Archer Daniels Midland Posts Decrease of 5% in Net Profit for Q2

Net sales decreased 5 % to $ 15.9 billion for the quarter and decreased 18 % to $ 30.8 billion for the six months. For the quarter, decreased average selling prices were offset by increased sales volumes and the impact of foreign exchange translation.

3 Feb 2010 --- Archer Daniels Midland Company announced earnings of $ 567 million and net sales of $ 15.9 billion for the quarter ended December 31, 2009.

*Net earnings attributable to ADM for the quarter ended December 31, 2009, were $ 567 million or $ .88 per share, down 2 % from last year’s second quarter.
*Net sales for the quarter ended December 31, 2009, were $ 15.9 billion, down 5 %. Increased sales volumes this quarter were offset by lower average selling prices, resulting primarily from year-over-year decreases in underlying commodity costs.
*Segment operating profit for the quarter ended December 31, 2009, was $ 970 million, up 19 %.
-Oilseeds Processing profit increased due to higher volumes and improved margins.
-Corn Processing profit increased on lower net corn costs and improved bioproducts results.
-Agricultural Services profit decreased as merchandising results were lower.
-Other operating profit increased due to improved results from cocoa and milling and the absence of last year’s Gruma and captive insurance losses.

Strategic Investment Activities

To drive earnings growth, the Company advanced its strategy to expand the size and global reach of its core model:
-The Company has started up its ethanol dry mill in Columbus, Nebraska, adding 300 million gallons of annual capacity.
-The Company has brought on line its Clinton, Iowa, cogeneration facility and started up the boilers at its Columbus, Nebraska, cogeneration facility. These new facilities will provide cost-effective process steam and electricity to adjacent corn wet and dry mills.

-The Company’s Brazilian JV sugarcane ethanol plant has been completed and is now operational.
-The Company integrated its newly acquired processing plant in Olomouc, Czech Republic, into its network, improving access to the Central European market and expanding its origination footprint.
-The Company started production at its Hazelton, Pennsylvania, cocoa plant.
-The Company continued construction at its bioplastics plant in Clinton, Iowa, propylene/ethylene glycol plant in Decatur, Illinois, and ethanol dry mill in Cedar Rapids, Iowa.
-The Company has completed expansion projects at a number of its existing North American oilseeds processing plants and at its Decatur, Illinois, corn wet milling plant.

Discussion of Operations

Net sales decreased 5 % to $ 15.9 billion for the quarter and decreased 18 % to $ 30.8 billion for the six months. For the quarter, decreased average selling prices were offset by increased sales volumes and the impact of foreign exchange translation. Year-to-date net sales decreased due principally to lower average selling prices. Average selling prices decreased in line with year-over-year declines in underlying commodity costs. Year-to-date total sales volumes were comparable.

Net earnings attributable to ADM decreased $ 11 million for the quarter primarily due to a $ 177 million pre-tax decline in Corporate results related to the change in LIFO inventory valuations partially offset by increased segment operating profit. Net earnings attributable to ADM decreased $ 560 million for the six months due to lower segment operating profit and lower Corporate results arising from a $ 554 million pre-tax change in LIFO inventory valuations. Income taxes decreased $ 15 million for the quarter and $ 235 million for the six months due principally to lower pre-tax earnings.

Oilseeds Processing Operating Profit

Oilseeds Processing operating profit increased $ 33 million for the quarter and decreased $ 193 million for the six months. Crushing and origination results increased $ 6 million for the quarter as stronger crush margins in North America and the absence of fertilizer inventory write-downs recognized last year were partially offset by weaker year-over-year European results. Year-to-date crushing and origination results decreased $ 198 million as margins declined from high prior-year levels due to lower demand for vegetable oil and protein meal. Global soybean supply shortages resulted in lower production volumes in the early part of this fiscal year.

Refining, packaging, biodiesel and other operating profit decreased $ 10 million for the quarter and $ 46 million for the six months. Lower European biodiesel margins for the quarter and six months were only partially offset by improved South American refining and biodiesel results. North American sales volumes and margins decreased for the quarter and six months. Oilseeds results in Asia increased $ 37 million for the quarter and $ 51 million for the six months as the Company’s investments, principally its equity interest in Wilmar International Limited, continued to perform well.

Corn Processing Operating Profit

Corn Processing operating profit increased $ 261 million for the quarter and $ 331 million for the six months. Sweeteners and starches operating profit increased $31 million for the quarter and $ 160 million for the six months due to lower net corn and manufacturing costs partially offset by lower sales volumes.

Bioproducts operating profit increased $ 230 million for the quarter and $ 171 million for the six months due to improved ethanol margins and higher sales volumes resulting from lower net corn costs, decreased manufacturing costs, and favorable gasoline blending economics. Bioproducts operating profit for the quarter also reflected increased sales volumes and margins for lysine, increased citric acid margins, and increased startup costs related to the Company’s new industrial chemicals plants, ethanol dry mills, sugarcane processing plant, and new co-generation facilities.

Agricultural Services Operating Profit

Agricultural Services operating profit decreased $ 312 million for the quarter and $ 565 million for the six months. Merchandising and handling results decreased $282 million for the quarter and $ 510 million for the six months. Demand for exports of U.S. soybeans was strong during the quarter. Enhanced volume and margin opportunities created by last year’s volatile commodity markets and tight credit markets did not recur during the quarter and six months ended December 31, 2009.
Transportation results decreased $ 30 million for the quarter and $ 55 million for the six months due to lower barge freight rates and decreased utilization levels resulting from the late, extended North American harvest.

Other Operating Profit

Other operating profit increased $ 173 million for the quarter and $ 180 million for the six months. Other processing operating profit increased $ 108 million for the quarter and $ 112 million for the six months due to increased equity earnings from the Company’s investment in Gruma S.A.B de C.V., improved global wheat milling margins, and increased cocoa processing earnings. Other processing earnings for the quarter and six months ended December 31, 2009, include mark-to-market gains of $ 46 million and $ 69 million, respectively related to certain forward sales commitments accounted for as derivatives.

Other financial operating profit increased $ 65 million for the quarter and $ 68 million for the six months due to the absence of losses experienced last year by the Company’s captive insurance business and improved results of the Company’s brokerage services business.

Corporate Results

Corporate results decreased $ 188 million for the quarter and $ 555 million for the six months. Market prices for LIFO-based inventories were generally higher for the quarter resulting in a $ 54 million increase in LIFO inventory reserves compared to a $ 123 million decrease in last year’s quarter. LIFO inventory reserves decreased $ 22 million for the six months ended December 31, 2009, compared to a $ 576 million decrease in the same period last year. Interest expense - net increased $ 29 million for the quarter and $ 66 million for the six months reflecting a reduction in corporate interest income caused by lower short-term interest rates and lower working capital requirements of the operating segments. Corporate costs for the quarter increased $ 35 million due to higher employee-related costs and commercial services expenses. Year-to-date corporate costs increased primarily due to higher commercial services expenses. Other principally represents the elimination of after-tax earnings of minority interests.

New Accounting Standards

Certain amounts in the prior year’s Consolidated Statement of Earnings, Segment Operating Analysis, Summary of Financial Condition, and Summary of Cash Flows have been restated and presentation formats have been modified to apply the requirements of new accounting standards ASC Topic 810, Consolidation and ASC Topic 470-20, Debt with Conversion and Other Options. Effective July 1, 2009, the Company adopted this amended guidance which requires retrospective application to all periods presented.