ADM Reports Second Quarter 2012 Earnings of $80 Million

“It was a tough quarter,” said ADM Chairman and CEO Patricia Woertz. “The operating environment was challenging. Ongoing weakness in global oilseeds margins, lower results in corn and poor international merchandising results hurt our second quarter profits.

Feb 1 2012 --- Archer Daniels Midland Company reported financial results for the quarter ended Dec. 31, 2011. The company reported net earnings for the quarter of $80 million, or $0.12 per share, both down 89 percent from the same period one year earlier. Adjusted earnings per share1 which excludes the impact of LIFO, PHA-related impairment charges and other adjustments was $0.51 per share, 58 percent lower than the prior year quarter. Segment operating profit1, after excluding the impact of the PHA-related charges, was $648 million, down 52 percent from the record quarter a year ago.

“It was a tough quarter,” said ADM Chairman and CEO Patricia Woertz. “The operating environment was challenging. Ongoing weakness in global oilseeds margins, lower results in corn and poor international merchandising results hurt our second quarter profits.

“We remain optimistic about the long-term fundamentals of our business and the growing earnings power of our company,” added Woertz. “We continue to execute our plan to drive shareholder value: prioritizing capital projects, implementing productivity measures and returning capital to shareholders through increased dividends and share buybacks.”

Second Quarter 2012 Highlights
• Adjusted EPS of $0.51 excludes a LIFO charge of $0.06 and asset impairment costs of $0.33.
• Oilseeds Processing profit declined $72 million amid continued weakness in the global margin environment.
• Corn Processing results decreased $532 million, including $339 million in asset impairment charges related to the PHA renewable plastic production facility. Net corn costs for the quarter were high, partly due to economic hedging benefits recognized in the prior year.
• Agricultural Services profit decreased $268 million on poor international merchandising results and lower U.S. export volumes.
• Other businesses’ results decreased by $181 million, primarily due to a negative mark-to-market timing effect in cocoa processing. Mark-to-market losses this quarter were $127 million or approximately $0.13 per share.
• ADM returned $304 million to shareholders in the quarter, including buying back 6.5 million shares and increasing our quarterly dividend to 17.5 cents per share from 16 cents.

Adjusted EPS of 51 Cents, down 69 Cents

Adjusted EPS declined primarily due to the decrease in segment operating profit. This was partially offset by lower corporate expenses.

The effective tax rate for the quarter was 31 percent, bringing the cumulative rate to 30 percent.

Weak Global Oilseeds Margin Environment Continues to Impact Earnings

Oilseeds operating profit in the second quarter was $253 million, down $72 million from the same period one year earlier.

Crushing and origination operating profit fell $61 million to $139 million. Continued weakness in global oilseeds crushing margins, particularly in Europe, reduced overall results. The prior year’s quarter reflected a $71 million pretax gain related to the acquisition of the controlling interest in Golden Peanut. In addition, last year’s results included significant, negative mark-to-market timing effects which were not repeated this year.

Refining, packaging, biodiesel and other generated a profit of $74 million for the quarter, essentially flat from year-ago levels.

Oilseeds results in Asia for the quarter were in line with last year, principally reflecting ADM’s share of the results from its equity investee Wilmar International Limited.

Additional highlights from the quarter include:
• Integrating Elstar Oils S.A., the rapeseed crushing, refining, packaging and biodiesel business in Poland.
• Increasing efficiency at the Olomouc, Czech Republic, sunflower seed crushing and refining facility.
• Expanding ADM’s biodiesel presence with plans for a biodiesel plant at ADM’s Lloydminster, Canada, canola crushing facility.

Corn Processing Results Weaker, Reflecting PHA Impairment Charge

Corn processing reported an operating loss of $133 million, a decrease of $532 million from the same period one year earlier. The loss reflects $339 million in asset impairment charges related to the PHA renewable plastic production facility at Clinton, Iowa. Excluding the PHA impairment charges, corn processing operating profit of $206 million represented a $193 million reduction. Overall net corn costs were up, reflecting economic hedging benefits recognized in the prior year.

Sweeteners and starches operating profit decreased $46 million to $73 million. Export demand for sweeteners remained strong, though higher net corn costs more than offset higher average selling prices and increased sales volumes.

Bioproducts results in the quarter decreased $486 million to a loss of $206 million, including the $339 million PHA impairment charges and the absence of ownership gains from last year. Ethanol margins were good into December, when they declined significantly as industry production increased and exports declined.

Agricultural Services Down from Exceptionally Strong Year-ago Quarter

Agricultural Services operating profit was $158 million, down $268 million from the exceptionally strong period one year earlier.

Merchandising and handling earnings decreased on poor international merchandising results and a reduction in U.S. grain exports from the prior year’s record levels. Earnings from transportation operations were steady.

Other Businesses Deliver Strong Results, Excluding Significant Mark-to-Market Timing Effects

In the second quarter, profit from ADM’s Other businesses was $31 million, down $181 million from the same period one year earlier. Excluding net timing effects, the results in other processing were comparable to last year’s strong results.

In other processing, profits fell $150 million to $10 million. Results in the segment were impacted by $127 million in mark-to-market net timing losses in cocoa. Last year’s results reflected $23 million in net timing gains. The underlying performance in cocoa remained strong, driven by cocoa powder demand. Wheat milling results remained steady.

Other financial declined $31 million to $21 million on lower results of ADM’s captive insurance subsidiary.

Current Landscape Assessment

Worldwide demand for crops and agricultural products continues to grow at a stable rate. The South American harvest is beginning and is expected to help maintain adequate global soybean supplies. With adequate global crop supplies and a smaller U.S. crop last year, the U.S. lost export volumes. Global protein meal demand continues to grow, led by Asia, but crush margins, while improved, remain weak. U.S. ethanol margins are weak, with excess production amid reduced exports. U.S. corn sweetener capacity remains tight, driven by strong export demand.