CHICAGO, ILLINOIS, US — Productivity initiatives are helping ADM improve its execution and mitigate the impact of inflation, while also powering profitable growth, said Juan R. Luciano, chairman, chief executive officer and president.
Net earnings attributable to ADM in the second quarter ended June 30 totaled $1.24 billion, equal to $2.18 per share on the common stock, up 74% from $712 million, or $1.26 per share, in the same period a year ago.
“Our team executed extremely well in the second quarter, navigating dynamic conditions to deliver nutrition to billions." - Juan R. Luciano, chairman, chief executive officer and president.
Revenues for the second quarter increased 19%, climbing to $27.28 billion from $22.93 billion.
The stronger earnings sent ADM’s share price up nearly 6% in mid-day trading on the New York Stock Exchange on July 26, climbing as high as $80 per share before closing at $78.92, up from $75.62 on July 25.
“Our team executed extremely well in the second quarter, navigating dynamic conditions to deliver nutrition to billions,” Luciano said in a July 26 conference call with analysts. “And even as we work tirelessly to serve our customers and consumers around the globe, we are continuing to advance our strategy with productivity initiatives that are improving our efficiency and cost structure and innovation works that is powering profitable growth.
“Productivity is how we are improving our execution and optimizing costs is key to our long-term success, but equally as importantly, our productivity work is helping us mitigate the impact of inflation. We have a very strong pipeline of productivity initiatives.”
During the conference call, Luciano highlighted two of the initiatives. The first one, he explained, is a set of operational transformation efforts that ADM is driving across production facilities around the world and spanning all three of its businesses.
“Earlier this year, we completed a modernization project in our Marshall, Minnesota, US, corn facility that is unlocking significant new value through enhanced automation, more sophisticated control systems and the increased use of analytics,” he said. “We’re already seeing double-digit returns on the investment we made in that project. This is an example of the kinds of projects we’re undertaking across our operational footprint, designed to unlock incremental volumes and deliver safer, more reliable, more cost-efficient operations.”
A second initiative involves a shift in focus “not only on the numerator, but also the denominator,” Luciano said.
“Our original $1 billion challenge and its follow-up, the next billion, help us drive to 10% ROIC,” he said. “Earlier this year, we launched a new challenge aimed at monetizing assets and optimizing working capital to unlock another $1 billion in cash, helping us to continue to drive returns. In fact, we already realized more than $400 million.”
Operating profit in the Ag Services and Oilseeds segment surged 97% in the second quarter of fiscal 2022, climbing to $1.12 billion from $570 million. Ag services profit rose 114% during the quarter to $407 million, while crushing profit increased 212% to $468 million from $150 million.
“The Ag Services and Oilseeds team delivered exceptional results in a dynamic market,” Vikram Luthar, chief financial officer, said during the call. “Ag Services results more than doubled versus the year ago quarter. Global trade had an outstanding quarter. The destination marketing team’s ability to meet customer demand around the globe helped drive strong volumes and margins. And good execution in global freight as well as net timing gains of about $65 million for the quarter contributed to significantly higher year-over-year profits.
“North America had a solid performance as export volumes remained strong in a good global demand environment, though year-over-year results were lower due to the prior year’s insurance settlement and strong positioning gains. South America results were higher based on stronger origination volumes and better margins driven by strong global grain demand.”
Luthar said crushing delivered substantially higher results, adding that strong soy crush margins drove improved performance in all three regions as meal and oil demand remained robust.
Operating profit in the Carbohydrate Solutions segment increased 23% in the second quarter to $473 million. Starches and sweeteners profit increased 28% during the quarter, climbing to $393 million from $306 million. Vantage Corn Processors posted a profit of $80 million in the quarter, up from $77 million in the same period a year ago.
“The starches and sweeteners subsegment, including ethanol production from our wet mills, delivered much better results due to solid demand as foodservice volumes reached close to pre-pandemic levels,” Luthar said. “Corn coproducts, including strong demand for corn oil and effective risk management, drove higher ethanol and sweetener margins.”
In the Nutrition segment operating profit increased 19% to $239 million in the second quarter of fiscal 2022, up from $201 million a year ago. Within the segment, human nutrition profit improved to $183 million from $162 million, while animal nutrition increased to $56 million from $39 million.
“Flavors grew revenue in North America, EMEA and South America, though profits were lower due to negative currency effects in EMEA as well as weaker results in APAC,” Luthar said. “Healthy demand for alternative proteins resulted in strong soy protein volumes and margins as contributions from the Sojaprotein acquisition as well as good demand for texturants drove higher results in specialty ingredients. Strength across probiotics, including in the recently acquired Deerland business as well as robust demand for fibers, contributed to a stronger quarter in health and wellness.”
Looking ahead, Luciano said ADM is on track to deliver a very strong second half, with full-year earnings forecast above $6.50 per share.