CHICAGO — Challenging market conditions throughout 2016 led to a 31% decline in income for Archer Daniels Midland Co. in fiscal 2016. Net earnings attributable to the company for the year-ended Dec. 31, 2016, were $1,279 million, equal to $2.16 per share on the common stock, down from $1,849 million, or $2.98 per share, in the same period a year ago.
Net revenue also decreased during the year, falling nearly 8% to $62,346 million from $67,702 million a year ago. In the fourth quarter, net earnings fell 41% to $424 million from $718 million in the same period a year ago.
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| Juan Luciano, c.e.o. and chairman of ADM |
“We capitalized on an improved environment, delivering stronger fourth-quarter performance after working through difficult market conditions earlier in the year,” Juan Luciano, chief executive officer and chairman of ADM, said during a Feb. 7 conference call with analysts. “Ag Services saw strong results in North America and weak results from the global trade desk. The Corn business delivered a good quarter, led by sweeteners and starches, and saw solid results from bioproducts. Oilseeds results were comparable to last year despite lower global crush margins.”
Operating profit in the Agricultural Services segment totaled $602 million in fiscal 2016, down 16% from $714 million a year ago. Revenues in the segment decreased slightly to $27,893 million from $29,682 million.
“Ag Services results were up year-over-year as the business continued to benefit from the competitiveness of U.S. crops,” Mr. Luciano said. “Merchandising and handling results were up over the prior-year quarter. The North American team capitalized on strong global demand for U.S. commodities in an improved margin environment. Our global trade desk reported a loss for the quarter. The transportation team performed well showing the benefits of good execution and the strength of our integrated transportation model in a challenging market environment where North American freight rates were low.”
Milling and Other had another strong quarter driven by solid product margins — including wheat merchandising and handling income — and sales volumes.
In the Corn Processing segment, operating profit jumped 25% to $811 million, up from $648 million a year ago. Revenues for Corn Processing slipped to $9,466 million from $9,995 million. Processing volumes decreased 3.6% from 22,273,000 tonnes, down from 23,126,000 tonnes a year ago.
“Corn Processing again showed strong results,” Mr. Luciano said. “The Sweeteners & Starches team turned in a strong performance with results up as the group capped off an exceptionally strong year for the business. Growth in volumes both in North America and internationally, ongoing production efficiency improvements and lower raw material costs all contributed to good margins for the quarter.”
ADM’s expanding global foot print continued in the last quarter of 2016. The company finished integrating two corn wet mills in Adana, Turkey, and Razgrad, Bulgaria, along with a 50% ownership stake in a corn wet mill in Szabadegyháza, Hungary, that originally were acquired in November 2015.
Operating profit in the Oilseeds Processing unit fell 44% to $871 million from $1,574 million due to a sharp decline in the company’s crushing and origination results. Revenues for the segment also were lower, falling to $22,152 million from $25,217 million. Oilseed processing volumes decreased 1.3% to 33,788,000 tonnes, down from 34,260,000 tonnes in the same period of last year.
“While global soybean crush margins were more stable throughout the fourth quarter of 2016 compared to 2015, we continue to see ample supplies of alternative proteins competing with soybean meal in the global market, keeping margins constrained despite the relatively healthy global demand environment,” Mr. Luciano said. “In Brazil, farmers were less aggressive selling their new crop soybeans, which resulted in lower new crop ownership versus last year. Softseeds performance improved due to higher volumes and margins driven by more favorable seed supply and better demand for oil, as well as utilization of our flex capacity.”
Operating profit for Wild Flavors and Specialty Ingredients (WFSI) climbed 21% to $286 million, up from $280 million a year ago. Revenues slightly increased to $2,427 million from $2,407 million.
“When I look at the second full year of WFSI business, I continue to see encouraging progress as we are building this new integrated platform,” Mr. Luciano said. “We have been very pleased with the performance from the Wild flavors business.”
Mr. Luciano also discussed ADM’s accomplishments in the past year and how the company continues to grow and strengthen. The company achieved almost $700 million of monetizations, which included $285 million resulting from the December sale of ADM’s 19.9% equity stake in GrainCorp. ADM also completed the acquisition of Crosswind Industries, a pet food manufacturer, and announced the construction of two new plants for its animal nutrition business.
“More broadly for 2017, we expect an improved operating environment for Ag Services over 2016,” Mr. Luciano said. “Grain carries are developing in North America; global demand for grain is strong and we are continuing to implement changes for the global trade desk to improve performance throughout the year. In addition, we are continuing to drive increased volumes by expanding our supply chain direct to customer.”
