ADM earnings climb 7% in Q2 on 50% sales spike

by Eric Schroeder
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DECATUR, ILL. — Second-quarter earnings at Archer Daniels Midland Co. rose 7%, buoyed by strong oilseed processing results and increased demand for feed grains. Net income in the second quarter ended Dec. 31 was $473 million, equal to 73c per share on the common stock, up from $441 million, or 67c per share, in the second quarter a year ago.

Segment operating profit for the quarter increased 25% to $955 million from $767 million last year. ADM said its Oilseeds Processing division’s operating profit increased on improved margin conditions, due to strong global protein and oil demand. Its Corn Processing division’s operating profit declined due to lower ethanol sales prices and higher net corn costs. The company’s Agricultural Services division’s operating profit increased due to improved global grain merchandising and handling results.

Other operating profit increased primarily due to improved wheat and malt processing operations and higher financial services income.

Net sales and other operating income soared 50% in the quarter, climbing to $16,496 million from $10,976 million. The company attributed this to increased selling prices resulting from sharp rises in commodity prices accounted for approximately 78% of the increase while higher sales volumes, principally feed grains, ethanol and wheat, accounted for the remaining 22% increase.

ADM said its net earnings increased $32 million due principally to a $188 million increase in segment operating profits that was partially offset by increased corporate charges related principally to LIFO inventory valuations.

ADM said its Oilseeds Processing division’s operating profit increased $27 million to $219 million from $192 million last year due principally to strong global demand for protein meal and oil. Worldwide crush volumes increased 2% for the six months ended Dec. 31 to 14.7 million tonnes. Crushing and origination results increased $12 million for the quarter and $39 million for the first six months, due principally to better crush margins in North America and improved origination results in South America partially offset by a reduction in crush margins in Europe and increased manufacturing costs. Value-added refining, packaging and biodiesel results increased $6 million in the quarter, principally from improved refining volumes and margins. The results include asset abandonment charges of $15 million.

Corn Processing operating profit decreased $61 million in the quarter to $275 million from $336 million last year. Sweeteners and Starches operating profit fell $5 million to $147 million on higher average sweetener and starch selling prices and favorable risk management results, partially offset by higher net corn and manufacturing costs. Bioproducts results declined $56 million to $128 million due principally to higher net corn costs and lower ethanol selling prices and volumes.

The Agricultural Services division’s results increased $184 million to $315 million, due principally to improved global merchandising and handling results as volatile commodity market conditions, large North American crops and global wheat shortages provided increased margin and volume opportunities. Transportation results declined, due principally to lower barge freight rates and higher operating costs.

For the first six months of fiscal 2008, net earnings rose 8% to $913 million, or $1.41 per share, on a sales gain of 44%. Segment operating profit improved 24% in the first half to $1,752 million.

"ADM’s record earnings for the second quarter and first half of fiscal 2008 demonstrate the value created by and the strengths of our broadly diversified asset base and product portfolio," said Patricia A. Woertz, chairman and chief executive officer. "This quarter, heightened demand, coupled with demographic crop imbalances, drove volumes, prices and volatility in many key markets. Our team’s skill in managing both risk and rapidly changing market opportunities, enabled us to deliver outstanding value for our shareholders."

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