ADM earnings, sales slide

by Eric Schroeder
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ADM dry ethanol mill
ADM is considering options for U.S. dry mill ethanol plants.

CHICAGO — Adverse market conditions that affected many parts of the business across much of 2015 continued in the fourth quarter, leading to lower full-year results at Archer Daniels Midland Co. Net income at Archer Daniels Midland Co. in the year ended Dec. 31, 2015, totaled $1,849 million, equal to $2.98 per share on the common stock, down 18% from $2,248 million, or $3.43 per share, in fiscal 2014.

Fiscal 2015 revenues of $67,702 million were down 17% from $81,201 million in fiscal 2014.

Following the earnings release, shares of ADM fell nearly 9% on the New York Stock Exchange.

Juan Luciano, chief executive officer of ADM, cautioned in a Feb. 2 conference call with analysts that the company remains uncertain as to when the macro and business conditions will improve, returning the company’s earnings base to more normalized levels.

Juan Luciano, ADM
Juan Luciano, c.e.o. of ADM

“We continue to focus on what we can control to grow earnings and create value for our colleagues, our customers, and our shareholders,” he said.

Operating profit for ADM’s Agricultural Services segment was $714 million in fiscal 2015, down 32% from $1,043 million in fiscal 2014. Within Agricultural Services, operating profit for merchandising and handling fell to $305 million from $511 million.

Also within Agricultural Services, operating profit for transportation fell to $135 million from $187 million, while operating profit for milling and other rose to $244 million from $203 million. Mr. Luciano said a number of factors affected results, including a lack of global dislocations and a strong U.S. dollar versus the weakening currencies of other major crop-growing areas.

In ADM’s Corn Processing segment, fiscal 2015 operating profit fell to $648 million from $1,148 million. Within Corn Processing, operating profit for sweeteners and starches increased to $457 million from $430 million. Operating profit for bioproducts within Corn Processing in fiscal 2015 plunged to $149 million from $711 million.

During the conference call, Mr. Luciano said ADM will continue its efforts to reduce costs at its corn dry mills, and to that end has launched a strategic review of its U.S. dry mill ethanol plants.

“What we are seeing here is we continue to be implementing our cost reductions in the dry mills, but margin continues to be low, and even with our improvements in cost we are concerned about the long term from the dry mill ethanol part of the industry,” he said. “So we have asked the team to undertake a strategic review of that. They have an adviser helping them on that, and we’re going to run through the different scenarios — all the way from one extreme to the other… The whole operation is having positive cash flows, positive contributions, so there’s no need to panic. We just want to be prepared to look at the industry long term, and see can this industry present the returns that we expect.”

Operating profit for ADM’s Oilseeds Processing increased to $1,574 million in fiscal 2015 from $1,440 million in the previous year. Within Oilseeds Processing, operating profit for crushing and origination rose to $793 million from $744 million.

Also within Oilseeds Processing, operating profit for refining, packaging, biodiesel and other fell to $270 million from $314 million. Operating profit for cocoa and other fell to $38 million from $109 million.

Operating profit for Wild Flavors & Specialty Ingredients was $280 million in fiscal 2015, up from $205 million a year ago.

“For W.F.S.I., with the robust pipeline, continued realization of synergies and accretion from recent acquisitions, we expect double-digit percentage growth in operating profit in the 15% to 20% range in 2016,” Mr. Luciano said.

Separately, ADM announced it has agreed to purchase a controlling stake in Harvest Innovations, which offers expeller-pressed soy proteins, oils and gluten-free ingredients. Harvest Innovations uses expeller pressing to turn grains, legumes and oilseeds into non-bioengineered, organic and gluten-free ingredients, including non-bioengineered soy chips, expeller-pressed soy flour, textured vegetable protein, organic soy crisps, and gluten-free flours and pastas.

Harvest Innovations is based in Indianola, Iowa, and has a second processing facility in Deshler, Ohio.
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