ADM Reports First Quarter 2013 Earnings of $269 Million or $0.41 per Share
ADM Reports First Quarter 2013 Earnings of $269 Million or $0.41 per Share
5/1/2013
Adjusted EPS of $0.48, down 38 percent from year-ago quarter
Mixed results across business units
DECATUR, Ill.--(BUSINESS WIRE)--Archer Daniels Midland Company (NYSE: ADM) today reported financial results for the quarter ended March 31, 2013. The company reported net earnings for the quarter of $269 million, or $0.41 per share, down from $0.60 per share in the same period one year earlier. Adjusted earnings per share1 were $0.48, down from $0.78 in the same period last year. Segment operating profit1 was $630 million.
“As expected, this was a challenging quarter, with agricultural services negatively impacted by the ongoing effects of last summer’s U.S. drought,” said ADM Chairman and CEO Patricia Woertz. “In oilseeds, our earnings were reduced by challenges in Brazil and depressed margins in cocoa. Our ethanol business improved as declining inventories supported overall industry margins, and we began to see positive results from the actions we’ve been taking to improve the profitability of that business.
“We continue to manage through tight U.S. stocks of oilseeds and grains until the North American harvest. Demand for our products remains solid, and we will continue to leverage our global origination and processing network to serve the needs of our customers worldwide.”
First Quarter 2013 Highlights
- Adjusted EPS of $0.48 excludes approximately $34 million in pretax LIFO charges, or $0.03 per share, and a provision of $25 million, or $0.04 per share, related to the previously disclosed FCPA matter dating back to 2008 and earlier.
- Oilseeds Processing profit decreased $229 million due to significantly lower results from cocoa caused by industry margin pressures and weaker South American origination results.
- Corn Processing profit increased $20 million due to improved ethanol results. Sweeteners and starches results were negatively impacted by a $44 million pretax charge from corn hedge timing effects ($0.04 per share).
- Agricultural Services profit decreased $110 million as U.S. origination volumes declined.
Adjusted EPS of 48 Cents, down 30 Cents
Adjusted EPS decreased primarily due to lower segment operating profit.
This quarter’s effective tax rate of 28 percent was in line with the same period last year.
Oilseeds Earnings Decline on Cocoa, South American Origination and North American Softseeds
Oilseeds operating profit in the first quarter was $313 million, down $229 million from the same period one year earlier. Year-ago results included net favorable mark-to-market timing effects of about $60 million, while this quarter included minimal timing effects.
Crushing and origination operating profit was $156 million, down $108 million from the year-ago quarter. In North America, softseed crushing results were down from last year’s strong results as tight supplies affected seed basis and capacity utilization. North American soybean crushing results were strong in the quarter, but margins and production declined through the quarter amid weaker export meal demand and lower bean availability. In South America, higher trucking costs and reluctant farmer selling negatively impacted results. European crushing and origination results continued to recover, aided by reduced imports of North and South American meal.
Refining, packaging, biodiesel and other generated a profit of $108 million for the quarter, up $29 million, as U.S. biodiesel demand saw a modest recovery, offset by poor margin conditions in Europe. Results included about $20 million in biodiesel blender’s credits, retroactive from 2012 blending.
Cocoa and other results decreased $181 million amid weaker press margins and the absence of last year’s $72 million favorable mark-to-market timing effect. Press margins were negatively impacted by the addition of industry processing capacity, lower cocoa powder prices, and customer inventory reductions.
Oilseeds results in Asia for the quarter were up $31 million from the same period last year, principally reflecting ADM’s share of the improved results from Wilmar International Limited.
Corn Processing Results Reflect Improved Ethanol Conditions
Corn processing operating profit of $153 million represented an increase of $20 million from the same period one year earlier. This quarter’s results included a $44 million negative timing effect related to open corn cash-flow hedges at quarter end (about $0.04 per share), up from $11 million in the same period last year.
Sweeteners and starches operating profit decreased $19 million to $76 million, and was improved when adjusted for corn hedge-program timing effects, as solid demand translated to tight sweetener industry capacity.
Bioproducts results increased $39 million to $77 million. Ethanol margins improved through the quarter as reduced industry production rates, lower levels of imports and steady domestic demand resulted in reduced inventories and improved margins. Results also benefited from actions taken by ADM to improve the performance of its ethanol business.
Agricultural Services Pressured by Lower U.S. Volumes
Agricultural Services operating profit was $151 million, down $110 million from the same period one year earlier.
Merchandising and handling earnings declined $62 million to $86 million, due to lower volumes of U.S. origination and exports and lower execution margins in international merchandising.
Transportation results decreased $21 million to $6 million as lower U.S. exports reduced barge freight utilization.
Milling and other results remained steady, excluding last year’s $21 million equity income from Gruma. ADM disposed of its ownership in Gruma in December 2012. The milling business continued to perform well.
Other Financial Results Improve
Operating profit from ADM’s Other Financial businesses was $13 million, up $31 million. Last year’s results had significant provisions for property and crop risk losses.
Provision for FCPA Matter
ADM is in discussions with the U.S. Department of Justice and the U.S. Securities and Exchange Commission regarding a previously disclosed FCPA matter dating back to 2008 and earlier, and expects a resolution sometime this year. Based upon recent discussions, ADM believes it is appropriate to establish a provision of $25 million ($0.04 per share) to cover the potential assessments that may be imposed by these government agencies.
Conference Call Information
ADM will host a conference call and audio webcast Wednesday, May 1, 2013, at 5 p.m. Central Time to discuss financial results and provide a company update. A 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 32838804.
Replay of the call will be available from May 2, 2013, to May 8, 2013. 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 32838804. The replay will also be available online for an extended period of time at 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 265 processing plants, 460 crop procurement facilities, and the world’s premier crop transportation network, ADM helps connect the harvest to the home in more than 140 countries. For more information about ADM and its products, visit www.adm.com.
1 Non-GAAP financial measures, see pages 5 and 10 for explanations and reconciliations
Financial Tables Follow
| Segment Operating Profit and Corporate Results | ||||||||||||||||
|
A non-GAAP financial measure (unaudited) |
||||||||||||||||
| Quarter ended | ||||||||||||||||
| March 31 | ||||||||||||||||
| 2013 | 2012 | Change | ||||||||||||||
| (In millions) | ||||||||||||||||
| Oilseeds Processing Operating Profit | ||||||||||||||||
| Crushing and origination | $ | 156 | $ | 264 | $ | (108 | ) | |||||||||
| Refining, packaging, biodiesel and other | 108 | 79 | 29 | |||||||||||||
| Cocoa and other | (22 | ) | 159 | (181 | ) | |||||||||||
| Asia | 71 | 40 | 31 | |||||||||||||
| Total Oilseeds Processing | $ | 313 | $ | 542 | $ | (229 | ) | |||||||||
| Corn Processing Operating Profit | ||||||||||||||||
| Sweeteners and starches | $ | 76 | $ | 95 | $ | (19 | ) | |||||||||
| Bioproducts (excluding charges) | 77 | 48 | 29 | |||||||||||||
| Restructuring and exit costs | - | (10 | ) | 10 | ||||||||||||
| Total Corn Processing | $ | 153 | $ | 133 | $ | 20 | ||||||||||
| Agricultural Services Operating Profit | ||||||||||||||||
| Merchandising and handling |
$ |
86 |
|
$ | 148 | $ | (62 | ) | ||||||||
| Transportation |
6 |
|
27 | (21 | ) | |||||||||||
| Milling and other |
59 |
|
86 | (27 | ) | |||||||||||
| Total Agricultural Services |
$ |
151 |
|
$ | 261 | $ | (110 | ) | ||||||||
| Other Operating Profit | ||||||||||||||||
| Financial | $ | 13 | $ | (18 | ) | $ | 31 | |||||||||
| Total Other | $ | 13 | $ | (18 | ) | $ | 31 | |||||||||
| Segment Operating Profit | $ | 630 | $ | 918 | $ | (288 | ) | |||||||||
| Corporate Results | ||||||||||||||||
| LIFO credit (charge) | $ | (34 | ) | $ | (107 | ) | $ | 73 | ||||||||
| Interest expense - net | (105 | ) | (114 | ) | 9 | |||||||||||
| Unallocated corporate costs | (82 | ) | (67 | ) | (15 | ) | ||||||||||
| Employee-related exit costs | - | (71 | ) | 71 | ||||||||||||
| Other | (34 | ) | 9 | (43 | ) | |||||||||||
| Total Corporate | $ | (255 | ) | $ | (350 | ) | $ | 95 | ||||||||
| Earnings Before Income Taxes | $ | 375 | $ | 568 | $ | (193 | ) | |||||||||
Total segment operating profit is ADM’s consolidated income from operations before income tax that excludes certain corporate items. Management believes that segment operating profit is a useful measure of ADM’s performance because it provides investors information about ADM’s business unit performance excluding certain corporate overhead costs. Total segment operating profit is a non-GAAP financial measure and is not intended to replace earnings before income tax, the most directly comparable GAAP financial measure. Total segment operating profit is not a measure of consolidated operating results under U.S. GAAP and should not be considered as an alternative to income before income taxes or any other measure of consolidated operating results under U.S. GAAP.
| Consolidated Statements of Earnings | |||||||||||
|
(unaudited) |
|||||||||||
| Quarter ended | |||||||||||
| March 31 | |||||||||||
| 2013 | 2012 | ||||||||||
| (In millions, except per share amounts) | |||||||||||
| Net sales and other operating income | $ | 21,727 | $ | 21,155 | |||||||
| Cost of products sold | 20,971 | 20,147 | |||||||||
| Gross profit | 756 | 1,008 | |||||||||
| Selling, general and administrative expenses | (436 | ) | (402 | ) | |||||||
| Equity in earnings of unconsolidated affiliates | 137 | 115 | |||||||||
| Interest income | 27 | 26 | |||||||||
| Interest expense | (106 | ) | (116 | ) | |||||||
| Asset impairment, exit and restructuring costs | - | (85 | ) | ||||||||
| Other income (expense) – net | (3 | ) | 22 | ||||||||
| Earnings before income taxes | 375 | 568 | |||||||||
| Income taxes | (105 | ) | (163 | ) | |||||||
| Net earnings including noncontrolling interests | 270 | 405 | |||||||||
| Less: Net earnings (losses) attributable to noncontrolling interests | 1 | 6 | |||||||||
| Net earnings attributable to ADM | $ | 269 | $ | 399 | |||||||
| Diluted earnings per common share | $ | 0.41 | $ | 0.60 | |||||||
| Average number of shares outstanding | 662 | 663 | |||||||||
|
Other income (expense) - net consists of: |
|||||||||||
| Gain on sale of assets | $ | 5 | $ | 9 | |||||||
| Net gain on marketable securities transactions | - | 8 | |||||||||
| Other – net | (8 | ) | 5 | ||||||||
| $ | (3 | ) | $ | 22 | |||||||
| Summary of Financial Condition | |||||||||
|
(unaudited) |
|||||||||
| March 31, | March 31, | ||||||||
| 2013 | 2012 | ||||||||
| (in millions) | |||||||||
| NET INVESTMENT IN | |||||||||
| Cash and cash equivalents | $ | 1,448 | $ | 818 | |||||
| Short-term marketable securities | 183 | 428 | |||||||
| Operating working capital (a) | 13,581 | 14,962 | |||||||
| Property, plant, and equipment | 10,122 | 9,800 | |||||||
| Investments in and advances to affiliates | 3,252 | 3,385 | |||||||
| Long-term marketable securities | 683 | 320 | |||||||
| Other non-current assets | 1,304 | 1,247 | |||||||
| $ | 30,573 | $ | 30,960 | ||||||
| FINANCED BY | |||||||||
| Short-term debt | $ | 2,358 | $ | 1,987 | |||||
| Long-term debt, including current maturities | 6,505 | 8,343 | |||||||
| Deferred liabilities | 2,734 | 2,079 | |||||||
| Shareholders’ equity | 18,976 | 18,551 | |||||||
| $ | 30,573 | $ | 30,960 | ||||||
(a) Current assets (excluding cash and cash equivalents and short-term marketable securities) less current liabilities (excluding short-term debt and current maturities of long-term debt).
| Summary of Cash Flows | |||||||||||
| (unaudited) | |||||||||||
| Three Months Ended | |||||||||||
| March 31 | |||||||||||
| 2013 | 2012 | ||||||||||
| (in millions) | |||||||||||
| Operating Activities | |||||||||||
| Net earnings | $ | 270 | $ | 405 | |||||||
| Depreciation and amortization | 227 | 214 | |||||||||
| Asset impairment charges | - | 16 | |||||||||
| Other – net | (135 | ) | (116 | ) | |||||||
| Changes in operating assets and liabilities | (5 | ) | (1,302 | ) | |||||||
| Total Operating Activities | 357 | (783 | ) | ||||||||
|
Investing Activities |
|||||||||||
| Purchases of property, plant and equipment | (248 | ) | (341 | ) | |||||||
| Net assets of businesses acquired | (16 | ) | (33 | ) | |||||||
| Marketable securities – net | 391 | 201 | |||||||||
| Other investing activities | 42 | 10 | |||||||||
| Total Investing Activities | 169 | (163 | ) | ||||||||
|
Financing Activities |
|||||||||||
| Long-term debt borrowings | 17 | 4 | |||||||||
| Long-term debt payments | (250 | ) | (51 | ) | |||||||
| Net borrowings (repayments) under lines of credit | (441 | ) | 1,112 | ||||||||
| Purchases of treasury stock | - | (56 | ) | ||||||||
| Cash dividends | (125 | ) | (115 | ) | |||||||
| Other | 7 | 6 | |||||||||
| Total Financing Activities | (792 | ) | 900 | ||||||||
|
Increase (decrease) in cash and cash equivalents |
(266 | ) | (46 | ) | |||||||
| Cash and cash equivalents - beginning of period | 1,714 | 864 | |||||||||
| Cash and cash equivalents - end of period | $ | 1,448 | $ | 818 | |||||||
| Segment Operating Analysis | |||||||||
|
(unaudited) |
|||||||||
| Quarter Ended | |||||||||
| March 31 | |||||||||
| 2013 | 2012 | ||||||||
| (000’s of metric tons) | |||||||||
|
Processed volumes |
|||||||||
| Oilseeds | 8,355 | 8,159 | |||||||
| Corn | 5,294 | 6,174 | |||||||
| Milling and Cocoa | 1,731 | 1,740 | |||||||
| Total processed volumes | 15,380 | 16,073 | |||||||
| Quarter Ended | |||||||||
| March 31 | |||||||||
| 2013 | 2012 | ||||||||
| (In millions) | |||||||||
|
Net sales and other operating income |
|||||||||
| Oilseeds Processing | $ | 8,143 | $ | 7,715 | |||||
| Corn Processing | 3,053 | 2,835 | |||||||
| Agricultural Services | 10,500 | 10,571 | |||||||
| Other | 31 | 34 | |||||||
| Total net sales and other | |||||||||
| operating income | $ | 21,727 | $ | 21,155 | |||||
| Adjusted Earnings Per Share | |||||||||
| A non-GAAP financial measure | |||||||||
|
(unaudited) |
|||||||||
|
Quarter Ended |
|||||||||
| March 31 | |||||||||
| 2013 | 2012 | ||||||||
| Earnings Per Share (fully-diluted) | $ | 0.41 | $ | 0.60 | |||||
| Adjustments: | |||||||||
| LIFO charge/(credit) (a) | 0.03 | 0.10 | |||||||
| FCPA charge (b) | 0.04 | - | |||||||
| Restructuring and exit costs (c) | - | 0.08 | |||||||
| Sub-total adjustments | 0.07 | 0.18 | |||||||
| Adjusted Earnings Per Share (non-GAAP) | $ | 0.48 | $ | 0.78 | |||||
| (a) | The Company’s pretax changes in its LIFO reserves during the period, tax effected using the Company’s U.S. effective income tax rate. | |||||
| (b) | The FCPA charge related to an estimated provision for settlement with the government agencies pertaining to potential violations of anti-corruption practices, not tax effected because the Company assumed the provision is not deductible. | |||||
| (c) | The restructuring and exit costs related primarily to the global workforce reduction program, tax effected using the applicable U.S., European and South American tax rates. | |||||
Adjusted EPS is ADM’s fully diluted EPS after removal of the effect on Reported EPS of certain specified items as more fully described above. Management believes that Adjusted EPS is a useful measure of ADM’s performance because it provides investors additional information about ADM’s operations allowing better evaluation of ongoing business performance. Adjusted EPS is a non-GAAP financial measure and is not intended to replace or be an alternative to EPS, the most directly comparable GAAP financial measure, or any other measures of operating results under GAAP. Earnings amounts in the tables above have been divided by the company’s diluted shares outstanding for each respective quarter in order to arrive at an adjusted EPS amount for each specified item.
Archer Daniels Midland Company
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or
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