and power business to a company that can position them for greater growth. The second transaction is expected to close in the first quarter of fiscal 2018.
An integrated approach to deliver greater value
Two years ago, we set out to build a more integrated, focused and agile Cargill that is equipped to lead in a quickly evolving world. We consolidated our business units into a smaller number of global groups centered on specific product lines, and simplified our leadership structure to speed decision-making and raise accountability. With the aim of being the market leader across our portfolio, we exited businesses where we did not see a path to growth and redeployed capital to those where we did.
We also sought to realize the full benefits of becoming an integrated operating company, one with world-class capabilities and processes implemented at scale everywhere we do business. Some of these are skill sets for which Cargill has long been known: trading and risk management, supply chain and logistics expertise, and ingredient and formulation development. Some are areas where we have put in significant work to achieve progress in recent years: efficient plant operations and functional shared services. And some are proficiencies where we aspire to change the game within our industry: sustainability, digitalization and analytics, and leadership on issues that matter.
At the center of this work is a revitalized purpose, which we adopted across our organization: Cargill will be the leader in nourishing the world in a safe, responsible and sustainable way. This includes sectors like food and agriculture where we have demonstrated consistent success. It also encompasses emerging opportunities in human and animal nutrition, the data economy, and sustainable products and services. In all cases, we build on an unparalleled global network of talent and assets that allows us to serve customers in unique ways.
Although Cargill will continue to strengthen these capabilities, our accomplishments to date have contributed significantly to the results we saw this fiscal year. This report highlights many examples and points the way forward for how we will win in the market by helping our customers and other stakeholders thrive.
Partnerships for impact
We know that building a resilient food and agricultural system will require many hands and varied approaches tailored to local needs. This year, Cargill achieved significant milestones with our global corporate responsibility partners. Our close collaboration with CARE serves as a vivid illustration of the powerful impact we can have when combining our expertise with that of others.
Cargill and CARE have worked together for more than 50 years, with Cargill investing $18 million in the partnership since 2008. During the past three years, the partnership has positively impacted 300,000 lives in seven countries by increasing farmers’ productivity, market access and livelihoods, as well as improving food and nutrition security, community governance and education resources. This year, we embarked on a $7 million extension of the partnership with a goal to reach a total of 1 million people in agricultural communities by 2020.
With World Food Program USA, we initiated a $1 million school meals program that will benefit 100,000 students in Honduras, Kenya and Indonesia over the next two years. We announced a $3 million grant with Feeding America to support nutrition education, increased access to fruits and vegetables, diabetes prevention and food safety measures. And in Europe, we helped advance a training program for food bank managers with the European Federation of Food Banks, to reach some of the 43 million people there who remain food and nutrition insecure.
We also expanded partnerships focused on protecting the planet. With World Resources Institute and The Nature Conservancy, we undertook significant work to map and protect water and forest resources. Our Poliplant and PT Hindoli oil palm plantations in Indonesia received certification from the Roundtable on Sustainable Palm Oil, and the Indonesian government cited five of our palm oil mills for excellence in environmental management and sustainable production.
Our customers acknowledge the value of the work we are doing in these areas. Kellogg Company honored us with an award for our efforts to drive sustainability and traceability in its palm oil supply chain. KFC Asia gave us its 2016 Supply Chain Partner Award in part for our sustainability commitments. And a partnership for food safety innovations culminated in a supplier award from U.K. food retailer Tesco.
Our commitment to safety
We continued to advance employee and contractor safety across Cargill. We implemented a global safe driving policy that includes a ban on all mobile phone use – even hands-free devices – while driving for the company. Our recordable injury frequency rate reached another all-time low this year, and our three-year fatality rate dropped below the average for all companies reported by the U.S. Bureau of Labor Statistics.
Despite these results, we have yet to meet our most critical goal of sending each colleague home safe every day. We suffered seven fatalities this year, a number we will not accept. That’s why we have enlisted everyone across Cargill to proactively analyze all activities, stop work if they see an unsafe situation, and make a change to remove or mitigate the risk. Through this collective effort, combined with industry-leading programs and standards we are deploying worldwide, we know we can eliminate fatalities and serious injuries.
As we turn the page to a new year, Cargill is poised to lead in our markets. Living our purpose, we know we have a clear contribution to make in the world. Working with farmers, customers, communities and other partners, we look forward to making powerful progress.
Executive Vice President,
Chief Financial Officer and
Chief Compliance Officer
August 8, 2017