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

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 confirmation reflects significant recovery in Cargill’s operating performance in F2013 as well as the Company’s relatively stable long-term debt levels. 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.

Cargill’s earnings profile remained appropriate for the rating category on a through-the-cycle basis as earnings recovered materially in F2013 from significantly weaker-than-expected results in F2012. Net earnings increased to approximately $2.3 billion in F2013 as broad-based improvement saw 60 of the Company’s 69 businesses generate profit and two-thirds exceed prior-year earnings levels. Earnings declined somewhat in Q1 F2014 versus very strong results the previous year, nevertheless three-quarters of the Company’s businesses remained profitable. The Company’s financial profile remains within the range considered acceptable for the current rating category based on its cash flow-generating capacity and relatively stable long-term balance-sheet debt levels.

Going forward, DBRS believes that Cargill’s earnings profile should remain relatively stable over the longer term on a through-the-cycle basis. Earnings are expected to continue to benefit from the Company’s product and geographic diversification, which should help to moderate the volatility experienced in commodity prices. In addition, the Company’s earnings should benefit from continuing investments aimed at expanding operations in higher-growth emerging markets.

DBRS believes that Cargill has the potential to maintain a financial profile commensurate with the current rating category based on the strength of its free cash flow-generating capacity. Cash flow from operations should remain strong and more than sufficient to fund substantial capital expenditure investment and dividends. DBRS believes that Cargill will use free cash flow and cash on hand to invest in growth; but, given the Company’s long-term focus, DBRS does not expect any material deterioration in balance-sheet quality due to acquisitions or any other investments in growth. However, should credit metrics deteriorate beyond a level acceptable for the current rating category (i.e., long-term debt-to-EBITDA greater than 2.25 times) as a result of more aggressive-than-expected financial management (due to debt financed acquisitions and/or shareholder returns) and/or weaker-than-expected operating performance over an extended period of time, a negative rating action could result.

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 Companies in the Consumer Products Industry, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

Cargill Limited’s Commercial Paper and 10 1/8% Senior Notes are guaranteed by Cargill, Incorporated.