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Soybeans help pull Archer Daniels Midland through drought

by Camille Izlar
Oct 30, 2012

ADM Q1 Operating Profit

Camille Izlar/ MEDILL 

Oilseed profits far surpassed those from corn and other agricultural products.    

Suffering from high corn prices related to last summer’s drought, Archer Daniels Midland Co. reported a 60 percent decrease in first-quarter earnings Tuesday. The drought drove corn prices up, lowering profits for the major agricultural processor. However, results still managed to beat analyst expectations.

“Our first-quarter segment results were mixed,” CEO Pat Woertz acknowledged. “Oilseeds performance was strong, the ethanol industry experienced sustained negative margins, and agricultural services managed well through a complicated quarter.”

The Decatur-based firm is a well-known producer of ethanol, a form of renewable energy made from corn and other agricultural commodities that is used for motor fuel. ADM also has facilities that convert soybeans, cottonseed, canola and sunflower seeds into crude oil for food ingredients and meal for livestock.

Oilseed profits rose by more than 50 percent to $336 million. Morningstar analyst Min Tang-Varner said the oilseed results were better than she expected and improved the overall earnings report.

“Although people always associate ADM with ethanol and corn in the U.S., actually soybean and oil seed is always the biggest contributor,” said Tang-Varner. While she doesn’t expect a huge recovery in the company’s corn products and ethanol segment, she said an improvement in starches and sweeteners should help ADM going forward.

In the fiscal quarter ended Sept. 30, the Decatur-based company earned $182 million, or 28 cents per share, down from $460 million, or 68 cents per share, a year earlier. The decrease was largely due to charges related to the sale of a Mexican food company. The divestiture of Gruma, the largest manufacturer of corn flour and tortillas worldwide, drained $387 million from ADM’s bottom line.

Property value reassessments in Brazil led to another one-time charge. Excluding those items, ADM earned 50 cents per share on an operating basis, better than the 45 cents per share analysts surveyed by Reuters had predicted.

Sales dropped 4 percent to $21.81 billion from $21.9 billion for the year-ago period.

Looking forward, ADM executives said they plan to expand the company’s international presence. The company will add a soybean plant in Paraguay which it expects will increase South American cash flow by 25 percent, said Juan Luciano, chief operating officer. ADM also made an offer to acquire GrainCorp, an Australian company. The offer resulted in a slight increase in GrainCorp’s stock price last week. The company has not yet responded to ADM’s offer.

ADM shares, which did not trade Tuesday because of the Wall Street shutdown, closed at $27.05 Friday.