ADM Q4 shows profit slump

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Archer Daniels Midland (ADM) reported a sharp drop in earnings for its fourth quarter. 

Details about ADM’s fiscal period, which ran through December 31, 2016, were released on Tuesday.

Net earnings for the quarter were $424m, down from the $718m recorded in Q4 2015 - a 41% decline. 

Elaborating on the results, ADM said its segment operating profit of $806m, as reported for the quarter, included charges of $16m related to asset impairment and restructuring activities. Prior-year segment operating profit included impairment and restructuring charges of $146m, in addition to a net gain of $212m on the sale of the global cocoa and chocolate businesses and a $185m gain on the revaluation of the company’s previously held investment in Eaststarch, added the company.

“With expected improvements across all of our businesses throughout the year and additional contributions from recent projects and new facilities as they ramp up, we are optimistic about improving results throughout 2017,” said Juan Luciano, ADM CEO, who went into greater detail on the company's performance during an earnings call.

Next steps for the Illinois-based company include continuing acquisitions, working on growth projects, improving run-rate cost savings and an ongoing focus on reducing capital intensity, he said.

“We anticipate significantly improved performance from ag services versus the year-ago quarter,” he said. “Unlike the first quarter of 2016, we expect US exports for both corn and [soy]beans to be competitive throughout the first quarter.”

Commodity challenges

The North American team capitalized on strong global demand for US commodities in an improved market, said the CEO.  “Ag services results were up year-over-year, as the business continued to benefit from the competitiveness of US crops,” said Luciano

But domestic results were tempered by losses on the global trade desk.

“We created the global trade desk in 2015 to better align our international merchandising and help drive higher merchandise volumes, and we saw a solid 2015,” he said. “Since then, we have seen some changes in the marketplace that require us to adjust our approach.”

Results for corn processing were reported as $249m for the quarter and $811m for the year, showing an improvement from both the quarterly $200m and annual $648 recorded for 2015, the company said. Results were buoyed by solid demand in North America and internationally.

“Our actions to expand the corn business’s global footprint are continuing to show results,” said Luciano. These include acquisitions in central and eastern Europe and efforts to expand geographically.

Animal nutrition also had improved performance, he said. The upturn was based in part on “operational improvements” in ADM’s lysine production process which were carried out in early 2016.

Results for oilseeds from 2016 were $233m for the quarter and $871m for the year, a drop from the $426m and $1.57bn Q4 and full year operating profits recorded in 2015. 

“While global soybean crush margins were more stable throughout the fourth quarter of 2016 compared to 2015, we continued to see ample supplies of alternative proteins competing with soybean meal in the global market, keeping margins constrained despite a relatively healthy global demand environment,” said Luciano.

A small crop in Brazil limited volume and margins, he said. And farmers were slower to sell new-crop soybeans.

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