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Apr-30-2008High Demand for Corn Helps Lift ADM Profit 42%(topic overview)
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"Volatility in commodity markets presented unprecedented opportunities," Chief Executive Officer Patricia Woertz said in a news release. "Once again, our team leveraged our financial flexibility and global asset base to capture those opportunities to deliver shareholder value." Decatur, Ill. -based Archer Daniels Midland Co. also said operating profit from its oilseeds processing segment increased $52 million — 28 percent — to $185 million on strong overseas demand for cooking oil and protein. Profit in the company's corn-processing business, including its ethanol production, fell 31.5 percent to $172 million. ADM blamed high corn prices and the increasing cost of the energy needed to process the crop, but said increased ethanol sales partially offset those increases. [1] The company says while oilseeds processing operating profits increased due to continued strong global demand, corn processing operating profits decreased $79 million for the quarter primarily because of increasing corn and manufacturing costs - primarily energy. "Partially offsetting these higher costs, sweeteners and starches selling prices increased for the quarter and nine months and sales quantities of ethanol increased for the quarter and nine months.[2]
The results beat estimates of analysts surveyed by Thomson Financial, who expected earnings of 70 cents per share on revenue of $13.45 billion. ADM says operating profit from its oilseeds processing segment increased $52 million. ADM's operating profit from its corn processing segment fell $79 million, due to increased corn prices and manufacturing costs.[3] The corn processing segment includes activities related to the production of sweetners, starches, syrups and other specialty food and feed ingredients, as well as ethanol. After meeting with company management earlier this month, Driscoll said he has been reassured that ADM is managing its way through the record-setting corn prices and is perhaps even thriving. Driscoll, who has a "Buy" rating and $52 target price on the stock, subsequently raised his third-quarter earnings estimate by 10 cents to 75 cents per share, to reflect better operating conditions in agricultural services and oilseed processing.[4]
If profits are sagging at the corn group, ADM's agricultural services group recorded a phenomenal earnings jump, with operating profits soaring to $366 million from $46 million in last year's quarter. The company noted that exceptional market volatility had yielded "favorable risk-trading results" -- a reference to its grain trading activities -- and that the segment's grain-terminal operations had also benefited from the same market dynamics.[5] Earnings from processing corn into sweeteners and ethanol, the biggest profit contributor last year, fell 31 percent to $172 million because of higher costs for corn and energy, ADM said.[6] At ADM's corn processing group, which benefited in recent years from from the boom in the biofuel known as ethanol, saw operating profits decline $172 million, hit by a double whammy of higher corn costs and rising prices for the energy ADM must buy to process the grain.[5] Corn processing's operating profit declined to $172 million from $251 million a year ago, hurt by higher net corn and manufacturing costs, principally energy. These costs were partially offset by higher selling prices for sweeteners and starches as well as higher sales quantities of ethanol.[7]
Corn Processing operating profit decreased $79 million for the quarter and $177 million for the nine months due principally to higher net corn costs.[8]
Higher operating profit at the company's agricultural services segment, which benefited from rising grain prices, offset lower operating profit at its corn processing segment, which was hurt by higher net corn and manufacturing costs.[7] Corn Processing operating profit decreased due principally to higher net corn costs.[2] Corn processing operating profit decreased due principally to higher net corn costs," according to a company report.[9]
Archer Daniels Midland (ADM), says net earnings for the third quarter increased 42% to $517 million. They report net sales and other operating income increased 64% to $18.7 billion, with selling prices increased mainly due to high commodity prices. [2] Steve Mills, executive vice president and chief financial officer, attributed nearly 90 percent of ADM'''s net sales gains in the quarter to increases in selling prices as a result of higher commodity prices, while higher sales volumes accounted for just 10 percent. Despite a favorable top line, Ann Gilpin, an analyst with Morningstar Inc., commented, '''I don'''t think they had that great of a quarter. Their numbers look good, they beat the analyst estimate,''' but '''at the end of the day the agriculture increased 700 percent which is their trading desk, the only thing that improved their earnings.''' John Rice, executive vice president, commercial and production, said on the conference call that ADM'''s current $2.5 billion expansion projects, which include its ethanol production capacity, have been delayed due to '''weather, steel shipments and the ability to access'''craft labor.''' Gilpin is '''surprised they'''re building out capacity at all,''' since '''last year we had a glut of ethanol and that affected pricing. ADM is seen as a bellwether for the ethanol industry and they weren'''t able to pass along higher prices.'''[10]
Net income at the Decatur grain-processing concern rose to $517 million, or 80 cents a diluted share, from last year's $363 million, or 56 cents a share. Sales, artificially fattened by a big run-up in the price of corn and other grains ADM purchases for its processing activities, strengthened by 64 percent to $18.71 billion from $11.38 billion.[5] Net income climbed to $517 million, or 80 cents a share, in the three months through March, from $363 million, or 56 cents, a year earlier, Decatur, Illinois-based ADM said today in a statement.[6]
BOSTON (Thomson Financial) - Archer Daniels Midland Co. Tuesday reported third-quarter net earnings of $517 million, or 80 cents a share, compared with earnings of $363 million, or 56 cents a share, a year earlier.[11] The $517 million in earnings for the quarter compares to $363 million for the same quarter a year ago, or 80 cents per share versus 56 cents per share last year.[9] Earnings jumped to $517 million, or 80 cents per share, for the third quarter ended March 31, from $362.9 million, or 56 cents per share, a year earlier.[12]
The Decatur, Illinois-based company's net earnings for the third quarter increased to $517 million, or $0.80 per share from $363 million, or $0.56 per share, a year ago.[7] Earnings per share for the quarter increased 43% from last year, while the company's quarterly net sales and other operating income rose 64%.[7] For the nine months ended March 31, 2008, the company's net earnings climbed to $1.43 billion, or $2.21 per share, from $1.21 billion, or $1.83 per share in the same period last year.[7] ADM'''s net earnings for the nine months ended March 31 were $1.4 billion, or $2.21 per diluted share, compared with $1.2 billion, or $1.83 per diluted share, in the year prior.[10]
ADM says earnings grew to $517 million, or 80 cents per share, from year-ago profit of $363 million, or 56 cents per share.[1] The company reported profits of $517 million, or 80 cents per share, up from $363 million, or 56 cents per share a year ago.[13]
The Decatur, Ill. -based grain processor earned $517 million, or 80 cents per diluted share, in the quarter ended March 31, compared with $363 million, or 56 cents per diluted share, in the year-earlier period.[10]
Higher selling prices resulting primarily from sharp rises in commodity prices accounted for about 85% of the increase in sales, while higher sales volume, principally vegetable oil and meal, feed grains and wheat, accounted for the remaining 15% increase. Among Archer Daniels' peers, Westchester, Illinois-based Corn Products International Inc. (CPO) recently reported an increase in its profit for the first quarter to $64 million, or $0.85 per share from $50 million, or $0.66 per share in the prior-year quarter.[7] Net sales for the quarter increased 22% to $930.9 million from $761.9 million a year ago. Last week, White Plains, New York-based Bunge Ltd. (BG) reported a surge in its profit for the first quarter, helped by strong demand for agricultural products and higher prices.[7] Net sales and other operating profit for the segment climbed to $9.78 billion from $5.69 billion in the previous-year quarter.[7]
Agricultural Services operating profit increased $320 million for the quarter and $618 million for the nine months as highly volatile market conditions provided exceptional merchandising opportunities. Other segment operating profit increased due to improved margins and increased financial services income.[8] Third quarter segment operating profit increased 54% to $913 million from $593 million last year.[8] Agricultural services posted quarterly operating profit of $366 million, up from $46 million in the same quarter of last year.[7] The company's other operations recorded operating profit of $138 million in the quarter, compared to $111 million in the same quarter of last year.[7]
Just under a quarter of last year's U.S. corn crop was used to make ethanol, according to the industry trade group the National Corn Growers Association, up from 18 percent in 2006. Profit in the company's corn-processing business, including its ethanol production, fell 31.5 percent to $172 million.[14] Construction projects valued at about $2.5 billion have faced "substantial'' delays because of weather, late steel shipments and limited labor, John Rice, executive vice president of commercial and production, said during the call. An ethanol plant in Columbus, Nebraska, will be completed in the third quarter of calendar 2009 instead of the fourth quarter of this year, and a plant in Iowa will be delayed until the first quarter of 2010, instead of the third quarter of 2009. Earnings from the sale of sweeteners such as high-fructose corn syrup, used in candy and sodas, fell 26 percent to $98 million.[6]
Dick Bond, chief executive of the largest U.S. meat processor, claimed the diversion of corn to produce ethanol was inflating prices for animal feed, and warned that consumers faced steep rises in food prices. Woertz said she welcomed the debate and "empathized" with users facing higher food and feed prices, but said it would be "misguided and misinformed" to reverse state support that could lead to a new generation of renewable fuels. Analysts estimate that ethanol provided less than 10% of ADM's earnings in the latest quarter, with a surge in profits from its agricultural-services division driving the results.[15] Food costs are being driven primarily by higher energy costs, said Archer Daniels (ADM) Chairman and Chief Executive Patricia Woertz, which is the result of a tight energy supply -- not increased biofuel production. "And I actually find it sad, and maybe even a little ironic, that these misguided attacks on biofuels is directed at the one alternative we actually have today for. increasing the fuel supply," she said, speaking on a post- earnings conference call. A pullback of U.S. government subsidies to the industry would be " wrong, it's foolish, I think it's dangerous, I think it's a mistake," Woertz said. "Retreat from biofuels is just an empty gesture," she said. "That won't fill anybody's stomach and won't fill anybody's gas tanks." The nascent biofuel industry has spent millions lobbying for greater U.S. support, culminating in President George W. Bush's declaration in his 2006 State of the Union Address that biofuel will be an important step towards achieving national energy independence.[16] CHICAGO, April 29 (Reuters) - The chief executive of leading ethanol producer Archer Daniels Midland Co (ADM.N: Quote, Profile, Research ) said on Tuesday that any change in the U.S. energy bill or biofuels policy due to rising global food prices would be wrong and misguided. "I actually find it sad and even a little ironic that this attack on biofuels is directed to the one alternative we have today," said Chairman and CEO Patricia Woertz on a conference call with analysts.[17] Learn how to maintain seamless business continuity while migrating from traditional voice mail, to unified communications. In a conference call with analysts this morning, Chairman and CEO Patricia Woertz warned that any change in the U.S. energy bill or biofuels policy due to rising global food prices would be wrong and misguided. "I actually find it sad and even a little ironic that this attack on biofuels is directed to the one alternative we have today," she said.[13]
Pat Woertz, chairman and chief executive of the U.S. agribusiness group, said food prices were being driven by rising energy costs and global protein demand rather than production of biofuels.[18] Woertz, a former head of marketing and refining at Chevron Corp. (CVX), said food prices were being driven by rising energy costs and global protein demand rather than production of biofuels. Her remarks came a day after the head of Tyson Foods Inc. (TSN) called for ethanol subsidies to be swept away.[15]
OVERVIEW: The biggest issue facing Archer Daniels Midland is the rising price of corn _ the key component of most ethanol produced in the U.S. The ethanol industry's profitability has been limited by the commodity's surging cost, which producers have not been able to pass completely onto refiners. Despite being one of the country's largest ethanol producers, the Decatur, Ill. -based company counts on ethanol for only about one-tenth of its total sales. It still makes most of its money by processing soybeans and corn for animal feed, oil and other food products. [4] "Results were very clearly negatively impacted by much higher corn costs, which were only partially offset by higher selling prices," Citigroup analyst David Driscoll wrote in a note to investors. ADM predicted Tuesday that ethanol sales and prices should improve through this fall, when more U.S. ethanol production capacity comes on line. Ethanol prices are currently low compared with gasoline prices, which ADM Executive vice President John Rice said should encourage fuel blenders to put more ethanol in the gasoline they sell. Some analysts, like Citigroup's Driscoll, praised Decatur, Ill. -based ADM for its ability to capitalize on spikes and drops in commodity prices. They also questioned whether the company could maintain anything like the third-quarter results in agricultural services, which ADM itself called extraordinary.[14]
Tyson Foods Inc. Chief Executive Officer Richard L. Bond yesterday blamed U.S. ethanol policies for causing a crisis by diverting corn from the food supply. Tyson, the second-largest U.S. poultry producer, yesterday posted its first loss in six quarters as surging corn and soybean prices boosted the cost of feeding chickens.[6] Dick Bond, chief executive of the largest U.S. meat processor, claimed the diversion of corn to produce ethanol was inflating prices for animal feed, and warned that consumers faced steep rises in food prices.[18]
The chief executive of ADM, a leading alternative fuel producer, defended the use of corn to make ethanol as food prices rise around the world, leading to riots and many countries limiting exports.[12]
CHAMPAIGN, Ill. (AP) — Archer Daniels Midland Co. cashed in on volatile prices and heavy demand for the corn, soybeans and wheat it processes to generate a 42 percent increase in third-quarter profits. Though ADM easily beat Wall Street expectations, investors Tuesday seemed to doubt that ADM could sustain the same pace amid such fickle markets, and company shares dropped sharply. [14] CHICAGO, April 29 (Reuters) - Worries that the U.S. government will repeal or soften mandates on blending ethanol with gasoline sent shares of Archer Daniels Midland Co (ADM.N: Quote, Profile, Research ) down 4.7 percent on Tuesday, even as ADM posted a 42 percent jump in quarterly profit.[12]
CHICAGO, April 29 (Reuters) - Archer Daniels Midland Co (ADM.N: Quote, Profile, Research ), a leading U.S. food processor and ethanol producer, said Tuesday that quarterly earnings rose 42 percent.[19]
NEW YORK (Associated Press) - Food processor Archer Daniels Midland reports earnings for the 2008 fiscal third quarter on Tuesday.[4]
In what company CEO Patricia Woertz called a fiscal quarter of "unprecedented volatility," Archer Daniels Midland Company (ADM) officials on Tuesday reported a 42% growth in profits in the quarter ending March 31, according to a company report.[9] April 29 (Bloomberg) -- Archer Daniels Midland Co., the world's largest grain processor, said third-quarter profit rose 42 percent, topping analyst estimates, as it increased commodity trading and soybean crushing.[6] CHAMPAIGN, Ill. (AP) — Archer Daniels Midland says its fiscal third-quarter profits rose 42 percent as the agricultural processor took advantage of a volatile commodities market.[1]
Archer Daniels Midland Co.' s top executive expressed optimism about global food supplies, despite the soaring prices that have driven shortages in some regions. She also defended the biofuels industry against criticism that it is fanning food inflation.[20] Archer Daniels Midland (nyse: ADM - news - people ) cited increased volatility and sharp rises in commodity prices as reason for the increased revenue.[11] Amidst all the political noise, you could hardly hear the solid results reported by Archer Daniels Midland (NYSE: ADM ) today.[21]
Archer Daniels Midland ( ADM ) turned in a fantastic quarter this morning (see transcript ).[8]
Archer Daniels' quarterly net sales and other operating income rose 64% to $18.71 billion from $11.38 billion in the previous-year quarter.[7] Net sales and other operating income increased 64% to $18.7 billion for the quarter ended March 31, 2008 and 51% or $16.2 billion for the nine months.[8]
Net sales and other operating income for the segment was $1.40 billion, up from $968 million a year ago.[7] Net sales and other operating income for the period totaled $48.03 billion, up 51% from $31.80 billion in the prior-year period.[7]
Net sales for the quarter rose 70% to $12.47 billion from $7.34 billion in the same period last year.[7] Net sales in the nine months rose 51 percent to $48.0 billion from $31.8 billion.[10]
ADM, the third-largest U.S. ethanol producer, with 1.07 billion gallons of annual capacity, said profit from corn bioproducts, which includes ethanol refining, fell 38 percent to $74 million.[6] For one, some people may be disappointed with the results we're seeing in corn processing, which is arguably more of a "core" business than ADM's ag-services arm. The company spins this reversal of profit prominence as a demonstration of the firm's balanced global operations, and I tend to agree. We're right in the middle of Farm Bill Follies, in which all sorts of humongous handouts get shoehorned into this $300 billion beast.[21] Oilseeds Processing operating profit increased $52 million for the quarter and $119 million for the nine months as global demand for protein and oil improved.[8] Segment wise, oilseeds processing reported third-quarter operating profit of $237 million, up from $185 million in the prior-year quarter, boosted by continuing strong global demand for protein meal and oil.[7]
Profitability in the production, processing and financial management sectors led to an operating profit of $913 million for the quarter, up 54% from a year ago's $593 million.[9]
ADM's third quarter earnings increased 42% to $517 million, thanks to higher profits from its oilseeds processing and agricultural services divisions.[22] The quarter's results were driven by an almost sevenfold increase in profits in ADM's Agricultural Services division, from $46 million to $366 million.[1]
The firm's agricultural services segment was simply smoking in the quarter, with operating profit up eightfold. The ADM trading desk played this volatile market like a Stradivarius violin.[21] "Agricultural services operating profit increased as highly volatile market conditions provided exceptional merchandising opportunities. Other segment operating profit increased due to improved margins and increased financial services income."[9]
"Oilseeds processing operating profit increased as global demand for protein and oil improved.[9] Earnings from crushing oilseeds rose 28 percent to $237 million as "strong'' global demand for protein meal and vegetable oil boosted processing margins in North America and South America and increased worldwide crushing volumes, ADM said.[6] ADM is the country's second-largest producer of the fuel additive. The company said profit in its other businesses, which include wheat and cocoa processing, increased 24.3 percent to $138 million.[1]
As an investment, ADM's fortunes have turned not on biofuels (corn processing, which includes HFCS and ethanol, was only 20% of profits in the most recent quarter), but from the world's demand for food. That will not change anytime soon and a very real argument can be made that the increases we have seen are only the beginning of what is to come.[8] With everyone from state governors to corporate leaders like Tyson Foods ' (NYSE: TSN ) CEO lashing out against ethanol subsidies, the winds are blowing pretty stiffly against ethanol producers at the moment. I don't see this as a reason to run from ADM. A look at future iterations of biofuels should convince you that this alternative source isn't going anywhere, and Archer is well-positioned to profit over the long haul.[21]
The suddenly staggering cost of transporting food to markets due to high oil prices has more to do with increased food costs than biofuels. Should we get rid of the 51 cent subsidy for ethanol? Don't ask ADM, they do not receive it.[8] Wheat prices are soaring not because of biofuels but because of demand in China and India for the commodity and poor harvests in Australia and Europe. Woertz, when she took over at ADM, predicted the situation we are in. She laid out the scenario then that as nations developed, the demand for protein-based products would increase exponentially. Her excitement for taking the ADM job at the time was due to its position in the food chain for those products. She has been 100% accurate.[8] ADM is one of the world's largest shippers and processors of grains, seeds and other commodities, and its earnings reflected the rise in global demand driven by changing eating patterns, especially in emerging markets. Her comments come at a time when soaring global commodity prices have created concerns about food shortages and price inflation, with inventories of some crops at historical lows.[15]
"ADM management indicated that corn-derived ethanol margins have continued to improve despite high corn prices, and on the back of a rapid rise in gasoline and ethanol prices. It would seem that fears of vast ethanol oversupplies have proven to be false, thus far." Driscoll said a significant drop in crude oil prices is one of the biggest risks to his earnings estimates, as declining crude oil values would impact the company's ethanol prices and margins, as well as other areas of the business, such as its biodiesel operations.[4] Analysts, on average, expected 70 cents, according to Reuters Estimates. The futures trading desk in its agricultural services division helped boost earnings, even as record corn prices hurt profits from selling sweeteners, starches and ethanol.[12]
Profit in the agricultural-services unit, which stores grain and transports it to market, surged almost eightfold to $366 million as rising demand pushed wheat, soybean and corn prices to records.[6] Corn prices averaged 28 percent higher during the quarter than a year earlier and reached a record $6.24 a bushel today because of demand for livestock feed and biofuels.[6] To retreat from biofuels is wrong. It's foolish. It's dangerous. It's an empty gesture. It won't fill anyone's stomach. It won't fill anyone's gas tank," she added. About 25 percent of U.S. corn is turned into ethanol, according to U.S. Agriculture Department estimates, and corn futures have risen 70 percent in the past year and hit record highs on increased demand to use the grain both as food and fuel.[12] Rising demand for corn for ethanol has literally crowded out wheat and soy acreage in the U.S. for the past two years as farmer took the market signal and planted more corn, that that has caused caused wheat and soy prices to rise.[8]
Ask Exxon ( XOM ) and the refiners. They are the recipients of the tariff, not ethanol producers. It is technically a "blending credit" given to refiners for mixing ethanol in gas. Why keep it? Consider this: The ethanol blenders' credit cost taxpayers about $3 billion last year. It reduced crop price supports by about $6 billion and our oil import bill by another $15 billion.[8] The industry benefited from about $3.2 billion in federal tax breaks last year, the biggest energy-related tax break ever, according to an April report from the Energy Information Administration. Biofuel is made from the same grains that people eat and feed to their livestock. With the price of grain sharply higher this year, many are now questioning whether subsidizing the ethanol industry is really in the country's best interest.[16]
Soybean prices averaged 82 percent higher in the quarter and reached a record $15.8625 a bushel on March 3 in Chicago after U.S. farmers reduced plantings last year to the lowest in more than a decade.[6]
After payment of preferred dividends, the company's net income available to common shareholders for the first quarter was $270 million, or $2.10 per share, compared to $6 million, or $0.05 per share in the prior-year quarter.[7] On a sequential basis, earnings for the quarter increased from $473 million, or $0.73 per share in the preceding second quarter.[7] The results beat estimates of analysts surveyed by Thomson Financial, who expected earnings of 70 cents per share on revenue of $13.45 billion.[1] On average, nine analysts polled by First Call/Thomson Financial expected the company to earn $0.70 per share for the third quarter.[7]
Pat Woertz, chairman and chief executive of the U.S. agribusiness company, cited improving wheat supplies and harvest prospects for other crops in Europe and South America. "I think the supply fundamentals of world crops are improving," Ms. Woertz said on a conference call with analysts after the U.S. company reported a 42% rise in its net profit for its fiscal third quarter ended.[20] The division also includes a large grain-trading operation that tries to profit from shifts in commodity prices and buffers ADM against price spikes. "The volatility this quarter was unprecedented; it was higher than we had ever seen before in any crop," Chief Executive Officer Patricia Woertz said during a conference call with Wall Street analysts.[14]
Patricia Woertz, ADM'''s chairman and CEO, said in a conference call with analysts that the company should be able to continue to capitalize globally on market volatility. '''We try to describe the current situation as continuing volatility'''markets continue to move and we'''re still seeing quarters where we'''ve not seen them like this before,''' Woertz said.[10]
"We look cautiously further out as it is still unclear how quickly the industry will absorb the additional capacity scheduled to come into production,'' Mills said. Woertz said ADM won't retreat from its ethanol business amid recent calls by some lawmakers and livestock company executives for the U.S. to reduce support for biofuel production.[6] ADM also launched a staunch defense of the biofuels industry in the wake of renewed criticism that it is stoking food price inflation. Woertz said any attempts to reverse the state support for renewable fuels - such as the corn-based ethanol produced by ADM - would have "unintended consequences" on food and energy supplies. "I actually find it sad and even a little ironic that this attack on biofuels is directed to the one alternative we have today," she said.[15]
There are growing calls for the United States to cut a tax credit of 51 cents a gallon for ethanol blenders and eliminate a tariff on ethanol imports. "I actually find it sad, and even a little ironic, that this attack on biofuels is directed to the one alternative we have today," Chairman and CEO Patricia Woertz said on a conference call with analysts.[12] The remarks from Woertz on a conference call with analysts came a day after the head of Tyson Foods Inc. (TSN) called for ethanol subsidies to be swept away.[18]
Total project costs were expected to remain fairly steady at $2.6 billion, compared with initial estimates of $2.5 billion, the company said on a conference call with analysts. "This period of unprecedented growth has proven to be challenging," said John Rice, executive vice president of commercial and production. [23] Profits at the unit climbed from $46 million to $366 million in the quarter. Earnings from its oilseed-processing division also rose, but fell at the corn-processing division in a reflection of higher input costs.[15] Income taxes increased $45 million for the quarter and $103 million for the nine months due principally to increased pretax earnings. That was partially offset by a lower effective tax rate for the quarter due to changes in the geographic mix of earnings. AP Business Writer Sara Lepro in New York contributed to this report.[1] Financial earnings increase $19 million for the quarter on higher brokerage services income, lower insurance loss provisions, marketable securities gains and higher earnings from managed fund investments.[7]
Net income for the quarter soared to $289 million from $14 million a year ago.[7]
Archer Daniels' selling, general and administrative expenses for the third quarter were recorded at $378 million, up from $294 million in the previous-year quarter.[7] Archer Daniels Midland contributed more than $700,000 toward lobbying the federal government in 2007, according to filings provided through the Lobbying Disclosure Act.[16] CHICAGO, April 29 (Reuters) - Archer Daniels Midland Co (ADM.N: Quote, Profile, Research ) said on Tuesday that the opening of its new ethanol plants, a cocoa plant and other projects will be delayed until 2009 and 2010 due to weather and delayed steel shipments.[23]
ADM fell $1.84, or 3.9 percent, to $45.58 as of 4:15 p.m. in New York Stock Exchange composite trading after the company announced delays in completing some ethanol projects. [6] ADM shares dropped 3.9 percent to close at $45.58 Tuesday. AP Business Writer Sara Lepro in New York contributed to this report.[14]
Earnings were above the average estimate of analysts of 70 cents a share, but ADM shares were down 4.5% at $45.29 in recent trading.[15] The mean estimate of analysts polled by Thomson Reuters was for third-quarter earnings of 70 cents a share.[11]
ADM outperformed the estimate of analysts polled by Zacks Investment Research of 72 cents per diluted share.[10]
Shares of ADM closed at $45.58 Tuesday, down $1.84 from Monday'''s close of $47.42.[10] The shares have gained 17 percent in the past year and reached a record $48.95 April 22.[6]
Crushing and origination results were up $78 million from the same period last year on account of improved processing margins in North and South America, in addition to higher worldwide crushing volumes.[7] Between ADM's corn and oilseeds processing businesses, operating earnings came in a bit lower than last year. While pricing perked up for many products, biofuels results were a bummer on both sides of the Atlantic.[21]
The company attributed the increase in profit from the same period last year to higher segmental operating profit, partially offset by increased corporate expenses principally related to LIFO inventory valuations and minority interest elimination.[7] All segments combined for a 54% improvement in operating profits, most of which made it to the bottom line. The result was a big beat, but this agricultural apple was still bruised by the Street.[21]
The gains came even as higher energy and corn costs hurt profits at the firm's ethanol-producing corn processing business and weaker biodiesel margins in Europe hurt results for that fuel.[22] At a time when parts of the world are facing food riots, Big Agriculture is dealing with a different sort of challenge: huge profits. Grain-processing giant Archer-Daniels-Midland Co. said its fiscal third-quarter profits jumped 42%, including a sevenfold increase in net income in its unit that stores, transports and trades grains such as wheat and corn, as well as soybeans. Monsanto Co., maker of seeds and herbicides, Deere & Co., which builds tractors, combines and sprayers, and fertilizer maker Mosaic Co. all reported similar windfalls in their latest quarters.[24] Much of the soar in profits is due to the rise in corn prices, company officials say.[9] ANALYST TAKE: The biggest concern for Citi Investment Research analyst David Driscoll has been the effect of rising corn prices on the company's corn processing operations, which, he said, represents the largest and most important segment for the company.[4]
Corn prices set a new record high above $6 a bushel during the quarter.[14] The average price of wheat more than doubled from the year- earlier quarter and reached a record $13.495 a bushel on Feb. 27 as importers increased purchases amid concern the world's growers wouldn't produce enough to meet demand.[6] The company expects improved ethanol prices in the current quarter as demand continues to grow, Mills said.[6] The company, one of the largest ethanol producers in the U.S., is faced with the issue of rising price of corn.[7] The company, the operator of more than 350 grain elevators globally, benefited from last year's record U.S. corn crop, which the Department of Agriculture estimated at 13.074 billion bushels.[6] The division includes the company's grain transportation and handling services, which continues to move last year's large corn crop and other commodities in high demand.[14]
WHAT'S AHEAD: Driscoll forecasts above-normal profitability within the company's agricultural services business for at least a couple more quarters. He said the company should also benefit from improving conditions in the North American high-fructose corn syrup market, where ADM is a leading producer.[4]
The year-ago quarter's results include a gain of $39 million from business disposals.[7] Wheat, cocoa and malt operations improved $8 million for the quarter, mainly due to favorable risk management results in wheat and malt partially offset by lower cocoa processing margins.[7] Refining, packaging, biodiesel and other results declined $16 million in the quarter, due primarily to weaker biodiesel margins in Europe.[7]
The year-ago results for refining, packaging, biodiesel and other include a gain of $14 million from business disposals.[7]
Sales for the three-month period ended March 31 rose 64% to $18.71 billion from $11.38 billion in the year-earlier quarter. [11] Wall Street analysts had a consensus revenue estimate of $13.45 billion for the quarter.[7]
s third quarter net earnings grew 42 percent, beating analysts''' estimate, on trading gains and its ability to capitalize on high commodities prices, but it ultimately disappointed Wall Street as the stock drooped nearly 4 percent at Tuesday'''s close.[10] Increases in sales prices and volumes for the quarter and nine months of lysine also favorably impacted bioproducts earnings," says the company.[2] "Selling prices increased due principally to sharp rises in commodity prices," according to a company report. Other market factors did have a role in the ADM boom.[9]
'Volatility in commodity markets presented unprecedented opportunities. Once again, our team leveraged our financial flexibility and global asset base to capture those opportunities to deliver shareholder value, ' ADM CEO Patricia Woertz said in a release.[22] Volatile crop markets are creating "unprecedented'' profit opportunities, Chief Executive Officer Patricia Woertz said in the statement.[6]
The increase in profit was due to improved margins and higher financial services income.[7] Andrews rates the shares "overweight'' and had forecast profit of 83 cents a share.[6] That was as the Decatur-based company said third-quarter profits are up 42 percent as the food processor took advantage of a volatile commodities market.[3] The growth in profit was attributable to continuing enhanced merchandising and handling margins caused by the highly volatile global grain markets and favorable risk management results.[7]
"Ag Services drove the results, more than offsetting cost- related weakness in ethanol and high-fructose corn syrup,'' Morgan Stanley analysts led by Vincent Andrews said today in a report.[6] We'll consume about 3.1 bil. bu. of corn for ethanol during the 07/08 marketing year (Sept. -Aug.) and another 4 bil. next year. To say this has no impact on wheat or soy prices is lunacy.[8] Food processors say the vast amount of corn used to produce ethanol is driving up the cost to make feed for livestock.[14] Subsidized food burning makes no economic sense and is very harmful to the environment is many way. It's very good for ADM and other ethanol producers and for the overall economy of the Corn Belt, so it must be good! Stop the mandates.[8]
Ethanol futures traded in Chicago averaged 4.5 percent higher in the quarter than a year earlier. [6] "Our U.S. elevator and river system locations continue to benefit from higher capacity utilization rates and improved storage and handling margins, particularly on export-related business as last crop year's large North American harvest continued to work through our system,'' Chief Financial Officer Steven Mills said during a conference call with analysts and investors.[6] We also have to note that the $15 billion we save on our oil bill is $15 billion that stayed in the U.S. and did not find it way to the Middle East.[8] Revenue surged more than 64 percent to $18.71 billion, from $11.38 billion.[14]
SOURCES
1. The Associated Press: ADM 3Q profit jumps 42 pct in volatile commodities markets
2. Your Spot for Futures Trading, Commodities Info, Ag News, Successful Farming Tips More
3. WJBC: The Voice Of McLean County
4. Earnings Preview: Archer Daniels Midland Co.
5. Archer Daniels Midland profit up 42 percent on commodity surge -- chicagotribune.com
6. Bloomberg.com: U.S.
7. Archer Daniels Midland Q3 Profit Surges 42% - Update [ADM] - RTTNews, Today's Top Stories, Global Newswires, ToDay's Top News,Global Business news .
8. Archer Daniels Midland: Profiting More From Food Than Fuel - Seeking Alpha
9. ADM profits explode on corn prices, farm margins
10. ADM posts strong third quarter earnings on higher sales prices
11. Archer Daniels Midland 3Q profit tops analyst estimates; revenue rises 64% - Forbes.com
12. UPDATE 3-ADM 3rd-qtr profit rises; shrs off on ethanol worry | Industries | Consumer Goods & Retail | Reuters
13. Archer Daniel Reports Q1 Profit Surge, But Uncertainty Drives Down Shares
14. The Associated Press: ADM 3Q profit jumps 42 pct in volatile commodities markets
15. ADM Optimistic On Global Food Supplies; Defends Ethanol
16. UPDATE: Archer Daniels Defends Ethanol In Wake Of Rising Food Costs
17. ADM's CEO defends biofuels amid rising food prices | Markets | Markets News | Reuters
18. ADM CEO: Any Retreat From Biofuels Is Foolish
19. ADM quarterly profit rises 42 pct | Markets | Markets News | Reuters
20. Free Preview - WSJ.com
21. Archer's Blazing Arrow
22. Illinois Farm Bureau - ADM 3Q Profits Up 42 Percent
23. UPDATE 1-ADM ethanol projects delayed by weather, steel | Markets | Markets News | Reuters
24. Free Preview - WSJ.com
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