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Letter to Shareholders from ADM Chairman, CEO and President Patricia A. Woertz

Dear Shareholders:

Last year, ADM announced that our company would change its financial reporting schedule to align with the calendar year. This shift will produce considerable efficiencies and cost-savings over time, as it synchronizes our fiscal year with our tax and regulatory year.

The changeover required an interim, six-month fiscal year: 2012.5. While short, and notable for the most severe drought in recent U.S. history, 2012.5 was a highly productive period.

The drought reduced both the volume of North American crops available to us and water levels on the Mississippi River, impacting our origination and transportation businesses. At the same time, ethanol industry margins were depressed throughout the fiscal year, which hurt the overall profitability of our Corn Processing business. Our teams rose to the challenges—using our global asset network to prepare for, and manage through, tough conditions. We posted adjusted earnings per share of $1.10 for the two quarters ended Dec. 31, compared with $1.09 for the same six-month period one year earlier.

Given this unfavorable environment, I believe our 2012.5 performance demonstrates that the steps we are taking to better manage our business are working. Our focus on the 3C’s—capital, cost and cash—is improving our ability to deliver the best possible results today while positioning us to generate better returns on invested capital in months and years ahead.

Improved performance from effective planning, execution
Strong preparation, coordination, communication and day-to-day execution—along with effective risk-management—were key to the stronger results we began to deliver by the second quarter of 2012.5. Those results were highlighted by improved performance from every geographic region in our Oilseeds Processing business unit; better-than-expected profits in Agricultural Services, where our grain and transportation groups did a great job of anticipating crop availability and optimizing regional operations accordingly; and solid contributions from our sweeteners and starches business. At the same time, our ethanol team conducted a thorough review of its operations and took action to help improve the business’s overall margins.

Ongoing efforts in 3C’s position company to deliver greater value
As we overcame difficult circumstances, we continued to advance efforts to improve returns. Our team:

  • Freed up more than $1 billion in cash. Through our Billion Dollar Challenge, ADM colleagues submitted more than 1,500 suggestions on how to free up cash for higher-value uses. Inventory reductions, sales of $570 million in non-core assets, and improvements in financing collateral requirements contributed to our reaching this goal months ahead of schedule. We are now hard at work identifying the next $1 billion. In addition, between July 1 and Dec. 31, we significantly diversified our portfolio of financings, which will enhance our ability to manage through increases in working-capital requirements created by commodity-price volatility. Our balance sheet and liquidity position remain exceptionally strong despite the higher commodity price environment.
  • Demonstrated greater discipline in capital spending. By carefully evaluating every project and opportunity to ensure they are aligned with our criteria for returns on invested capital, we are deploying capital more prudently. In 2012.5, most of our growth capital was invested outside the U.S. as we completed a large soybean crush facility in Paraguay in time for an anticipated record harvest; acquired a port in Belem, Brazil, that will enable us to improve our regional export capacity and expand fertilizer operations; and launched three joint ventures in partnership with Wilmar International Ltd., a premier Asian agricultural processor.
  • Acted decisively to reduce costs. We realized more than $150 million in annual run-rate savings, in large part from a global organizational restructuring. In addition, our Corn and Oilseeds Processing business units reduced costs 5 percent and 7 percent, respectively, while costs in Ag Services rose just 3 percent—impressive given the lower throughput due to the drought. We also reduced corporate SG&A costs. Each of these results represented significant actions to enable ADM to achieve true cost leadership in our industry and reduce the break-even point for our operations.

Taken together, our success in these three key areas positions ADM to continue driving improved shareholder returns while advancing our strategy, which is to increase our origination capabilities in key supply regions; increase our ability to import and process crops in high-demand regions; and optimize our operations in many mature markets, including North America and Western Europe.

I am extremely proud of the resilience, resourcefulness and commitment to results our teams exhibited throughout 2012.5. I am also pleased that, at the end of the year, ADM’s record of quarterly dividend payments reached 325—81 consecutive years of value-creation—and we increased the dividend 8.6 percent, or 1.5 cents per share.

This commitment to value-creation will be evident in the actions we take to continue improving returns in 2013 and beyond. I am truly excited about the potential for ADM to build on the accomplishments of 2012.5, and I look forward to having a great deal of additional progress to share with you next year at this time.

Sincerely,

Patricia A. Woertz
Chairman, CEO and President

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