Revenue for the first quarter was $14.38 billion down 17.8% from $17.5 billion in the same period of last year.
“Challenging market conditions continued in the first quarter, particularly affecting Ag Services,” said Juan Luciano, ADM chairman and chief executive officer. “Low U.S. export volumes and weak margins continued, and in the quarter, poor results from the global trade desk impacted results for Ag Services. Results for Corn improved compared to the first quarter one year ago, led by a strong performance in sweeteners and starches. For Oilseeds, global protein demand remained solid. However, first-quarter results were impacted by weak global crush margins. WFSI results were in line with expectations.”
Agricultural Services operating profit was $76 million, down $118 million from the year-ago quarter. Merchandising and handling earnings declined $83 million to $24 million, primarily due to a challenging merchandising environment that continued due to weak U.S. export competitiveness, lower North American volumes and margins, and a quarterly loss for the global trade desk compared to positive results last year. Losses from the global trade desk were caused in part by unfavorable merchandising positions.
Transportation results declined $28 million to $4 million, due to low U.S. exports and high water conditions that resulted in lower barge volumes and higher operating costs.
Milling and Other had a solid quarter, but results were down $7 million to $48 million due to lower grain and feed margins.
Total processing volume for Agricultural Services was 14.02 million tonnes, down from 14.15 million in the same period of last year.
Corn Processing operating profit increased from $127 million to $129 million.
Sweeteners and starches results improved $56 million to $141 million as the business continued to perform well, with an improved cost environment driven by strong capacity utilization.
Bioproducts results were down from $42 million to a loss of $12 million, due primarily to the continued challenging conditions in the global lysine market. In addition, ethanol margins continue to be impacted by high industry production levels that caused inventories to build throughout the quarter.
Total processing volume for corn was 5.74 million tonnes up compared to 5.3 million tonnes in the same period of last year.
Oilseeds operating profit of $261 million decreased $231 million from the strong year-ago results.
Crushing and origination operating profit of $120 million declined $214 million from last year’s high levels. Global soybean crush and origination results were down significantly due to lower global margins resulting from increased Argentine soymeal exports and significantly reduced U.S. meal exports. In addition, lower softseed crush volumes and weaker Brazilian commercialization, which slowed throughout the quarter, negatively impacted results.
Refining, packaging, biodiesel and other generated a profit of $79 million for the quarter, down $11 million from year-ago results, with stronger results from North America and Europe offset by weaker results in South America. With the sale of the Cocoa business in October 2015, results decreased $24 million compared to last year.
Oilseeds results in Asia for the quarter declined $6 million from the year-ago period, due primarily to Wilmar’s lower fourth-quarter earnings.
“The first half of the year continues to present a challenging environment,” Luciano said. “However, we are cautiously optimistic that reduced South American soybean and corn production could bring improved soybean crush margins and merchandising opportunities in the second half of the year.”
Oilseeds total processing volumes were 8.28 million tonnes, down 8.84 million tonnes in the same period of last year.
WFSI operating profit was $70 million in the first quarter. Results included operational start-up costs for the Tianjin Fibersol facility in China and the Campo Grande specialty protein complex in Brazil. Excluding these start-up costs, results improved by about $5 million from prior-year results with a solid performance from WILD Flavors and higher results from specialty proteins. With more than 900 revenue synergy projects identified, WFSI remains on track to achieve its 2016 targets.
“During the quarter, we continued to advance our strategic plan,” Luciano said. “We acquired a controlling stake in Harvest Innovations, enhancing ADM’s plant protein, gluten-free ingredient portfolio. We announced the purchase of a corn wet mill in Morocco that will further expand our global sweeteners footprint. We opened our new, state-of-the-art flavor creation, application and customer innovation center in Cranbury, New Jersey. And, as part of our ongoing portfolio management efforts, we reached an agreement to sell our Brazilian sugarcane ethanol operations.
“In addition, we achieved almost $50 million of run-rate savings in the quarter and remain on track to meet our $275 million target by the end of the calendar year,” Luciano said. “We repurchased about $300 million of shares in the quarter as we continue to execute on our balanced capital allocation framework.”