Archer Daniels Midland Company Third-Quarter Earnings up $ 418 Million
Archer Daniels Midland Company Third-Quarter Earnings up $ 418 Million
5/4/2010
DECATUR, Ill.--(BUSINESS WIRE)--Archer Daniels Midland Company (NYSE:ADM) today reported net earnings of $ 421 million and segment operating profit of $ 696 million for the quarter ended March 31, 2010—increases of $ 418 million and $ 442 million, respectively, from the Company’s totals for the same period one year earlier.
- ADM earned $ 0.65 diluted EPS for the third quarter, versus last year’s breakeven third quarter.
- Profit in ADM’s Oilseeds Processing segment improved $ 181 million due to both higher margins and increased volumes.
- Corn Processing profit increased $ 55 million on stronger bioproducts results.
- In the Agricultural Services segment, profit increased $ 44 million as ADM saw a good global supply of grains and oilseeds and modestly improving demand.
- Other business units’ operating profit increased $ 162 million on improved results from flour milling operations and the absence of last year’s currency-derivative losses of equity investee, Gruma S.A.B. de C.V.
“In the third quarter, the ADM team did a good job managing our large, flexible origination and processing network to meet global demands,” said Chairman of the Board and Chief Executive Officer Patricia Woertz. “We also completed startup of our Columbus ethanol dry mill and began shipments from our renewable plastics plant in Clinton, and we are commissioning our propylene glycol plant in Decatur.”
Financial Highlights
(Amounts in millions, except per share data)
| Quarter Ended March 31 | Nine Months Ended March 31 | ||||||||||||||||||||||||
| 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||||
| Segment operating profit | $ | 696 | $ | 254 | $ | 442 | $ | 2,440 | $ | 2,245 | $ | 195 | |||||||||||||
| Net earnings | $ | 421 | $ | 3 | $ | 418 | $ | 1,484 | $ | 1,626 | $ | (142 | ) | ||||||||||||
| Diluted earnings per share | $ | 0.65 | $ | 0.00 | $ | 0.65 | $ | 2.30 | $ | 2.52 | $ | (0.22 | ) | ||||||||||||
| Average shares outstanding | 645 | 644 | 644 | 644 | |||||||||||||||||||||
A summary of segment operating profit and net earnings is as follows:
|
| Quarter ended | Nine months ended | |||||||||||||||||||||||||||||
| March 31 | March 31 | ||||||||||||||||||||||||||||||
| 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||
| Oilseeds Processing | $ | 405 | $ | 224 | $ | 181 | $ | 1,041 | $ | 1,053 | $ | (12 | ) | ||||||||||||||||||
| Corn Processing | 104 | 49 | 55 | 582 | 196 | 386 | |||||||||||||||||||||||||
| Agricultural Services | 165 | 121 | 44 | 490 | 1,011 | (521 | ) | ||||||||||||||||||||||||
| Other | 22 | (140 | ) | 162 | 327 | (15 | ) | 342 | |||||||||||||||||||||||
| Segment operating profit | 696 | 254 | 442 | 2,440 | 2,245 | 195 | |||||||||||||||||||||||||
| Corporate | (162 | ) | (111 | ) | (51 | ) | (405 | ) | 201 | (606 | ) | ||||||||||||||||||||
| Earnings before income taxes | 534 | 143 | 391 | 2,035 | 2,446 | (411 | ) | ||||||||||||||||||||||||
| Income taxes | (118 | ) | (140 | ) | 22 | (561 | ) | (818 | ) | 257 | |||||||||||||||||||||
| Net earnings including noncontrolling interests | 416 | 3 | 413 | 1,474 | 1,628 | (154 | ) | ||||||||||||||||||||||||
| Less: Net earnings (losses) attributable to noncontrolling interests |
(5 |
) |
- |
(5 |
) |
(10 |
) |
2 |
(12 |
) | |||||||||||||||||||||
| Net earnings | $ | 421 | $ | 3 | $ | 418 | $ | 1,484 | $ | 1,626 | $ | (142 | ) | ||||||||||||||||||
Discussion of Operations
Net earnings for the third quarter increased $ 418 million due to a $ 442 million pretax increase in segment operating profit, a $ 30 million after-tax favorable impact from changing LIFO inventory valuations, and lower income tax expense, partially offset by debt-buyback costs of $ 47 million, after tax. Segment operating profit for the year-ago quarter included $ 132 million of after-tax currency-derivative losses from the Company’s equity investee, Gruma S.A.B. de C.V. Last year’s third-quarter income tax expense included $ 97 million of deferred tax charges related to the restructuring of ADM’s investment in Wilmar International, Ltd.
Net earnings decreased 9 percent to $ 1.5 billion for the nine months ended March 31, 2010, due to a $ 315 million after-tax negative impact from changing LIFO inventory valuations, and debt-buyback charges of $ 47 million, after tax, partially offset by a $ 195 million pretax increase in segment operating profit. The Company’s effective income tax rate for the nine months declined to 27.6 percent, compared to 33.4 percent for the comparable period last year, due to changes in the geographic mix of pretax earnings and the absence of last year’s $ 97 million charge related to the restructuring of ADM’s investment in Wilmar International, Ltd.
Oilseeds Processing Operating Profit
Profit in ADM’s Oilseeds Processing segment increased $ 181 million for the quarter and decreased $ 12 million for the nine months.
Crushing and origination results increased to $ 272 million for the quarter. With last year’s short South American soybean crop, ADM’s North American operations were able to run at higher utilization rates and realize improved margins and volumes.
Refining, packaging, biodiesel and other results increased $ 14 million to $ 66 million for the quarter. Improved demand for biodiesel in Europe and South America helped drive these results.
Oilseeds results in Asia were $ 67 million for the quarter, as results of ADM’s equity investee, Wilmar International, Ltd., continued to be strong. Last year’s third quarter reflected a gain of $ 18 million related to the sale of an equity investment.
Corn Processing Operating Profit
Corn Processing results increased $ 55 million for the quarter and $ 386 million for the nine months.
Sweeteners and starches operating profit decreased $ 101 million from the prior year to $ 45 million. This decrease reflects lower average selling prices that were only partially offset by lower net corn costs. These net corn costs were significantly impacted by mark-to-market losses and hedge accounting ineffectiveness related to corn futures.
Bioproducts profit in the quarter was up significantly from last year’s loss due to lower net corn costs and improved ethanol margins resulting from good ethanol demand driven by favorable gasoline blending economics. Results also reflected stronger lysine sales volumes and margins.
During the third quarter, ADM shipped the first commercial product from its joint-venture Mirel™ bioplastics plant and began commissioning its propylene glycol plant. Startup was completed at ADM’s Columbus ethanol dry mill, and work on the Cedar Rapids ethanol dry mill is going well, with the plant on-track to start up this summer.
Agricultural Services Operating Profit
Agricultural Services results increased $ 44 million for the quarter and decreased $ 521 million for the nine months.
In the quarter, ADM saw a good global supply of grains and oilseeds and modestly improving demand.
Merchandising and handling profit improved as global soybean demand was met primarily with U.S. supplies, due to last year’s short South American crop, giving ADM good asset utilization and margins. Earnings from transportation operations declined on lower barge-freight rates and reduced capacity utilization caused by weak demand.
Other Operating Profit
Results from ADM’s Other business units increased $ 162 million for the quarter and $ 342 million for the nine months.
Other processing businesses had higher results. Last year’s third quarter reflected a loss of $ 212 million for ADM’s share of foreign-currency-derivative losses of equity investee, Gruma S.A.B. de C.V. This quarter’s other processing earnings reflected improved results from ADM’s flour milling operations. Other processing earnings for the quarter include mark-to-market losses of $ 63 million related to certain forward sales commitments accounted for as derivatives, offsetting gains recorded in the preceding two quarters.
Other financial results in the quarter increased $ 30 million due primarily to the absence of losses experienced last year in managed fund investments and captive insurance operations.
Corporate Results
Corporate results decreased $ 51 million for the quarter—including $ 75 million in pretax costs related to debt buyback—and $ 606 million for the nine months. Declining commodity prices generated a $ 43 million decrease in ADM’s LIFO inventory valuation reserves this quarter, compared to a $ 5 million increase a year ago. For the nine months, the change in LIFO inventory valuation reserves resulted in a credit of $ 65 million this year, compared to a $ 571 million credit last year.
New Accounting Standards
Certain amounts in the prior year’s Consolidated Statement of Earnings, Segment Operating Analysis, Summary of Financial Condition, and Summary of Cash Flows have been restated and presentation formats have been modified to apply the requirements of new accounting standards ASC Topic 810, Consolidation and ASC Topic 470-20, Debt with Conversion and Other Options. Effective July 1, 2009, the Company adopted this amended guidance which requires retrospective application to all periods presented.
Conference Call Information
ADM will host a conference call and audio webcast at 8 a.m. Central Time on Tuesday, May 4, 2010, 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 800-901-5226 or 617-786-4513; the access code is 78248623. Replay of the call will be available from 11 a.m. Central Time on May 4 to May 11, 2010. To listen to the replay by telephone, dial 888-286-8010 or 617-801-6888; the access code is 85463572. To listen to the replay online, visit www.adm.com/webcast.
About ADM
Every day, the 28,000 people of Archer Daniels Midland Company (NYSE:ADM) turn crops into renewable products that meet the demands of a growing world. At more than 230 processing plants, we convert corn, oilseeds, wheat and cocoa into products for food, animal feed, chemical and energy uses. We operate the world’s premier crop origination and transportation network, connecting crops and markets in more than 60 countries. Our global headquarters is in Decatur, Illinois, and our net sales for the fiscal year ended June 30, 2009, were $69 billion. For more information about our Company and our products, visit www.adm.com.
| Segment Operating Analysis | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Quarter ended | Nine months ended | |||||||||||||||
| March 31 | March 31 | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (in 000s metric tons) | ||||||||||||||||
| Processing volumes | ||||||||||||||||
| Oilseeds Processing | 7,740 | 7,018 | 21,911 | 21,178 | ||||||||||||
| Corn Processing | 4,990 | 4,377 | 14,378 | 13,382 | ||||||||||||
| Wheat, cocoa and malt | 1,764 | 1,716 | 5,548 | 5,440 | ||||||||||||
| Total processing volumes | 14,494 | 13,111 | 41,837 | 40,000 | ||||||||||||
| Quarter ended | Nine months ended | |||||||||||||||
| March 31 | March 31 | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (in millions) | ||||||||||||||||
| Net sales and other operating income | ||||||||||||||||
| Oilseeds Processing | $ | 5,084 | $ | 4,689 | $ | 16,322 | $ | 17,757 | ||||||||
| Corn Processing | 1,960 | 1,725 | 5,905 | 5,819 | ||||||||||||
| Agricultural Services | 6,788 | 7,302 | 19,750 | 25,012 | ||||||||||||
| Other |
| 1,313 | 1,126 | 4,002 | 4,087 | |||||||||||
| Total net sales and other operating income | $ | 15,145 | $ | 14,842 | $ | 45,979 | $ | 52,675 | ||||||||
| Segment Operating Profit (unaudited) | ||||||||||||||||||||||||||
| Quarter ended March 31 | Nine months ended March 31 | |||||||||||||||||||||||||
| 2010 | 2009 | Change | 2010 | 2009 | Change | |||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Oilseeds Processing Operating Profit | ||||||||||||||||||||||||||
| Crushing and origination | $ | 272 | $ | 100 | $ | 172 | $ | 600 | $ | 626 | $ | (26 | ) | |||||||||||||
| Refining, packaging, biodiesel and other
| 66 | 52 |
| 14 | 212 |
| 244 | (32 | ) | |||||||||||||||||
| Asia | 67 | 72 |
| (5 | ) | 229 |
| 183 | 46 | |||||||||||||||||
| Total Oilseeds Processing | $ | 405 | $ | 224 | $ | 181 | $ | 1,041 | $ | 1,053 | $ | (12 | ) | |||||||||||||
|
| ||||||||||||||||||||||||||
| Corn Processing Operating Profit | ||||||||||||||||||||||||||
| Sweeteners and starches | $ | 45 | $ | 146 | $ | (101 | ) | $ | 410 | $ | 351 | $ | 59 | |||||||||||||
| Bioproducts | 59 | (97 | ) |
| 156 |
| 172 |
| (155 | ) | 327 | |||||||||||||||
| Total Corn Processing | $ | 104 | $ | 49 | $ | 55 | $ | 582 | $ | 196 | $ | 386 | ||||||||||||||
|
| ||||||||||||||||||||||||||
| Agricultural Services Operating Profit | ||||||||||||||||||||||||||
| Merchandising and handling | $ | 154 | $ | 91 | $ | 63 | $ | 414 | $ | 861 | $ | (447 | ) | |||||||||||||
| Transportation | 11 | 30 |
| (19 | ) |
| 76 |
| 150 | (74 | ) | |||||||||||||||
| Total Agricultural Services | $ | 165 | $ | 121 | $ | 44 | $ | 490 | $ | 1,011 | $ | (521 | ) | |||||||||||||
|
| ||||||||||||||||||||||||||
| Other Operating Profit | ||||||||||||||||||||||||||
| Processing | $ | 9 | $ | (123 | ) | $ | 132 | $ | 275 | $ | 31 | $ | 244 | |||||||||||||
| Financial | 13 | (17 | ) |
| 30 | 52 |
| (46 | ) | 98 | ||||||||||||||||
| Total Other(1) | $ | 22 | $ | (140 | ) | $ | 162 | $ | 327 | $ | (15 | ) | $ | 342 | ||||||||||||
|
| ||||||||||||||||||||||||||
| Corporate Results | ||||||||||||||||||||||||||
| LIFO credit (charge) | $ 43 | $ | (5 | ) | $ | 48 | $ | 65 | $ | 571 | $ | (506 | ) | |||||||||||||
| Interest expense - net | (73 | ) | (59 | ) | (14 | ) |
| (209 | ) | (129 | ) | (80 | ) | |||||||||||||
| Corporate costs | (64 | ) | (54 | ) | (10 | ) |
| (203 | ) | (183 | ) | (20 | ) | |||||||||||||
| Debt buyback costs | (75 | ) | - | (75 | ) |
| (75 | ) | - | (75 | ) | |||||||||||||||
| Other | 7 | 7 | - |
| 17 | (58 | ) | 75 | ||||||||||||||||||
| Total Corporate | $ (162 | ) | $ | (111 | ) | $ | (51 | ) | $ | (405 | ) | $ | 201 | $ | (606 | ) | ||||||||||
| (1) Includes Gruma fx losses of $ 212 million for the quarter and $ 263 million for the nine months ended March 31, 2009. | ||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||
| Consolidated Statements of Earnings | |||||||||||||||||||
| (unaudited) | |||||||||||||||||||
| Quarter ended | Nine months ended | ||||||||||||||||||
| March 31 | March 31 | ||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
| (in millions, except per share amounts) | |||||||||||||||||||
| Net sales and other operating income | $ | 15,145 | $ | 14,842 | $ | 45,979 | $ | 52,675 | |||||||||||
| Cost of products sold | 14,254 | 14,193 | 43,062 | 48,947 | |||||||||||||||
| Gross profit | 891 | 649 | 2,917 | 3,728 | |||||||||||||||
| Selling, general and administrative expenses | 355 | 346 | 1,067 | 1,092 | |||||||||||||||
| Other (income) expense – net | 2 | 160 | (185 | ) | 190 | ||||||||||||||
| Earnings before income taxes | 534 | 143 | 2,035 | 2,446 | |||||||||||||||
| Income taxes | 118 | 140 | 561 | 818 | |||||||||||||||
| Net earnings including noncontrolling interests | 416 | 3 | 1,474 | 1,628 | |||||||||||||||
| Less: Net earnings (losses) attributable to noncontrolling interests
| (5 | ) | – | (10 | ) | 2 | |||||||||||||
| Net earnings attributable to ADM | $ | 421 | $ | 3 | $ | 1,484 | $ | 1,626 | |||||||||||
| Diluted earnings per common share | $ | .65 | $ | .00 | $ | 2.30 | $ | 2.52 | |||||||||||
| Average number of shares outstanding | 645 | 644 | 644 | 644 | |||||||||||||||
| Other (income) expense - net consists of: | |||||||||||||||||||
| Interest expense | $ | 101 | $ | 103 | $ | 304 | $ | 371 | |||||||||||
| Investment income | (34 | ) | (43 | ) | (100 | ) | (145 | ) | |||||||||||
| Net gain on marketable securities transactions | – | – | (7 | ) | (9 | ) | |||||||||||||
| Equity in (earnings) losses of unconsolidated affiliates | (137 | ) | 136 | (428 | ) | (80 | ) | ||||||||||||
| Debt buyback costs | 75 | – | 75 | – | |||||||||||||||
| Other – net | (3 | ) | (36 | ) | (29 | ) | 53 | ||||||||||||
| $ | 2 | $ | 160 | $ | (185 | ) | $ | 190 | |||||||||||
| Summary of Financial Condition | ||||||||||
| (unaudited) | ||||||||||
| March 31 | June 30 | |||||||||
| (in millions) | ||||||||||
| NET INVESTMENT IN | ||||||||||
| Working capital | $ | 10,475 | $ | 10,927 | ||||||
| Property, plant, and equipment | 8,642 | 7,950 | ||||||||
| Investments in and advances to affiliates | 2,671 | 2,459 | ||||||||
| Long-term marketable securities | 673 | 626 | ||||||||
| Other non-current assets | 1,140 | 1,139 | ||||||||
| $ | 23,601 | $ | 23,101 | |||||||
| FINANCED BY | ||||||||||
| Short-term debt | $ | 266 | $ | 356 | ||||||
| Long-term debt, including current maturities | 7,155 | 7,640 | ||||||||
| Deferred liabilities | 1,411 | 1,452 | ||||||||
| Shareholders' equity | 14,769 | 13,653 | ||||||||
| $ | 23,601 | $ | 23,101 | |||||||
| Summary of Cash Flows | |||||||||||
| (unaudited) | |||||||||||
| Nine Months Ended | |||||||||||
| March 31 | |||||||||||
| 2010 | 2009 | ||||||||||
| (in millions) | |||||||||||
| Operating Activities | |||||||||||
| Net earnings | $ | 1,474 | $ | 1,628 | |||||||
| Depreciation and amortization | 673 | 576 | |||||||||
| Other – net | (129 | ) | (184 | ) | |||||||
| Changes in operating assets and liabilities | 757 | 3,831 | |||||||||
| Total Operating Activities | 2,775 | 5,851 | |||||||||
| Investing Activities | |||||||||||
| Purchases of property, plant and equipment | (1,230 | ) | (1,462 | ) | |||||||
| Proceeds from sales of businesses | – | 258 | |||||||||
| Net assets of businesses acquired | (59 | ) | (44 | ) | |||||||
| Other investing activities | 76 | 26 | |||||||||
| Total Investing Activities | (1,213 | ) | (1,222 | ) | |||||||
| Financing Activities | |||||||||||
| Long-term debt borrowings | 14 | 102 | |||||||||
| Long-term debt payments | (546 | ) | (18 | ) | |||||||
| Debt repayment premium and costs | (71 | ) | – | ||||||||
| Net borrowings (payments) under lines of credit | (89 | ) | (2,989 | ) | |||||||
| Purchases of treasury stock | – | (100 | ) | ||||||||
| Cash dividends | (276 | ) | (257 | ) | |||||||
| Other | 10 | 11 | |||||||||
| Total Financing Activities | (958 | ) | (3,251 | ) | |||||||
| Increase in cash and cash equivalents | 604 | 1,378 | |||||||||
| Cash and cash equivalents - beginning of period | 1,055 | 810 | |||||||||
| Cash and cash equivalents - end of period | $ | 1,659 | $ | 2,188 | |||||||
Archer Daniels Midland Company
Media:
David Weintraub, 217-424-5413
Director, External Communications
Investors:
Dwight Grimestad, 217-424-4586
Vice President, Investor Relations