ADM Reports Higher Earnings in Q3
Net earnings for the third quarter increased $ 418 million due to a $ 442 million pretax increase in segment operating profit, a $ 30 million after-tax favorable impact from changing LIFO inventory valuations, and lower income tax expense, partially offset by debt-buyback costs of $ 47 million, after tax.
5 May 2010 --- Archer Daniels Midland Company (ADM) has reported net earnings of $ 421 million and segment operating profit of $ 696 million for the quarter ended March 31, 2010—increases of $ 418 million and $ 442 million, respectively, from the Company’s totals for the same period one year earlier.
Net earnings for the third quarter increased $ 418 million due to a $ 442 million pretax increase in segment operating profit, a $ 30 million after-tax favorable impact from changing LIFO inventory valuations, and lower income tax expense, partially offset by debt-buyback costs of $ 47 million, after tax. Segment operating profit for the year-ago quarter included $ 132 million of after-tax currency-derivative losses from the Company’s equity investee, Gruma S.A.B. de C.V. Last year’s third-quarter income tax expense included $ 97 million of deferred tax charges related to the restructuring of ADM’s investment in Wilmar International, Ltd.
Net earnings decreased 9 percent to $ 1.5 billion for the nine months ended March 31, 2010, due to a $ 315 million after-tax negative impact from changing LIFO inventory valuations, and debt-buyback charges of $ 47 million, after tax, partially offset by a $ 195 million pretax increase in segment operating profit. The Company’s effective income tax rate for the nine months declined to 27.6 percent, compared to 33.4 percent for the comparable period last year, due to changes in the geographic mix of pretax earnings and the absence of last year’s $ 97 million charge related to the restructuring of ADM’s investment in Wilmar International, Ltd.
Profit in ADM’s Oilseeds Processing segment increased $ 181 million for the quarter and decreased $ 12 million for the nine months. Crushing and origination results increased to $ 272 million for the quarter. With last year’s short South American soybean crop, ADM’s North American operations were able to run at higher utilization rates and realize improved margins and volumes. Refining, packaging, biodiesel and other results increased $ 14 million to $ 66 million for the quarter. Improved demand for biodiesel in Europe and South America helped drive these results. Oilseeds results in Asia were $ 67 million for the quarter, as results of ADM’s equity investee, Wilmar International, Ltd., continued to be strong. Last year’s third quarter reflected a gain of $ 18 million related to the sale of an equity investment.
Corn Processing results increased $ 55 million for the quarter and $ 386 million for the nine months. Sweeteners and starches operating profit decreased $ 101 million from the prior year to $ 45 million. This decrease reflects lower average selling prices that were only partially offset by lower net corn costs. These net corn costs were significantly impacted by mark-to-market losses and hedge accounting ineffectiveness related to corn futures.
Bioproducts profit in the quarter was up significantly from last year’s loss due to lower net corn costs and improved ethanol margins resulting from good ethanol demand driven by favorable gasoline blending economics. Results also reflected stronger lysine sales volumes and margins.
During the third quarter, ADM shipped the first commercial product from its joint-venture Mirel bioplastics plant and began commissioning its propylene glycol plant. Startup was completed at ADM’s Columbus ethanol dry mill, and work on the Cedar Rapids ethanol dry mill is going well, with the plant on-track to start up this summer.
Agricultural Services results increased $ 44 million for the quarter and decreased $ 521 million for the nine months. In the quarter, ADM saw a good global supply of grains and oilseeds and modestly improving demand. Merchandising and handling profit improved as global soybean demand was met primarily with U.S. supplies, due to last year’s short South American crop, giving ADM good asset utilization and margins. Earnings from transportation operations declined on lower barge-freight rates and reduced capacity utilization caused by weak demand.
Results from ADM’s Other business units increased $ 162 million for the quarter and $ 342 million for the nine months. Other processing businesses had higher results. Last year’s third quarter reflected a loss of $ 212 million for ADM’s share of foreign-currency-derivative losses of equity investee, Gruma S.A.B. de C.V. This quarter’s other processing earnings reflected improved results from ADM’s flour milling operations. Other processing earnings for the quarter include mark-to-market losses of $ 63 million related to certain forward sales commitments accounted for as derivatives, offsetting gains recorded in the preceding two quarters. Other financial results in the quarter increased $ 30 million due primarily to the absence of losses experienced last year in managed fund investments and captive insurance operations.
Corporate results decreased $ 51 million for the quarter—including $ 75 million in pretax costs related to debt buyback—and $ 606 million for the nine months. Declining commodity prices generated a $ 43 million decrease in ADM’s LIFO inventory valuation reserves this quarter, compared to a $ 5 million increase a year ago. For the nine months, the change in LIFO inventory valuation reserves resulted in a credit of $ 65 million this year, compared to a $ 571 million credit last year.
