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 The 149-year-old company is shutting its power and gas trading desks
in Europe 14 years after establishing the business in Geneva,
becoming the first traditional commodities firm to step away from a
sector hard-hit by falling margins.
Cargill said all of the closures were unrelated to losses in U.S.
energy markets, which one report put at more than $100 million.
The closures follow just six months after new chief executive David
MacLennan stressed plans to expand Cargill's energy business to
include more physical trade.
"It is likely that Cargill has made these changes to help optimize
the overall profitability of its broad global portfolio of
businesses," said Judi Rossetti, a senior director for Fitch
Ratings.
One of the world's largest privately held corporations and biggest
commodities firms, Cargill is best known as a top grains trader. Its
revenue of $136.7 billion for fiscal 2013 would have placed it No.
10 on the Fortune 500 list of publicly held companies.
Investors will watch to see whether other trading firms follow the
energy strategy of Cargill, which also has closed its carbon
emissions trading and renewable energy businesses.
"We are making these decisions in order to focus our resources where
we can be most successful for our customers and for Cargill,"
spokesman Pete Stoddart said.
Separately, Cargill said on Thursday that it will form a joint sugar
trading business with Brazil's Copersucar that is likely to be the
world's largest.
MacLennan said in September that he believed the company's greatest
opportunities for growth were in Brazil.
Traders said they expected the 23-year company veteran to move
employees and resources from the coal and European power and gas
businesses to other segments of Cargill's energy operations.
Cargill may be "cleaning up parts of their energy trading that
aren't working" in preparation to move ahead with MacLennan's
strategy to expand in physical energy trading, said Ken Morrison, a
trader who worked for Cargill for 27 years.
"Just drawing from the culture there, I'd be surprised if they were
taking a U-turn so soon," he said, referring to MacLennan's plan to
expand Cargill's physical presence.
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Fewer than 50 of Cargill's 140,000 employees will be affected by the
closure of the energy desks, and many will be reassigned to other
Cargill segments, according to the company. The company will
continue trading in petroleum, petrochemicals, iron ore, steel,
ocean freight and North American gas and power markets.
"Our understanding is there are some areas that they are probably
not as competitive in as others," Standard & Poor's analyst Chris
Johnson said about Cargill. "To the extent they exit certain
businesses, it probably reflects that assessment."
Cargill's coal business was an active player across physical and
financial markets, according to its website. In January, it reported
earnings in the energy unit, which included trading in petroleum,
coal, power and gas, had declined in the second quarter ended
November 30.
A spokeswoman at the time said the energy business was "heavily
dependent on trading and trading goes through different cycles of
performance."
Cargill's agricultural rivals also have sought to shed
underperforming assets, with Archers Daniels Midland Co <ADM.N>
looking to sell its cocoa business and Bunge Ltd <BG.N> reviewing
options for its Brazilian sugar operations. The companies, along
with Louis Dreyfus Corp <LOUDR.UL>, make up a group of firms known
as the "ABCD" that dominate global agricultural trading.
Global commodities traders may be realizing that they "can't do
everything," said Philippe de Laperouse, director of HighQuest
Partners' global food and agribusiness practice and a former Bunge
executive.
"We see in all the commodity markets that volatilities are here to
stay," he said. "Maybe there's a sense that in being able to manage
that volatility, you can only do so much."
(Additional reporting by Christine Stebbins in Chicago; editing by
Andrew Hay)
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