ADM Reports First Quarter Adjusted Earnings of $0.42 per Share

posted by AJOT | May 03 2016 at 10:20 AM | International Trade

Net earnings of $230 million, or $0.39 per share
Challenging market conditions continued into the quarter
Continued to actively manage portfolio
Market dynamics could present opportunities in second half of the year

CHICAGO - Archer Daniels Midland Company (NYSE: ADM) today reported financial results for the quarter ended Mar. 31, 2016. The company reported adjusted earnings per share1 of $0.42, down from $0.78 in the same period last year. Included in these results was a $0.08 per share loss related to updated portfolio valuations in an investment joint venture. Adjusted segment operating profit1 was $573 million, down 36 percent from $892 million in the year-ago period. Net earnings for the quarter were $230 million, or $0.39 per share, and segment operating profit1 was $573 million. “Challenging market conditions continued in the first quarter, particularly affecting Ag Services,” said ADM Chairman and CEO Juan Luciano. “Low U.S. export volumes and weak margins continued, and in the quarter, poor results from the global trade desk impacted results for Ag Services. Results for Corn improved compared to the first quarter one year ago, led by a strong performance in sweeteners and starches. For Oilseeds, global protein demand remained solid. However, first quarter results were impacted by weak global crush margins. WFSI results were in line with expectations. “During the quarter, we continued to advance our strategic plan. We acquired a controlling stake in Harvest Innovations, enhancing ADM’s plant protein, gluten-free ingredient portfolio. We announced the purchase of a corn wet mill in Morocco that will further expand our global sweeteners footprint. We opened our new, state-of-the-art flavor creation, application and customer innovation center in Cranbury, New Jersey. And, as part of our ongoing portfolio management efforts, we reached an agreement to sell our Brazilian sugarcane ethanol operations. In addition, we achieved almost $50 million of run-rate savings in the quarter and remain on track to meet our $275 million target by the end of the calendar year. We repurchased about $300 million of shares in the quarter as we continue to execute on our balanced capital allocation framework. “The first half of the year continues to present a challenging environment. However, we are cautiously optimistic that reduced South American soybean and corn production could bring improved soybean crush margins and merchandising opportunities in the second half of the year.” First Quarter 2016 Highlights Adjusted EPS of $0.42 excludes a $0.02 per share charge related to LIFO and $0.01 per share in impairments. Included in adjusted EPS is a $0.08 per share loss related to updated portfolio investment valuations in CIP, an investment joint venture. Agricultural Services decreased $118 million compared to a strong quarter last year amid lower North American export volumes and margins, fewer global merchandising and transportation opportunities, as well as unfavorable Global Trade Desk merchandising positions. Corn Processing increased $2 million as strong results for sweeteners and starches were offset by weaker lysine results and lower ethanol margins. Oilseeds Processing decreased $231 million compared to a very strong year-ago period, as higher Argentine crush run rates weakened global margins. WILD Flavors and Specialty Ingredients earned $70 million on solid performance from WILD Flavors and higher results from specialty ingredients. Trailing four-quarter-average adjusted ROIC was 6.3 percent, 30 basis points below our annual WACC of 6.6 percent. The company returned $0.5 billion to shareholders through dividends and share repurchases. 1 Non-GAAP financial measures; see pages 4 and 9 for explanations and reconciliations, including after-tax amounts. Ag Services Earnings Decline on Reduced Merchandising Opportunities Agricultural Services operating profit was $76 million, down $118 million from the year-ago quarter. Merchandising and handling earnings declined $83 million to $24 million, primarily due to a challenging merchandising environment that continued due to weak U.S. export competitiveness, lower North American volumes and margins, and a quarterly loss for the global trade desk compared to positive results last year. Losses from the global trade desk were caused in part by unfavorable merchandising positions. Transportation results declined $28 million to $4 million, due to low U.S. exports and high water conditions that resulted in lower barge volumes and higher operating costs. Milling and other had a solid quarter, but results were down $7 million to $48 million due to lower grain and feed margins. Corn Processing Earnings Up, Led by Sweeteners and Starches Results Corn Processing operating profit increased from $127 million to $129 million. Sweeteners and starches results improved $56 million to $141 million as the business continued to perform well, with an improved cost environment driven by strong capacity utilization. Bioproducts results were down from $42 million to a loss of $12 million, due primarily to the continued challenging conditions in the global lysine market. In addition, ethanol margins continue to be impacted by high industry production levels that caused inventories to build throughout the quarter. Oilseeds Earnings Lower vs. Exceptionally Strong Year-Ago Quarter Oilseeds operating profit of $261 million decreased $231 million from the strong year-ago results. Crushing and origination operating profit of $120 million declined $214 million from last year’s high levels. Global soybean crush and origination results were down significantly due to lower global margins resulting from increased Argentine soy meal exports and significantly reduced U.S. meal exports. In addition, lower softseed crush volumes and weaker Brazilian commercialization, which slowed throughout the quarter, negatively impacted results. Refining, packaging, biodiesel and other generated a profit of $79 million for the quarter, down $11 million from year-ago results, with stronger results from North America and Europe offset by weaker results in South America. With the sale of the Cocoa business in October 2015, results decreased $24 million compared to last year. Oilseeds results in Asia for the quarter declined $6 million from the year-ago period, due primarily to Wilmar’s lower fourth quarter earnings. WFSI Earns $70 million, Up vs. Last Year WFSI operating profit was $70 million in the first quarter. Results included operational start-up costs for the Tianjin Fibersol facility in China and the Campo Grande specialty protein complex in Brazil. Excluding these start-up costs, results improved by about $5 million from prior year results with solid performance from WILD Flavors and higher results from specialty proteins. With more than 900 revenue synergy projects identified, WFSI remains on track to achieve its 2016 targets. Other Items of Note As additional information to help clarify underlying business performance, the tables on page 9 include both adjusted EPS as well as adjusted EPS excluding significant timing effects. Included in Corporate results was a $50 million loss related to updated portfolio investment valuations in Compagnie Industrielle et Financiere des Produits Amylaces SA (CIP). ADM holds a 43.7 percent equity interest in CIP, an investment joint venture held since the late 1980s. Conference Call Information ADM will host a webcast on May 3, 2016, at 8 a.m. Central Time to discuss financial results and provide a company update. A financial summary slide presentation will be available to download approximately 60 minutes prior to the call. To listen to the webcast or to download the slide presentation, go to www.adm.com/webcast. A replay of the webcast will also be available for an extended period of time at www.adm.com/webcast. Forward-Looking Statements Some of the above statements constitute forward-looking statements. ADM’s filings with the SEC provide detailed information on such statements and risks, and should be consulted along with this release. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements.