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” and its Commercial Paper rating at R-1 (low), all with Stable trends. DBRS also confirmed the 10 1/8% Senior Notes and Commercial Paper of Cargill Limited (guaranteed by Cargill) at “A” and R-1 (low), respectively, both with Stable trends. The confirmation reflects the Company’s relatively stable long-term debt levels, as well as a moderate cyclical decline in the Company’s earnings in F2014 and Q1 F2015. The ratings reflect Cargill’s leading market positions and strong product and geographic diversification. The ratings also incorporate the effects of volatility in commodity prices and trading, as well as risks related to expansion and growth.

Cargill’s earnings profile remained acceptable for the current rating on a through-the-cycle basis, despite notable declines in earnings in three of the Company’s four business segments in F2014 and H1 F2015. Net earnings declined to approximately $1.7 billion for the LTM ended Q1 F2015, versus approximately $2.3 billion in F2013 as the Animal Nutrition & Protein segment displayed significant improvement, helping to offset declines in each of the Company’s other segments. The Company’s financial profile remained within the range considered acceptable for the current rating, based on its cash flow-generating capacity and relatively stable long-term balance sheet debt.

Going forward, DBRS believes that Cargill’s earnings profile should remain relatively stable over the longer term on a through-the-cycle basis. Variance in the earnings of each of the Company’s business segments can be significant because of changes in commodity prices, macroeconomic factors and geopolitical turmoil. DBRS notes, however, that strong product and geographic diversification help to moderate such changes on a consolidated basis. However, should operating results be weaker than expected for an extended period of time, indicating issues that are more structural in nature than cyclical, a negative rating action could result.

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. However, should credit metrics deteriorate beyond a level acceptable for the current rating category (i.e., long-term debt-to-EBITDA above 2.25x, currently 2.04x for the LTM ended Q1 F2015) as a result of more aggressive 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 Canadian 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.

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.

The applicable methodology is Rating Companies in the Consumer Products Industry, which can be found on our web site under Methodologies.

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