Archer Daniels Midland Co. (NYSE: ADM) reported financial results for the quarter ended Dec. 31, 2012. The company reported net earnings for the quarter of $510 million, or $0.77 per share, up from $0.12 per share in the same period one year earlier. Adjusted earnings per share1 were $0.60, up from $0.51 in the same period last year. Segment operating profit1 was $808 million.
“The ADM team managed well despite challenges from the U.S. drought and from persistent, negative margins in the ethanol industry”
“The ADM team managed well despite challenges from the U.S. drought and from persistent, negative margins in the ethanol industry,” said ADM Chairman and CEO Patricia Woertz. “Our results in Oilseeds and Agricultural Services demonstrated the ability of our people to use our global asset network to prepare for and manage in a range of market conditions.
“In North America, we fully utilized our oilseeds crushing capacity to meet strong global demand, and we adjusted our transportation and origination network to move goods efficiently despite constrained river traffic and a smaller corn crop. In South America, we leveraged our origination, transportation and export facilities to move the record corn crop to world markets. And, in Europe, we made some operational changes, and the market responded to reduced imports.
“During our abbreviated fiscal year, we drove meaningful improvements in capital, costs and cash to enhance our future competitiveness. We continued taking action to improve underperforming businesses. As part of our ongoing portfolio management, we sold $570 million of non-core investments. And, through a companywide focus, we unlocked more than $1 billion in working cash.”
Second quarter 2012.5 highlights
- Adjusted EPS of $0.60 excludes approximately $113 million in pretax LIFO gains ($0.11 per share) and other items that net to about $0.06 per share.
- Oilseeds Processing profit increased $202 million, with year-over-year improvements in crushing and origination results in all regions.
- Excluding last year’s $339 million asset impairment charge, Corn Processing profit decreased $207 million, due to ongoing weakness in industry ethanol margins.
- Agricultural Services profit rose $77 million, as solid U.S. soybean exports, improved international merchandising and a gain on ADM’s investment in GrainCorp benefitted results.
- Net debt balances declined to $7.2 billion, the lowest level since June 2010, as the benefits of the company wide focus on unlocking cash began to be realized.
Adjusted EPS of 60 cents, up 9 cents
Adjusted EPS increased primarily due to higher segment operating profit.
This fiscal year’s effective tax rate of 30 percent was in line with the same six-month period last year.
Oilseeds earnings improve across all three regions
Oilseeds operating profit in the second quarter was $411 million, up $202 million from the same period one year earlier. Results included unfavorable mark-to-market timing effects of about $50 million (about $0.05 per share), compared to an unfavorable impact of about $110 million in the year-ago quarter.
Crushing and origination operating profit was $261 million, up $140 million from the year-ago quarter on strong improvements in all three geographies. ADM’s U.S. soybean operations ran at record capacity during the quarter and delivered very strong results amid good domestic and export meal demand. In South America, ADM was well prepared to move the record corn harvest. And in Europe, operational changes and reduced imports from South America drove improved results.
Refining, packaging, biodiesel and other generated a profit of $50 million for the quarter, down $27 million, due to weakness in biodiesel margins in the U.S. and Europe.
Cocoa and other results increased $66 million. Weaker cocoa press margins were offset by the absence of last year’s significant negative mark-to-market impacts.
Oilseeds results in Asia for the quarter were up $23 million from the prior year’s second quarter, principally reflecting ADM’s share of the results from its equity investee Wilmar International Limited.
Corn processing results weak on continued ethanol industry challenges
Corn processing operating profit of $3 million represented a decline of $207 million from the same period one year earlier, when excluding the year-ago quarter’s $339 million asset impairment.
Sweeteners and starches operating profit increased $22 million to $97 million, as tight sweetener industry capacity and higher corn costs supported higher year-over-year selling prices.
Excluding last year’s $339 million asset impairment charge, bioproducts results decreased $229 million to a loss of $94 million. Weak domestic gasoline demand and unfavorable global ethanol trade flows resulted in continued excess industry capacity, keeping ethanol margins negative.
Agricultural Services solid despite impact of U.S. drought
Agricultural Services operating profit was $317 million, up $77 million from the same period one year earlier. Results included a $62 million gain on ADM’s investment in GrainCorp.
Excluding the gain on GrainCorp, merchandising and handling earnings rose $23 million to $129 million, as solid U.S. soybean exports and improved international merchandising results more than offset lower U.S. corn origination and export volumes.
Transportation results were solid, despite challenges from low water on the Mississippi River. Results decreased $5 million to $48 million as increased barge operating expenses were partially offset by higher freight rates.
Milling and other results remained steady, as the milling business continued to perform well.
Other financial results improve
Operating profit from ADM’s Other Financial businesses was $77 million, up $55 million, with asset disposal gains and favorable captive insurance loss reserve adjustments.