Archer Daniels Midland Company : UPDATE : Archer Daniels Midland 2Q Net Down 89% On Writedown, Oilseed Margins

--ADM 2Q profit falls sharply, misses expectations

--Oilseed margins weak, grain trading profits fall

--Write-down on bioplastics venture weighs on earnings

(Updates with detail and executive comment, starting in the first paragraph.)

 
    By Ian Berry and Ben Fox Rubin 
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Archer Daniels Midland Co.'s (ADM) fiscal second-quarter earnings plummeted 89% as the grain handler posted a large writedown related to a bioplastics joint venture and trading profits declined amid global market volatility.

Overall revenue rose, but the company saw earnings fall in three of its major segments. The company's shares fell 2% to $29.08.

"It was a tough quarter, particularly for comparisons," Chief Executive Patricia Woertz said. "The operating environment was challenging.

The Decatur, Ill., grain trader and processor reported a 63% drop in its agricultural services division, which buys, stores and sells grain around the world. ADM and other grain merchandisers, particularly privately held Cargill Inc., have struggled due to volatile global financial markets, fueled in part by Europe's debt crisis. The volatility has at times caused commodity prices to disregard underlying supply and demand dynamics, undermining a key advantage for large grain traders.

The company also noted that U.S. exports were weaker, and noted its agricultural services segment had an "exceptionally strong period" a year earlier.

The weakening grain merchandising results added to the challenges ADM has already been facing with excess oilseed processing capacity, which has depressed margins across the industry, and higher net corn costs.

The oilseeds processing segment's profit fell 22% versus a year ago amid weak global oilseed crushing margins, particularly in Europe, while processing volume grew 4.6%. Chief Operating Officer Juan Luciano said the company is reducing its oilseed processing rates in Europe in response.

The corn-processing business swung to a loss of $133 million, due to a $339 million writedown related to its announcement that it was pulling out of an Iowa bioplastics joint venture with Metabolix Inc. (MBLX).

Earlier this month, ADM said it would cut 1,000 jobs, or 3% of its work force, highlighting the challenges faced by the agribusiness sector as market volatility cuts into trading profits. The layoffs, the company has said, are expected to save about $100 million annually and help boost its international competitiveness.

Woertz said Tuesday she was optimistic that the operating environment would improve, but the company also noted that ethanol margins, which had been strong in the second quarter, eroded amid excess production and reduced exports. Luciano said that producers ramped up their output after seeing strong margins early in the quarter, creating excess supply.

For the quarter ended Dec. 31, the company posted a profit of $80 million, or 12 cents a share, from $732 million, or $1.14 a share, a year earlier. Revenue increased 11% to $23.31 billion.

Analysts surveyed by Thomson Reuters expected earnings of 76 cents on revenue of $22.82 billion.

Adjusted earnings excluding an accounting method called LIFO and other items fell to 51 cents from $1.20.

--By Ian Berry, Dow Jones Newswires; 312-750-4072

--Ben Rubin contributed to this report.