ADM earnings ease 3% on charges

by Eric Schroeder
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ADM
ADM's adjusted earnings per share increased to 57c from 41c a year ago.
 

CHICAGO — Net income at Archer Daniels Midland Co. in the second quarter ended June 30 totaled $276 million, equal to 48c per share on the common stock, down 3% from $284 million, or 48c per share, in the same period a year ago. Excluding asset impairments, restructuring and settlement activities, as well as a LIFO charge and a loss on the sale of assets and businesses, adjusted earnings per share were 57c, up from 41c in the same period a year ago. Revenues decreased 4% to $14.943 billion from $15.629 billion.

Juan Luciano, ADM
Juan Luciano, chairman and c.e.o. of ADM

“I'm extremely proud of the results our team achieved this quarter,” Juan Luciano, chairman and chief executive officer, said during an Aug. 1 conference call with analysts. “Under some tough conditions, we were able to deliver strong growth in earnings and returns. In fact, it was our fourth consecutive quarter of year-over-year higher returns on invested capital. We did this by continuing to deliver on our strategic plan and capitalizing on improving conditions in some markets.”

Operating profit in the Oilseeds Processing unit was $206 million in the second quarter, down 12% from $235 million in the same period a year ago. Crushing and origination profit fell to $38 million from $135 million.

“In Oilseeds Processing, the business benefited from diversity of feedstocks, products and geographies,” Mr. Luciano said. “However, overall results were down compared to the second quarter of 2016. Crushing origination results were lower. Global crush margins remain pressured due to alternative protein substitutes, slower first-half growth in meal demand, and a competitive global marketplace.

“In South America, when the Brazilian real dropped in value for a brief time in May, we saw more aggressive farmer selling. But in general throughout the quarter the real remained firm, contributed to compressed South American origination margins.

“On the other hand, our softseeds performance improved over the previous year as we continued to utilize our flex crush capacity to capitalize on margin opportunities.”

Agricultural Services operating profit increased 91% to $109 million from $57 million, as merchandising and handling posted a profit of $40 million after sustaining a loss of $14 million in the year-ago period. Milling and other results rose to $58 million from $56 million, and transportation fell to $11 million from $15 million.

“North America grain results increased significantly over the prior year with strong carries in wheat, corn and soybeans,” Mr. Luciano said. “We are seeing the benefits of our actions to improve the performance of the global trade desk. The group generated solid profitable results and was up over the year-ago quarter. Good execution led to improved margins that more than offset some lower volumes. In addition, favorable timing effects benefited results.”

Operating profit within the Corn Processing unit increased 37% to $224 million from $163 million. Sweeteners and starches results improved $16 million to $198 million behind higher volumes and improved margins. Bioproducts turned in a profit of $26 million, which compared with a loss of $19 million a year ago, due primarily to an improvement in ethanol margins.

“Our global sweeteners and starches business performed very well,” Mr. Luciano said. “Higher volumes and improved margins in North America sweeteners and starches contributed to a strong performance. In addition, our European operations showed positive growth as a result of increased sales volumes. Results from our sweetener complex in Tianjin, China, improved modestly over the year-ago quarter with good growth in sales volumes, reaching full utilization levels during the quarter.”

Looking forward, Mr. Luciano said ADM is “aggressively” managing costs and capital, and taking additional portfolio actions.

“We are ahead of pace for meeting our 2017 target of $225 million in run rate savings,” he said. “We implemented over $130 million in operational run rate cost savings during the first half of the year while continuing to invest in R.&D., innovation centers and process improvements. And, in line with our balanced capital allocation framework, we returned $875 million to shareholders in dividends and share repurchases. Because of all these actions, we expect to deliver a strong year-over-year earnings growth and returns in 2017. And we are poised to be an even stronger company in 2018.” 
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