ADM second-quarter earnings decline 89%

by World Grain Staff
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DECATUR, ILLINOIS, U.S. — Weakness in global oilseed margins as well as disappointing results in corn and international merchandising led to an 89% decline in earnings for the second-quarter, Archer Daniels Midland (ADM) reported on Jan. 31.

For the quarter ended Dec. 31, 2011, the company had earnings of $80 million, equal to 12¢ per share on the common stock, which compared with earnings of $732 million, or $1.14 per share, during the same quarter of the previous year. Adjusted earnings per share, which excludes the impact of LIFO, PHA-related impairment charges and other adjustments, was 51¢ per share, down 58% from the prior year’s second quarter. Segment operating profit, after excluding the impact of the PHA-related charge, was $648 million, down 52% from a year ago.

“It was a tough quarter,” said ADM Chairman and Chief Executive Officer Patricia Woertz. “The operating environment was challenging. Ongoing weakness in global oilseeds margins, lower results in corn and poor international merchandising results hurt our second quarter profits.

“We remain optimistic about the long-term fundamentals of our business and the growing earnings power of our company. We continue to execute our plan to drive shareholder value: prioritizing capital projects, implementing productivity measures and returning capital to shareholders through increased dividends and share buybacks.”

Oilseeds Processing profit declined $72 million amid continued weakness in the global margin environment. Operating profit in the second quarter was $253 million, down $72 million from the same period one year earlier.

Crushing and origination operating profit fell $61 million to $139 million. Continued weakness in global oilseeds crushing margins, particularly in Europe, reduced overall results. The prior year’s quarter reflected a $71 million pretax gain related to the acquisition of the controlling interest in Golden Peanut. In addition, last year’s results included significant, negative mark-to-market timing effects which were not repeated this year.

Refining, packaging, biodiesel and other generated a profit of $74 million for the quarter, essentially flat from year-ago levels.

Oilseeds results in Asia for the quarter were in line with last year, principally reflecting ADM’s share of the results from its equity investee Wilmar International Limited.

Corn Processing reported an operating loss of $133 million, a decrease of $532 million from the same period one year earlier. The loss reflects $339 million in asset impairment charges related to the PHA renewable plastic production facility at Clinton, Iowa. Excluding the PHA impairment charges, corn processing operating profit of $206 million represented a $193 million reduction. Overall net corn costs were up, reflecting economic hedging benefits recognized in the prior year.

Sweeteners and starches operating profit decreased $46 million to $73 million. Export demand for sweeteners remained strong, though higher net corn costs more than offset higher average selling prices and increased sales volumes.

Bioproducts results in the quarter decreased $486 million to a loss of $206 million, including the $339 million PHA impairment charges and the absence of ownership gains from last year. Ethanol margins were good into December, when they declined significantly as industry production increased and exports declined.

Net corn costs for the quarter were high, partly due to economic hedging benefits recognized in the prior year. Agricultural Services profit decreased $268 million on poor international merchandising results and lower U.S. export volumes.

Other businesses’ results decreased by $181 million, primarily due to a negative mark-to-market timing effect in cocoa processing. Mark-to-market losses this quarter were $127 million or approximately 13¢ per share.

ADM returned $304 million to shareholders in the quarter, including buying back 6.5 million shares and increasing our quarterly dividend to 17.5¢ per share from 16¢.

Worldwide demand for crops and agricultural products continues to grow at a stable rate, ADM said. The South American harvest is beginning and is expected to help maintain adequate global soybean supplies. With adequate global crop supplies and a smaller U.S. crop last year, the U.S. lost export volumes. Global protein meal demand continues to grow, led by Asia, but crush margins, while improved, remain weak. U.S. ethanol margins are weak, with excess production amid reduced exports. U.S. corn sweetener capacity remains tight, driven by strong export demand.



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