ADM earnings improve on cost, capital initiatives

by Susan Reidy
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ADM headquarters
Archer Daniels Midland posted improved earnings for 2017.
 

CHICAGO — Against the backdrop of a possible takeover of Bunge, Archer Daniels Midland Co. on Feb. 6 posted improved earnings for 2017 and the fourth quarter ended Dec. 31, 2017.

For the year, the company posted net earnings attributable to ADM of $1,595 million, up from $1,279 million in the prior year. For the quarter, profit increased to $788 million, up 86% from $424 million in the same period a year earlier.

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

“We ended 2017 with a solid fourth quarter,” said Juan Luciano, chairman and chief executive officer. “We pulled the levers under our control — including cost and capital initiatives and interventions throughout the year — to deliver value for shareholders.

“For 2017 as a whole, we grew earnings per share, improved returns on invested capital and generated positive EVA. Looking ahead, we expect improving results through 2018 as our strategy advances. Our increasing international presence and expanding capabilities in areas such as destination marketing, food and beverage innovation, and health and wellness all help to position ADM for continued growth and value creation.”

Revenue for the year fell 2.5% to $60,828 million. For the quarter, revenue decreased 2.7% to $16,070 million.

The company made no mention of a possible takeover bid for Bunge in its earnings release and Mr. Luciano said he would not comment during a Feb. 6 conference call with analysts. The Wall Street Journal on Jan. 19 said ADM has approached Bunge about a possible takeover bid. The Journal suggested a bidding war between ADM and Glencore PLC, Baar, Switzerland, which made a takeover bid for Bunge in May.

However, Mr. Luciano highlighted four components that will help the company in the coming year, including growth initiatives both organically and through mergers and acquisitions, “particularly on the right-hand side of the value chain.”

Corn processing
ADM's perating profit in the Corn Processing segment increased 29% in fiscal 2017.
 

Investments will be strategic, he said, because the company wants to invest to plug holes in its value chain, not just to be big.

“We have a good base from this quarter and this year in which to build, and we are looking for a year of solid earnings and e.p.s. growth,” Mr. Luciano said.

Operating profit in the Corn Processing segment increased 29% in fiscal 2017 and 2.4% in the fourth quarter, to $909 million and $261 million, respectively. Sweeteners and Starches had another strong quarter, with solid earnings growth over the prior year in both North America and EMEA. Lower year-over-year results in Bioproducts due to lower ethanol margins were partially mitigated by favorable risk management, ADM said.

Oilseeds Processing profit eased 4.5% in the full year to $841 million, while fourth-quarter profit fell 16% to $202 million. Crushing and Origination results were lower due to weak crush margins, despite strong crush volumes and continued growth in demand. Origination results in South America were impacted by weak margins.

“Throughout the quarter, we continue to see the indicators of improving global demand for soybean meal as the effects of alternate proteins diminish and livestock numbers continue to increase,” Ray Guy Young, executive vice-president and chief financial officer, said during the conference call with analysts.

Soybeans
ADM's Oilseeds Processing profit eased 4.5% in the full year to $841 million.
 

Year-over-year operating profit in the Ag Services segment increased 2% in fiscal 2017 to $585 million, while fourth-quarter profit was up 23%, to $301 million.

“Our global trade team executed well, delivering positive results for the third consecutive quarter, and we are continuing to see good contributions from our investments in destination marketing, including in Egypt, in Israel, where we have expanded our capabilities in recent years,” Mr. Young said.

Merchandising and Handling earnings increased 32% in fiscal 2017. The lack of competitiveness of U.S. grain exports was offset by solid performance in Global Trade, strong destination marketing gains, and insurance and other income.

Meanwhile, Milling and Other earnings fell 12% year-over-year due to lower volumes and margins.

Transportation results decreased from the prior-year period, due to lower barge loadings and freight values.

Refining, Packaging, Biodiesel and Other experienced lower earnings versus the fourth quarter of 2016, due primarily to weaker biodiesel margins, partially offset by strong refining and packaging results.

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