ADM profits rise on improved margins

Soybean crushing margins help boost profits.

May 1, 2018

3 Min Read
ADM profits rise on improved margins

Archer Daniels Midland Co. (ADM) released its 2018 first quarter results on May 1, showing improved year-over-year results. Both higher soybean crush margins and strategic management contributed to the improvements, the company said.

Net earnings for the quarter were $393 million, up from $339 million during the first quarter of 2017. Financial results showed earnings per share (EPS) of 70 cents, which included a 2 cents per share charge related to asset impairment and restructuring activities, a positive 3 cents per share tax adjustment related to U.S. tax reform and a positive 1 cent per share adjustment related to LIFO. EPS for the same period in 2017 was 59 cents. Adjusted EPS, which excluded these items, was 68 cents, up from 60 cents during the first quarter of 2017.  

“The team executed exceptionally well in the first quarter, and we harvested the benefits of the strategic actions we took over the last few years, delivering strong results,” ADM chairman and chief executive officer Juan Luciano said.

Looking forward, Luciano said the company is focusing growth efforts on five key platforms — animal nutrition, bioactives, carbohydrates, human nutrition and taste — as well as geographic regions that are seeing increasing consumer demand. Additionally, the company is enhancing its agility, streamlining and standardizing processes, and implementing innovative technologies for its business and customers, he said.

“The consistent execution of our strategic plan, combined with our first-quarter results, improving market conditions for many of our businesses and the benefits of U.S. tax reform, lead us to be even more confident about 2018,” Luciano said.

Results of operations

ADM reported that origination results were in line with the prior year, saying negative timing effects that affected the quarter’s performance are expected to reverse in future quarters as contracted agreements are executed.

Merchandising and handling results were up significantly year over year, the company said.

“Global Trade had higher margins and increased volumes, resulting in a significant turnaround compared to the year-ago period,” the company noted. However, it also reported that North American Grain was down compared to the first quarter of 2017 on lower U.S. export volumes and approximately $40 million of mark-to-market effects on existing contracts due to improvements in forward export margins and barge freight rates; those impacts are expected to reverse in future quarters as contracts are executed.

Transportation was down due to high river levels, resulting in increased operating costs, ADM said.

Oilseeds results were up versus the first quarter of 2017.

“Global market dynamics continued to push soybean crush margins higher, and the company set crush volume records in North and South America,” the company said.

Improving crush margins resulted in negative timing effects of more than $100 million on forward hedges, which the company said led to crushing and origination results that were lower than the year-ago period. However, the majority of those impacts are expected to reverse over the course of 2018, ADM noted.

South America saw strong origination volumes and improving margins as farmer selling accelerated.

Softseeds were down on lower margins, ADM added.

Refining, packaging, biodiesel and other results were substantially higher on approximately $120 million of income due to the passage of the 2017 biodiesel tax credit.

Wilmar results were lower in Asia.

Carbohydrate solutions results were in line with the year-ago quarter.

ADM said results for starches and sweeteners were up versus the prior year on increasing contributions from the Chamtor acquisition and solid results from joint ventures in North America, as well as improved results from starches and dry sweeteners. Wheat Milling was up, benefiting from stronger margins.

Bioproducts results, on the hand, were down versus the year-ago quarter in a pressured ethanol industry margin environment.

Nutrition was up versus the year-ago period.

WFSI results were in line with the first quarter of 2017. WILD had another quarter of double-digit profit increases versus the prior-year period, offset by some weakness in Specialty Ingredients.

Animal Nutrition was up significantly over the first quarter of 2017 due to strong trade sales and a good product mix with strong margins.

Other results decreased due to lower underwriting performance in captive insurance operations and lower results at ADM Investor Services.

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