ADM earnings slip amid pre-tax charges, tight crop supplies

by Jeff Gelski
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DECATUR, ILL. — Pre-tax charges, the ongoing GrainCorp Ltd. acquisition, tight crop supplies and an FCPA matter all affected second-quarter earnings for Archer Daniels Midland Co. The Decatur-based company had net earnings of $223 million, or 34c per share, in the quarter ended June 30, which compared with $284 million, or 43c per share, in the second quarter of the previous year.

Adjusted earnings were 46c per share, which compared with 38c per share in the second quarter of the previous year. They excluded about $39 million, or 4c per share, in pre-tax LIFO charges, $51 million, or 5c per share, in foreign-currency hedging losses related to the acquisition of GrainCorp, and $29 million, or 3c per share, of additional provisions related to a previously disclosed FCPA (Foreign Corrupt Practices Act) matter.

ADM has discussed the FCPA matter, which dates to 2008 and earlier, with the U.S. Department of Justice and the U.S. Securities and Exchange Commission. ADM now believes it is appropriate to increase its provision to $54 million from the $25 million established in the first quarter. The matter involves the handling of grain and feed exports.

ADM had sales and other operating income of $22,541 million in the second quarter, which was down from $22,675 million in the previous year’s second quarter.

“The team managed well through this period as tight U.S. crop supplies reduced volumes,” said Patricia Woertz, chairman and chief executive officer, when results were given Aug. 6. “Also, corn results improved amid volatile ethanol industry conditions. During the quarter we continued our work to improve the company’s future returns and earnings power over the cycle. Our effort to unlock cash reached $2 billion, with the team reaching this milestone a half year ahead of schedule. And, in cost, we made solid progress toward our goal of $200 million in additional cost reductions by the end of 2014.

“Looking ahead, we’ll be managing through tight crop supplies until the forecast large but delayed U.S. harvest.”

Oilseeds Processing profit in the quarter decreased to $321 million from $331 million in the previous year’s second quarter. Weaker cocoa results offset a solid performance in crushing and origination. Tight crop supplies in North America resulted in weaker soy and softseed crush margins.

Due to improved ethanol results, Corn Processing profit increased to $223 million from $74 million. Operating profit in Agricultural Services fell to $81 million from $123 million.

ADM’s net debt position dropped to $5.5 billion from $8.9 billion a year ago. For the six months ended June 30, ADM had net earnings of $492 million, or 74c per share, which compared with $683 million, or $1.03, in the same time period of the previous year. Net sales and other operating income for the six months ended June 30 were $44,268 million, up from $43,830 million.

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