Poor US harvests send ADM profits lower

(AgriMoney) – Archer Daniels Midland failed to enjoy the profits revival enjoyed by peers Bunge and Cargill, reporting a 60% tumble in earnings, hurt by weak ethanol margins and a poor US harvest.

The corn processor-to-cocoa group reported earnings of $182m for the July-to-September quarter, down from $460m a year before.

The decline, on revenues flat at $21.8bn, was in part down to one-time effects, including a $146m charge from the sale of a stake in Mexican food group Gruma.

Even excluding one-time effects, earnings on a per share basis dropped to $0.50, from $0.68 in the same quarter of last year – althought this result was better than the $0.35 a share that Wall Street had expected.

‘Negative margins’

The result contrasts with a sharp revival in earnings at Cargill, while Bunge last week revealed a doubling in profits. These groups, with ADM and France’s Louis Dreyfus, represent the so-called “ABCD” of crop trading giants.

However, it reflected a collapse in profitability of corn ethanol production, to which ADM is particularly exposed, leaving its bioproducts operations with a $26m operating loss, compared with a $153 profit a year before.

“Weak” US ethanol exports, and “slow” implementation of measures to raise to 15% the proportion of the biofuel in gasoline, “kept industry markets negative” at a time of high corn prices, the group said.

ADM was also undermined by its focus on the US, whose poor, drought-hit harvests left it with lower volumes of crops to market or export, prompting a near-halving in profits from marketing and transport.

The results come as ADM is attempting to ramp up in Australia, and gain a gateway to Asia, by buying grain handler GrainCorp.

‘Mixed’ performance

The downturns in performance more than offset improvements in corn-based sweeteners, for which takings were supporting by prices rises enabled by “tight industry capacity”, and oilseeds crushing, for which profits soared 53% to $336m.

“ADM’s US soybean operations delivered very strong results amid good US demand and meal exports,” the group said, adding that “in Europe, soybean and rapeseed crushing earnings improved significantly”.

Patricia Woertz, the ADM chief executive, termed the group results “mixed”.

However, she said the group had “focused on actions that will improve returns”, putting itself on track to achieve a target of $150m in annual cost savings ahead of schedule.