DBRS Confirms Cargill at “A” and R-1 (low), Stable Trends

DBRS has today confirmed Cargill, Incorporated’s (Cargill or the Company) Issuer Rating and Senior Unsecured Debt rating at “A”, its Commercial Paper rating at R-1 (low) and the long and short-term ratings of Cargill Limited, guaranteed by the Company, at “A” and R-1 (low), respectively. All trends remain Stable. The ratings continue to be supported by Cargill’s leading market positions and strong product and geographic diversification. The ratings also reflect volatility in commodity prices and trading, as well as risks related to expansions and growth, particularly in new regions with less political stability.

The earnings profile of Cargill remains adequate for the current rating category despite weaker-than-expected operating results in F2012. The Company’s diversification, which is typically regarded as a significant strength, failed in F2012 to help offset exposure to commodity cycles, negatively affecting all business segments. The Company’s earnings began to recover in Q1 F2013 as all business segments improved net earnings versus the same period in the prior year. Cargill’s financial profile remains within a range acceptable for the current rating category based on the Company’s relatively stable long-term balance-sheet debt levels and solid cash generating capacity.

Going forward, DBRS believes that Cargill’s earnings profile will remain stable over the long term on a through-the-cycle basis as the Company continues to build its brand, increases sales of higher-margin products and benefits from continued investments and acquisitions. Operating performance is expected to continue to improve across all business segments after notably weak net earnings in F2012.

In terms of financial profile, DBRS believes that Cargill will remain relatively stable on a through-the-cycle basis as high levels of capital spending and acquisitions moderate and long-term debt remains relatively stable. Cash flow from operations should remain strong over the long term and remain sufficient to fund capex and dividends. Cargill’s acquisitions strategy is generally focused on the long-term view; as such, DBRS does not expect any material deterioration of balance-sheet quality due to acquisitions or investments in growth.

DBRS believes that Cargill will remain well diversified and well placed in the current rating category on a through-the-cycle basis, despite recent volatility in commodity prices and earnings. Should net earnings not build on recent momentum and continue to recover through the remainder of F2013, the challenges facing Cargill may be considered more structural in nature than cyclical and could result in a negative rating action.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Rating the Consumer Products Industry, which can be found on our website under Methodologies.