Archer Daniels Midland Co. (NYSE: ADM) reported financial results for the quarter ended Sept. 30, 2014.
The company reported adjusted earnings per share of $0.81, up from $0.47 in the same period last year. Adjusted segment operating profit was $914 million, up 45 percent from $632 million in the year-ago period.
Net earnings for the quarter were $747 million, or $1.14 per share, and segment operating profit was $1.07 billion.
“The team delivered very strong results in the third quarter and made significant progress improving earnings and returns,” said ADM chairman and CEO Patricia Woertz. “Corn Processing managed their product mix to serve good demand and optimize margins. Continued improvement in international merchandising results supported the ongoing recovery of Ag Services. And Oilseeds Processing again delivered solid results overall, benefiting from good demand and its diverse footprint and product portfolio.
“We also continued to advance our portfolio management. Since the beginning of the third quarter, we signed a deal to sell our global chocolate business; we reached an agreement to acquire Specialty Commodities Incorporated; and we completed our acquisition of WILD Flavors.
“In mid-October, we completed our previously announced buyback of 18 million shares, ahead of our year-end target. Given the strength of our balance sheet and our strong cash flows, we expect to repurchase up to 10 million more shares by the end of 2014.”
Third quarter 2014 highlights
- Adjusted EPS of $0.81 excludes approximately $315 million in pretax LIFO income; a $156 million pretax gain on the expansion of the ADM-Marubeni joint venture; and a $102 million pretax loss on foreign exchange hedging of the WILD Flavors equity purchase. As a result of Euro depreciation, and net of these hedging losses, ADM’s purchase price of the WILD Flavors equity was $114 million below the price at signing.
- Oilseeds Processing was in line with last year’s solid result, with the impact from slower farmer selling in South America offset by stronger global softseed, soybean and biodiesel results.
- Corn Processing increased $176 million on improved margins in ethanol and sweeteners.
- Agricultural Services increased $57 million, with improvements in international merchandising and transportation.
- Trailing four-quarter-average adjusted ROIC was 8.5 percent, up 280 basis points year over year.
- The net debt position of the company declined to $0.7 billion, compared with $3.4 billion at the end of the same period last year, which also resulted in a lower net interest expense.
Oilseeds earnings solid, with lower South American origination offset by improved global oilseed processing, biodiesel and cocoa
Oilseeds operating profit of $366 million was similar to the same period one year earlier.
Crushing and origination operating profit declined $28 million to $214 million. Softseed results improved significantly, driven primarily by European rapeseed margins and volumes. Soybean crushing results rose as South American and European operations saw higher capacity utilization and better margins. However, continued slow farmer selling limited origination volumes and profits in South America.
Refining, packaging, biodiesel and other generated a profit of $96 million for the quarter, up $11 million, with improved results from biodiesel in North America and Europe.
Cocoa and other earned $30 million in the quarter, up $20 million from the year-ago period, reflecting the improved margin environment and higher capacity utilization in the cocoa business.
Oilseeds results in Asia for the quarter were down $3 million from the same period last year, principally reflecting weaker results from Wilmar International Limited.
Corn processing results improved significantly on strong performances across the segment
Corn processing operating profit nearly doubled from $180 million to $356 million.
Sweeteners and starches results increased $63 million to $171 million on steady volumes, with the expected lower average selling prices more than offset by the benefit of lower net corn costs.
Bioproducts results increased $113 million to $185 million driven by solid ethanol demand and margins through most of the quarter.
Agricultural Services results improve on international merchandising and transportation
Agricultural Services operating profit was $159 million, up $57 million from the year-ago period. This excludes a gain of $156 million related to the expansion of the ADM-Marubeni joint venture, Pacificor, formerly the Kalama Export Company. Last year's result included approximately $30 million related to intercompany insurance settlements.
Merchandising and handling earnings increased $60 million to $64 million, with significant improvements in international merchandising results more than offsetting the impact of the normal seasonal decline in U.S. export volumes until harvest began in September.
Transportation results increased $14 million to $35 million, with higher barge freight volumes and rates.
Milling and other results declined $17 million to $60 million on lower margins and volumes in the milling business.
Other items of note
This quarter’s effective tax rate was 28 percent, versus 32 percent in the same period last year.
ADM incurred a $102 million pretax loss on foreign exchange hedging of the WILD Flavors equity purchase. During the period from signing on July 5 to closing on Oct. 1, ADM progressively hedged the anticipated cash outflow related to the equity purchase. The Euro depreciated significantly, particularly in the month of September, resulting in losses on those hedges. As a result of the overall depreciation of the Euro, ADM's total purchase price of the equity, net of these hedging losses, was $114 million lower than on July 5, when the purchase agreement was signed.
Included in Corporate results was a $56 million loss related to updated valuations of CIP’s portfolio of investments. ADM holds a 43.7 percent equity interest in CIP, a joint venture that targets investments in food, feed ingredients and bioproducts businesses.
As additional information to help clarify underlying business performance, the tables on page 9 include both adjusted EPS as well as adjusted EPS excluding significant timing effects.