A peek inside America’s largest privately owned firm

Industrial leader: A Cargill meat-packing plant in Montreal, Canada. The company has 155,000 employees across 70 countries. — Reuters

THEY’RE one of America’s richest but least known corporate dynasties: the Cargill-MacMillan family.

The source of their billions, the commodity trading giant Cargill Inc, is the largest privately held company in the United States by revenue.

Quietly, both the company and its owners are enjoying some of their best times ever.

That’s rather counter-intuitive. Pandemics, wars, inflation and geopolitical chaos don’t typically make for a good business backdrop.

But it’s precisely the treacherous conditions of 2020 to 2023, including supply-chain mayhem and wild price gyrations, that are driving the profitability of the commodity trading industry.

Keeping track of all the money isn’t straightforward: Cargill, which was founded in 1865 in Iowa but is today headquartered in a suburb of Minneapolis, eschews publicity.

It decided a few years ago to stop releasing annual financial statements. Bloomberg Opinion has managed to take a look via a copy of its fiscal year 2023 accounts.

What emerges is a world of riches, where the money is big and easy.

A world of riches

Cargill reported weaker profitability in its 2023 fiscal year – but despite the drop, the last four years mark the best ever period for the commodity giant.

Granted, profits dropped sequentially from the previous year.

But the picture that appears from the annual accounts is of a resilient business that’s able to structurally make more money while still subject to the ups and downs of the commodity cycle.

In total, Cargill reported net income of US$3.81bil in its fiscal year to the end of May, down from a record high of US$6.68bil a year earlier.

Still, the 2023 fiscal year is the fourth-best ever for the company. Much of the drop in profits came from its so-called “protein” business, which includes beef processing.

Its “origination and processing” segment, which includes commodity trading, did rather well. Cargill declined to comment.

Looking in aggregate at the 2020-to-2023 period makes for more interesting reading.

Cargill, controlled by two billionaire families linked by marriage, has been a lucrative cash machine.

Over this four-year interval, the company has reported profits of about US$18.5bil, nearly as much as it made in the entire decades of the 1990s and 2000s combined.

The chaotic markets of the last four years have helped, even if the meat business has recently weakened.

But above all it’s the strong distribution footprint of Cargill – the likes of McDonald’s Corp and Coca-Cola Co are clients – and its geographical diversification that are key to its success.

So is the corporate restructuring of recent years, in which Cargill dropped unprofitable businesses and expanded heavily into meat and fish.

Setting the standards

With some 155,000 employees across 70 countries, Cargill is the “C” in the vaunted “ABCD” of the agricultural commodity trading industry.

The other members of that storied club are Archer-Daniels-Midland Co, Bunge Ltd and Louis Dreyfus Co.

This quartet has jointly dominated grain trading for more than a century.

If Cargill was a publicly listed company, it would be among the largest in corporate America.

Based on the price-to-earnings multiples of its publicly listed rivals, Cargill could be valued at about US$50bil to US$75bil, if not more. The company seems to agree with such a figure. In its annual report, Cargill puts the fair value on its stock at US$87.07 per share.

Multiply that by the number of shares, and one gets to a valuation of just north of US$61.5bil. Still, that’s down from a fair value of US$97.06 per share in 2022, according to Cargill.

The company’s strong financial performance – including declaring more than US$900mil in dividends in 2023 – may put to rest perennial gossip about whether the Cargill-MacMillans will take the company public.

For now, the two families, which count at least 14 relatives as billionaires, have resisted the temptation of an initial public offering and of following rivals Bunge, which went public in New York in 2001 and Glencore Plc, which sold shares a decade later in London.

Cargill earlier this year appointed its tenth chief executive officer in its 158-year history.

As the CEO baton passed from Dave MacLennan to Brian Sikes in January, many in the industry asked if the latter would be the one to take Cargill public.

The company has remained adamant there’s no appetite to take the step.

MacLennan, who’s now chairman of the board, earlier this year reiterated it in strong terms: “Family shareholders are committed to private ownership,” he said. “There’s no reason that’s going to change in the near future.”

As long as Sikes, the current boss, maintains the days of big and easy money, he’s likely to have the support to continue making billions and keeping it all private.

Why wouldn’t the company and its wealthy shareholders prefer to remain in the shadows?

For Cargill, the current business model has worked for a century and a half already. If it ain’t broke, no need to fix it. — Bloomberg

Javier Blas is a Bloomberg Opinion columnist covering energy and commodities. The views expressed here are the writer’s own.

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