ADM shares tumble to 52-week low on soft sales, earnings

by Holly Demaree
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ADM headquarters
Shares of ADM fell after the company failed to deliver earnings and sales results in line with industry forecasts.

CHICAGO — Shares of Archer Daniels Midland Co. fell to a 52-week low on Oct. 31 after the Chicago-based company failed to deliver earnings and sales results in line with industry forecasts. At $39.95, the company’s share price in mid-day trading on Oct. 31 was down 6.7% from the previous day’s close of $42.81 and down 16.6% from the 52-week high of $47.88 set on Nov. 8, 2016.

Net earnings attributable to ADM in the third quarter ended Sept. 30 totaled $192 million, equal to 34c per share on the common stock, down nearly 44% from $341 million, or 58c per share, in the same period a year ago.

Total revenue for the quarter decreased slightly, to $14,827 million from $15,832 million.

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

“Although we created value in a difficult environment this quarter, our results were below our expectations,” Juan Luciano, president and chief executive officer, said during an Oct. 31 conference call with analysts. “The operating environment in the third quarter was more challenging than we had anticipated even three months ago. Our services was impacted more than expected by the lack of competitiveness of the U.S. corn and soybeans in global markets. And in oilseeds, global crush margins were even more compressed than our outlook last quarter, and we continued to experience tight origination margins in South America.

“Through the quarter, we took several actions to be even more competitive in the future, including restructuring our global workforce, reconfiguring the Peoria ethanol complex, working to complete several operational start-ups, driving additional asset monetizations and further reducing costs through our Project Readiness initiative. Some of these actions had only begun to take hold in the third quarter.”

Operating profit in ADM’s Agricultural Services segment, which includes merchandising and handling, milling and other and transportation, fell to $87 million in the quarter, down from $195 million in the same period a year ago.

In Merchandising and Handling, results decreased in both North America Grain and Global Trade, largely due to the lack of competitiveness of U.S. corn and soybeans in global markets, ADM said.

ADM corn
Operating profit in ADM's Corn Processing segment increased to $253 million from $214 million.

“Transportation results decreased from the prior-year period, due to a slower start of harvest in North America, which led to lower barge freight volumes and margins,” Mr. Luciano said. “Milling and other earnings were down due to lower volumes, though the business was still a strong contributor and maintained steady profit margins.”

Operating profit in the Corn Processing segment increased to $253 million from $214 million. North America Sweeteners and Starches experienced good margins. Bioproducts results increased, with better ethanol margins over the prior-year period, the company said.

ADM said it processed 5,621,000 tonnes of corn during the third quarter of 2017, down from 5,794,000 tonnes processed in the third quarter of 2016.

Oilseeds Processing results for the third quarter totaled $119 million, down from $145 million in the third quarter of last year. Crushing and Origination results were affected by compressed global crush margins and weak South America origination margins.

ADM soybean oil
ADM's Oilseeds Processing results for the third quarter totaled $119 million.

“Crushing and Origination results were down,” Mr. Luciano said. “Globally, crush margins remained compressed with ample meal supplies. In North America, results were impacted by weak canola margins, partially due to higher seed costs. Our European processing business was down amid competition from significantly increased flow of mill imports from Argentina. In South America, originations remained tight due to continued low commodity prices that reduced the pace of farmer commercialization, forcing higher basis costs.”

ADM processed 8,265,000 tonnes of oilseeds in the third quarter of 2017, down slightly from 8,388,000 tonnes in the same period of last year. Both corn and oilseed segments produced a total of 13,886,000 tonnes down as well from the same period of last year. 

Refining, Packaging, Biodiesel and Other experienced lower earnings versus the third quarter of 2016, due primarily to weaker biodiesel results caused by lower margins and negative mark-to-market impacts.

Asia was up over the prior-year period on Wilmar results that were lower than anticipated, but still higher than last year’s. In August, ADM increased its stake in Wilmar by spending S$129 million on 40 million shares, according to a filing on the Singapore Exchange. ADM’s stake in Wilmar increased to 24.9% from 24.3%. The company has been steadily increasing shares in Wilmar over the last few years.

Operating profit in the Wild Flavors & Specialty Ingredients (WFSI) segment totaled $61 million, down from $73 million in the same period a year ago. Wild Flavors delivered double-digit operating profit growth with strong sales in Asia and EMEA. Specialty Ingredients was down for the quarter, due in part to higher costs caused by operational start-ups in certain businesses.

“As we move through the fourth quarter, we are starting to transition from the period of costs and investments in acquisitions, new innovation centers and new facilities to a period of lower capital spending and increasing benefits from these investments,” Mr. Luciano said. 
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