Winter takes toll on ADM Q1 results

Winter takes toll on ADM Q1 results

Corn and oilseed results contribute $267 million in net earnings for ADM.

ARCHER Daniels Midland Co. (ADM) released financial results for its first quarter ended March 31, reporting weaker results compared to the fourth quarter of 2013, which it largely blamed on the harsh winter and the logistics complications that caused.

Despite the challenges, ADM did report net earnings of $267 million, or 40 cents per share. Adjusted earnings decreased from the previous quarter to 55 cents but improved from 46 cents in the same period last year.

Segment operating profit was $691 million, up 10% from the year-ago period (Table). Adjusted segment operating profit was $780 million, up 17% from the year-ago period.

"Our businesses delivered mixed results in the first quarter," ADM chair and chief executive officer Patricia Woertz said. "Our Ag Services business again generated weak results due to a low-margin environment as well as logistics and weather challenges in the U.S."

She added that continued strong performance in corn was supported by the robust ethanol market, and solid results in oilseeds were driven by good margins and volumes in North and South American soybean crushing.

"We continued to make good progress during the quarter in our ongoing portfolio management and other key initiatives to improve the earnings power and returns of the company," Woertz said.

Operating profit of $358 million for the Oilseed Processing segment was up $50 million from the same period one year earlier. These numbers exclude a $24 million charge for cocoa hedge timing effects versus a gain of $5 million in the year-ago period.

Crushing and origination operating profit was essentially flat, at $161 million. North American soybean crushing operations benefited from good crush capacity utilization in a favorable margin environment driven by strong domestic and export meal demand. That was offset by lower results in North American softseeds.

In South America, soybean crushing operations saw improved utilization, and the logistics network saw increased volumes as it began moving the large harvest to world markets in an improved environment. European results were essentially flat.

Refining, packaging, biodiesel and other generated a profit of $113 million for the quarter, up $5 million, as improved European biodiesel results offset a decline in North America due to the absence of $20 million in biodiesel tax credits recorded in the year-ago period.

Oilseed results in Asia for the quarter were down $17 million from the same period last year, principally reflecting ADM's share of lower results from Wilmar International Ltd.

Corn Processing operating profit of $261 million represented an increase of $64 million from the same period one year earlier. These numbers exclude negative timing effects of $65 million versus a loss of $44 million in the year-ago period. ADM chief financial officer Ray Young said the company expects to recover these losses in the second and third quarters of 2014.

Sweeteners and starches results declined $13 million to $107 million, with overall sales volumes for the quarter down slightly.

Bioproducts results increased $77 million to $154 million. Strong export demand and lower industry production volumes combined to drive a steadily improving margin environment throughout the quarter.

Agricultural Services operating profit was $153 million, similar to the year-ago period. Results for the quarter included the recovery of about $20 million of a previously established loss provision.

Merchandising and handling earnings declined $17 million to $69 million as margins were limited both by inverted corn, soybean and wheat markets and by increased costs that were exacerbated by weather.

"For the volumes we did move, our margins were hit by higher logistics costs due to rail delays and weather problems," explained Juan Luciano, ADM chief operating officer. "Unfortunately, this all occurred toward the end of the U.S. grain export season. So, while transportation conditions should improve in the coming months, overall U.S. export volumes will see their seasonal decline as the world looks to South America for soybeans."

Transportation results jumped from $6 million to $33 million over the year. Pent-up barge freight demand caused by the harsh U.S. winter pushed up freight rates significantly as river traffic returned in March.

Milling and other results declined $8 million to $51 million as a lack of seasonal carry in the wheat futures market reduced grain and feed merchandising opportunities.

"U.S. farmers are planting what could be a large harvest, which could reset the margin environment," Luciano added.

 

ADM segment operating profit, million $

 

-First quarter-

Segment

2014

2013

Oilseeds Processing operating profit

Crushing and origination

161

156

Refining, packaging, biodiesel and other

113

108

Cocoa and other (excluding timing effects)

30

(27)

Cocoa hedge timing effects

(24)

5

Asia

54

71

Total, Oilseeds Processing

334

313

Corn Processing operating profit

Sweeteners and starches (excl. timing effects)

107

120

Bioproducts (excl. timing effects)

154

77

Corn hedge timing effects

(65)

(44)

Total, Corn Processing

196

153

Agricultural Services operating profit

Merchandising and handling

69

86

Milling and other

51

59

Transportation

33

6

Total, Agricultural Services

153

151

Other operating profit

Financial

8

13

Total, Other

8

13

Segment operating profit

691

630

Adjusted segment operating profit

780

669

 

Volume:86 Issue:18

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