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ADM profits climb despite ethanol squeeze

by Jessica Murphy
Feb 05, 2013

ADM earnings per share

Jessica Murphy/MEDILL

ADM's adjusted vs. net earnings per share for the quarter ending Dec. 31, 2012 and 2011.  Net results in both periods were skewed by one-time items.

Archer Daniels Midland Co. reported a big jump in fiscal second-quarter earnings Tuesday with the help of one-time items. But the grain-processing giant’s underlying profit growth was more modest.

In the quarter ended Dec. 31, Decatur-based ADM had net earnings of $510 million, or 77 cents per diluted share, up sixfold from $80 million, or 12 cents per diluted share, in the year-ago period.

Sales rose 6.9 percent to $24.9 billion from $23.3 billion.

Both quarters’ earnings were skewed by special items, including a $339 million charge in 2011 and a $113 million gain in 2012.

Excluding such one-time items, ADM would have earned 60 cents per share, up from 51 cents in the same period last year. The latest quarter topped by two cents the 58 cents analysts surveyed by Yahoo Finance were expecting.

ADM shares rose 93 cents, or 3.27 percent, to close at $29.37 Tuesday.

The company’s positive earnings came “despite challenges from the U.S. drought and from persistent, negative margins in the ethanol industry,” said CEO Patricia Woertz in a conference call with analysts.

Excluding impairments, operating profit at ADM’s corn processing group dropped dramatically, to just $3 million from $210 million in the year-ago period. Chief Operating Officer Juan Luciano told the analysts that falling ethanol margins reflect a weak demand for gasoline, rather than the impact of high corn prices.

“Over the long run, we expect corn prices to retreat as supply is rebuilt,” said Jeffrey Stafford, an equity analyst at Morningstar Inc. in a report. “However, the near-term price outlook will always be clouded by weather uncertainty.”

The bulk of ADM’s profits this quarter came from oilseeds processing, which involves crushing and processing oilseeds such as soybeans and soft seeds into vegetable oils and protein meals. Helped by strong global demand, operating profits at the group nearly doubled to $411 million from $209 million in 2011.

Profits at the parent’s transportation division, which operates a fleet of river barges, decreased $5 million to $48 million due to severely low water levels on the Mississippi; officials said that situation disrupted barge traffic and increased barge-operating expenses.

In the first six months, ADM earned $692 million, or $1.05 per diluted share, a 28 percent increase from $540 million, or 81 cents per diluted share, in the year-ago period. Sales rose 3.4 percent to $4.7 billion from $4.5 billion.