Archer Daniels Midland Reports Solid Second Quarter Results
“Our balance sheet is strong, and we are focused on managing our business in these challenging markets while continuing to execute our strategy of building long-term shareholder value through strengthening and growing our value chain.”
04/02/09 Archer Daniels Midland Company announced net earnings of $ 585 million for the quarter ended December 31, 2008, up 24 % from the same period a year ago. Net sales and other operating income increased 1 % to $ 16.7 billion.
“Our insight into market dynamics and our core competencies in risk and cost management enabled our team to deliver strong results for the quarter as we saw a weakening global demand and margin environment,” said Chairman of the Board and Chief Executive Officer Patricia Woertz. “Our balance sheet is strong, and we are focused on managing our business in these challenging markets while continuing to execute our strategy of building long-term shareholder value through strengthening and growing our value chain.”
- Net earnings for the quarter ended December 31, 2008 increased 24 % to $ 585 million - $ .91 per share from $ 473 million - $ .73 per share last year.
- Net sales and other operating income increased 1 % to $ 16.7 billion for the quarter ended December 31, 2008. Higher average selling prices resulting primarily from year-over-year increases in underlying commodity costs were offset by decreased sales volumes.
- Segment operating profit for the quarter decreased 15 % to $ 815 million from $ 955 million last year.
• Oilseeds Processing operating profit increased due principally to improved results in all geographic regions, excluding South American fertilizer.
• Corn Processing operating profit decreased due principally to weaker ethanol operating conditions resulting in decreased bioproducts results.
• Agricultural Services operating profit increased due primarily to improved merchandising and handling results.
• Other operating profit decreased due principally to a non-cash operating loss related to the Company’s investment in Gruma S.A.B. de C.V. and to increased captive insurance loss provisions.
Discussion of Operations
Net sales and other operating income increased 1 % to $ 16.7 billion for the quarter and increased 29 % to $ 37.8 billion for the six months. For the quarter, increased average selling prices, resulting primarily from higher underlying commodity costs, were offset by decreased sales volumes and foreign exchange translation impacts. Year-to-date net sales and other operating income increased 29 % due principally to sharp rises in underlying commodity costs partially offset by decreased sales volumes.
Net earnings increased $ 112 million for the quarter and $ 722 million for the six months due principally to the positive impact on corporate results of the changes in LIFO inventory valuations. Segment operating profit decreased $ 140 million for the quarter and increased $ 239 million for the six months.
Oilseeds Processing Operating Profit
Oilseeds Processing operating profit increased $100 million for the quarter and $ 401 million for the six months. Crushing and origination results increased $ 46 million for the quarter and $254 million for the six months due principally to improved crushing and origination margins partially offset by lower fertilizer sales volumes and margins. Refining, packaging, biodiesel and other results increased $40 million for the quarter and $84 million for the six months. Biodiesel results increased for both the quarter and six months primarily related to the start up of a new facility in Brazil. Refining, packaging, biodiesel and other results also improved due to increased selling prices and the absence of asset abandonment charges of $ 15 million and $ 18 million included in the quarter and six months ended December 31, 2007, respectively. Asia results increased $14 million for the quarter and $63 million for the six months due to increased earnings related to equity investments, principally Wilmar International Limited.
Corn Processing Operating Profit
Corn Processing operating profit decreased $ 246 million for the quarter and $ 381 million for the six months. Sweetener and starches operating profit decreased $10 million for the quarter and $112 million for the six months due principally to sharply higher net corn and increased manufacturing costs partially offset by higher average selling prices. Bioproducts operating profit decreased $236 million for the quarter and $269 million for the six months due principally to a significant decline in ethanol margins resulting from sharply higher net corn and increased manufacturing costs, lower average selling prices and inventory write-downs.
Agricultural Services Operating Profit
Agricultural Services operating profit increased $ 147 million for the quarter and $346 million for the six months due principally to improved global merchandising and handling margins resulting from opportunities created by volatile commodity and freight market conditions. Transportation results increased for the quarter and six months due principally to higher barge freight rates.
Other Operating Profit
Other operating profit decreased $ 141 million for the quarter and $ 127 million for the six months. Wheat, cocoa, malt and sugar operating profit decreased $27 million for the quarter and increased $ 38 million for the six months due principally to lower equity earnings from the Company’s investment in Gruma S.A.B. de C.V. related to foreign currency derivative losses partially offset by improved wheat and cocoa processing margins. Financial operating profit decreased $114 million for the quarter and $165 million for the six months primarily due to increased captive insurance loss provisions, decreased interest income of the Company’s brokerage services business and decreased gains from sales of marketable securities.
Corporate Results
Corporate results increased $ 281 million for the quarter and $ 750 million for the six months due principally to LIFO credits of $ 123 million for the quarter and $ 576 million for the six months ended December 31, 2008 compared to LIFO charges of $225 million and $307 million for the quarter and six months ended December 31, 2007, respectively. Investment (expense) income decreased $ 70 million for the quarter and $ 132 million for the six months primarily related to increased interest expense and decreased interest income, partially offset by increased capitalized interest on construction projects.
