Commodities giant Archer Daniels Midland has booked a drop in full-year profits as record corn prices hit earnings in the fourth quarter.
In the three months to the end of June, net profit fell 25% to US$284m, while operating profits slid 40.9% to $544m.
Sales in the period, however, reached $22.67bn, a 0.8% increase on the prior-year.
In the firm's oilseed processing segment, operating profit dropped 26.3% to $331m, while ADM's corn processing division saw operating profit slide 39.9% to $74m.
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ADM Reports Fourth Quarter 2012 Earnings of $284 Million or $0.43 per Share
Adjusted EPS of $0.38, down from year-ago quarter
Segment operating profit declined on negative ethanol margins and weaker Ag Services results
For the full fiscal year, dividends and share repurchases of nearly $1 billion
DECATUR, Ill.--(BUSINESS WIRE)--Archer Daniels Midland Company (NYSE: ADM) today reported financial results for the quarter ended June 30, 2012. The company reported net earnings for the quarter of $284 million, or $0.43 per share, down from $0.58 per share in the same period one year earlier. Adjusted earnings per share1 were $0.38. Segment operating profit1 was $544 million.
"In a challenging fourth quarter, solid results from our global oilseeds business, particularly in South America, were more than offset by negative U.S. ethanol margins and weaker U.S. merchandising results"
For the fiscal year ended June 30, 2012, net earnings were $1.2 billion, or $1.84 per share. Adjusted earnings per share were $2.25. Segment operating profit was $2.5 billion.
"In a challenging fourth quarter, solid results from our global oilseeds business, particularly in South America, were more than offset by negative U.S. ethanol margins and weaker U.S. merchandising results," said ADM Chairman and CEO Patricia Woertz.
"As we look ahead, while drought has reduced the potential size of the U.S. corn crop, we are tracking the development of other crops in North America and Europe," added Woertz. "While U.S. crop carryouts are expected to be low, we have an experienced business team to manage through this environment.
"Conditions like these demonstrate the vital role of our global agribusiness. As weather has regional effects on crops, we respond by working with our customers to provide the best alternatives to meet their needs from all growing regions of the world."
Fourth Quarter 2012 Highlights
Adjusted EPS of $0.38 excludes a LIFO credit of $0.05 per share.
Oilseeds Processing performed well; the decline of $118 million was primarily due to the absence of significant favorable timing effects and weaker results in cocoa and other.
Corn Processing results decreased $48 million as negative ethanol margins more than offset improved results from sweeteners and starches.
Agricultural Services profit fell $222 million, as tight U.S. crop supplies impacted both export volumes and U.S. merchandising results.
Other Financial results increased $11 million on lower insurance loss reserves.
ADM returned $160 million to shareholders in the quarter. For the fiscal year, ADM returned nearly $1 billion to shareholders.
Adjusted EPS of 38 Cents, down 31 Cents
Adjusted EPS decreased primarily due to lower segment operating profit, partially offset by lower corporate expenses.
The effective tax rate for the quarter was 30 percent, resulting in an annual rate of 30 percent.
Oilseeds Earnings Down on Absence of Year-Ago Timing Gains and Weakness in Cocoa and Other
Oilseeds operating profit in the fourth quarter was $331 million, down $118 million from the same period one year earlier.
Crushing and origination operating profit was $150 million, down $76 million from the year-ago quarter. Significantly improved South American soybean and origination results were offset by lower North American softseeds crushing margins, and the absence of favorable mark-to-market timing effects in Europe that benefited the prior year. The net decrease in results from timing effects was approximately $70 million.
Refining, packaging, biodiesel and other generated a profit of $84 million for the quarter, down $6 million mainly on weaker biodiesel results from Europe.
Cocoa and other results declined $19 million, primarily due to weaker cocoa press margins in the quarter.
Oilseeds results in Asia for the quarter were down $17 million from the prior year's fourth quarter, principally reflecting ADM's share of the results from its equity investee Wilmar International Limited.
Corn Processing Results Lower on Negative Ethanol Margins
Corn processing operating profit was $74 million, a decrease of $48 million from the same period one year earlier.
Sweeteners and starches operating profit increased $124 million to $135 million, amid continued good sweetener export demand and higher average selling prices. The year-ago quarter's results were negatively impacted by higher net corn costs related to the timing effects of economic hedges, whose mark-to-market gains were recognized earlier in the fiscal year.
Bioproducts results in the quarter decreased $172 million to a loss of $61 million. Significantly weaker ethanol results more than offset improvements in other bioproducts businesses. Industry ethanol replacement margins were negative throughout the quarter, as the industry supply continued to exceed demand.
Agricultural Services Results Fall on Lower U.S. Exports
Agricultural Services operating profit was $123 million, down $222 million from the same period one year earlier.
Merchandising and handling earnings fell $152 million to $30 million due to lower U.S. merchandising results and lower U.S. crop supplies, which reduced North American export volumes. Results for the quarter also reflected an increase in loss provisions of approximately $40 million.
Transportation results increased $5 million to $17 million.
Excluding last year's $78 million gain related to ADM's share of Gruma S.A.B. de C.V.'s sale of assets, Milling and other results were steady.
Other Financial Results Slightly Up
In the fourth quarter, operating profit from ADM's Other Financial businesses was $16 million, up $11 million from the same period one year earlier. The improvement was primarily a result of lower captive insurance loss reserves, and better results at ADM Investor Services.
Current Landscape Assessment
The smaller South American spring harvest means that the U.S. is currently the primary global supplier of soybeans and meal. U.S. corn and soybean yields have been reduced by drought; wheat was less affected. Generally high crop prices will encourage large planted acreage in South America. Global protein meal demand remains good. Poor margins have lowered U.S. ethanol industry production which is reducing inventories. Demand for corn sweeteners remains solid, supported by exports.
Conference Call Information
ADM will host a conference call and audio webcast Tuesday, July 31, 2012, at 8 a.m. Central Time to discuss financial results and provide a company update. A financial summary slide presentation will be available to download approximately 60 minutes prior to the call.
To listen to the call via the Internet or to download the slide presentation, go to www.adm.com/webcast. To listen by telephone, dial (888) 522-5398 in the U.S. or (706) 902-2121 if calling from outside the U.S. The access code is 95403712.
A replay of the call will be available from Aug. 1, 2012 to Aug. 6, 2012. To listen to the replay by telephone, dial (855) 859-2056 in the U.S. or (404) 537-3406 if calling from outside the U.S. The access code is 95403712. To listen to the replay online, visit www.adm.com/webcast.
About ADM
For more than a century, the people of Archer Daniels Midland Company (NYSE: ADM) have transformed crops into products that serve vital needs. Today, 30,000 ADM employees around the globe convert oilseeds, corn, wheat and cocoa into products for food, animal feed, industrial and energy uses. With more than 270 processing plants, 420 crop procurement facilities, and the world's premier crop transportation network, ADM helps connect the harvest to the home in more than 160 countries. For more information about ADM and its products, visit www.adm.com.
Original source: Archer Daniels Midland
