28 Nov, 2008- Cargill Inc has said it is seeking to acquire companies following the global slump in share prices and the cost of raw materials, a leading executive from the company has said.
Asia-Pacific President Paul Conway said: “There will be opportunities to acquire both assets, companies and hire people that we didn’t think we’d be able to do six months ago.”
His comment came in the wake of the recent crash in commodity prices triggered by the global financial crisis that has hit demand and seen economies across the world pushed to recession.
“It’s been very fast and that hasn’t really worked its way through yet, but yes we are on the lookout for acquisitions,” Conway said.
He added: “A lot of people earlier in the summer booked forward at considerably higher prices than today, so counter- party risk is a real big concern.”
The farm-commodity supplier, the second largest privately held firm in the US, has taken tens of millions of dollars of non-material write downs recently and would be subject to more, he confirmed without being more specific. However, its most recent quarterly returns saw it post a net profit of almost US$1.5 billion - an increase of 62%.
Cargill’s intention to benefit from the global economic situation that many analyst see as leading to sell-offs and consolidations across many industries, echoes the tactics of other cash-rich companies. As Feedinfo News Service reported recently, US meat giant Tyson’s sees acquisitions in emerging markets outside the US as a major plank of its expansion strategy.
In a separate interview Mr Conway admitted Cargill had failed to take some opportunities in Asia, before listing a number of sectors that the company feels is core to its business.
He said: “We missed some opportunities a year ago in Malaysia. We’re interested in starch, interested in vegetable oils, fats, all our core businesses.”
The Cargill chief said he has detected signs that commodity prices may be near bottoming out as a result of falling demand due to record prices earlier in the year. He gave a cautious prediction that recovery could come in “the last third of 2009 or early 2010”.
Mr Conway said also said the company, which transports, processes and distributes grains, oilseeds and other commodities to makers of food and animal feed, may delay construction on some earmarked projects to take advantage of the decline in the price of materials such as steel routinely used in the building industry.
“It doesn’t matter if capacity is a little bit late,” he said. “If you can’t buy, you build. Building costs are dropping very, very sharply, by 25 to 30 percent.”