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Archer Daniels Midland Company : ADM 3Q Net Down 31% On Ethanol, European Oilseeds

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05/01/2012 | 06:14pm CET

--ADM reports 3Q profit declines on ethanol, Europe oilseed processing

--Shares jump as results beat expectations

--Excess ethanol supplies weigh on margins

--Global grain trading profits have stabilized

(Recasts, adds information on share price movement, comments from conference call.)

    By Ian Berry 

Archer Daniels Midland Co.'s (ADM) fiscal third-quarter earnings fell 31% amid an ethanol supply glut and weak European oilseed processing results, but shares jumped as the results beat expectations and the company reported bigger-than-expected savings from recent job cuts.

The company, one of the world's largest grain traders and processors, has struggled in recent quarters as high market volatility has cut into trading profits, but it reported Tuesday that its global grain trading business has stabilized. Profits in its North American oilseed processing business, another source of problems for ADM, have also improved, the company said.

Shares were up 6.7% in recent trading to $32.88 a share.

The company's recent restructuring efforts, which included more than 1,200 job cuts, or more than 3% of the global workforce, will save the company $150 million, up from prior forecasts of $125 million, Chief Executive Patricia Woertz told investors in a conference call.

Woertz added that the decline in quarterly earnings was due in part to a particularly strong third quarter a year ago.

"We delivered very good results this quarter despite difficult margin environments particularly in ethanol and European oilseeds," Woertz said.

Ethanol profits fell sharply as expected, as excess production and stockpiles continues to weigh on the market. ADM reported earnings in its bioproducts division, which includes ethanol, fell 69% to $37 million.

Poor ethanol margins "have slowed industry production, improving alignment of supply and demand," the Decatur, Ill.-based company said. ADM has said it would maintain production while waiting for poor margins to cause smaller companies to cut back, and Chief Operating Officer Juan Luciano said Tuesday that scarce corn supplies could prompt some ethanol plants to halt production as early as this month, hastening the production cuts.

ADM and other ethanol companies are also counting on a summer increase in gasoline demand to help draw down ethanol supplies.

ADM's oilseeds processing segment's operating profit sank to $395 million from $512 million, even as sales rose 14%. Margins in Europe remained weak, the company said, but were "significantly offset" by improved results in North and South America.

Meanwhile, ADM's global grain trading business has stabilized. The company reported earnings of $179 million in its agricultural services segment, up $8 million from the prior year and within the company's historical range of $150 million to $200 million.

ADM's profits in the segment had tumbled previously amid poor international trading results. Extreme volatility in grains prices, which had made ADM and competitors cautious in trading, has since abated.

For the quarter ended March 31, the company posted a profit of $399 million, or 60 cents a share, down from $578 million, or 86 cents a share, a year earlier. Revenue increased 5.4% to $21.16 billion.

Analysts surveyed by Thomson Reuters were looking for earnings of $337.8 million, or 59 cents a share, on revenue of $21.38 billion.

Adjusted earnings excluding restructuring charges, an accounting method called LIFO and other items fell to 78 cents from 89 cents.

--By Ian Berry, Dow Jones Newswires; 312-750-4072; ian.berry@dowjones.com

--Kristin Jones contributed to this report.

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Financials ($)
Sales 2017 63 978 M
EBIT 2017 2 250 M
Net income 2017 1 597 M
Debt 2017 4 941 M
Yield 2017 2,62%
P/E ratio 2017 16,04
P/E ratio 2018 14,81
EV / Sales 2017 0,48x
EV / Sales 2018 0,50x
Capitalization 26 047 M
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Archer Daniels Midland Com Technical Analysis Chart | ADM | US0394831020 | 4-Traders
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Mean consensus HOLD
Number of Analysts 15
Average target price 44,3 $
Spread / Average Target -2,9%
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Juan Ricardo Luciano Chairman, President & Chief Executive Officer
Ray G. Young Chief Financial Officer & Executive Vice President
Todd A. Werpy Chief Technology Officer & Senior Vice President
Patrick J. Moore Independent Director
Mollie Hale Carter Independent Director
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