ADM Q4 earnings miss analyst expectations

Company posts strong results despite challenging market conditions.

Archer Daniels Midland Co. (ADM) reported this week a sharp drop in financial results for the fourth quarter ended Dec. 31, 2016. Net earnings fell 41% from the prior year to $424 million, or earnings per share (EPS) of 73 cents. Analysts had expected the company to report EPS of around 80 cents.

“We capitalized on an improved environment, delivering stronger fourth-quarter performance after working through difficult market conditions earlier in the year,” ADM chairman and chief executive officer Juan Luciano said.

Luciano reported that the Ag Services division saw strong results in North America and weak results from the global trade desk. The corn business delivered a good quarter, led by sweeteners and starches, and saw solid results from bioproducts. Oilseeds results were comparable to last year despite lower global crush margins.

“We have continued to take important steps to advance our strategic plan by completing additional acquisitions, organic growth projects and portfolio management actions; exceeding our 2016 target for run-rate cost savings, and progressing in our efforts to reduce capital intensity,” Luciano said.

The company returned $1.7 billion to shareholders in dividends and share buybacks during the year. “With expected improvements across all of our businesses throughout the year and additional contributions from recent projects and new facilities as they ramp up, we are optimistic about improving results throughout 2017,” he added.

Results of operations

ADM reported that its Ag Services division saw good execution in North America amid strong global demand for U.S. commodities.

“Merchandising and handling results increased on strong export volumes in an improved margin environment. However, the global trade desk incurred losses, driven by poor execution and limited forward merchandising opportunities,” the company said.

According to the results, transportation performed well, with modest improvements in results despite an environment of lower freight rates.

Milling and other had a strong quarter, driven by solid product margins — including wheat merchandising and handling income — and sales volumes.

Corn Processing posted significantly improved results. The company said good performance in sweeteners and starches was driven by solid demand in North America and improved contributions from international operations.

Higher results in bioproducts were driven by improved ethanol margins and volumes as a result of robust domestic and export demand.

Animal nutrition posted improved results, in part due to operational improvements in the lysine production processes, the company reported.

Oilseeds Processing results were comparable to the challenging year-ago period. In crushing and origination, South American results were affected by reduced volumes as a result of the short 2016 soybean and corn crops in Brazil. ADM said global soybean crush margins were negatively affected by ample substitute proteins worldwide despite strong global crush volumes.

Softseeds performance improved due to higher volumes and margins, driven by more favorable seed supply and better demand for oil. Refining, packaging, biodiesel and other posted continued strong performance, bolstered by good demand for refined oils and biodiesel. ADM said results in Asia improved over the prior-year quarter, reflecting increased ownership and improved results from Wilmar.

In WFSI, the WILD Flavors business delivered solid year-over-year growth, with results from the Eatem foods acquisition in North America and good sales in the EMEAI and Asia Pacific regions more than offsetting weaker sales in Latin America. However, overall results declined in the quarter due to continued challenges in certain specialty ingredients businesses. ADM began implementing the restructuring of the specialty commodities unit and saw ongoing market softness in hydrocolloids and fibers, as well as the effects of a short crop in edible beans.

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