Archer Daniels Midland Company Reports Second Quarter Earnings of $ .88 Per Share
Archer Daniels Midland Company Reports Second Quarter Earnings of $ .88 Per Share
2/2/2010
ADM Team Leveraged Geographic Scope and Diversity of Asset Base to Deliver Strong Results
DECATUR, Ill.--(BUSINESS WIRE)--Archer Daniels Midland Company (NYSE:ADM) today announced earnings of $ 567 million and net sales of $ 15.9 billion for the quarter ended December 31, 2009.
“I’m very pleased with the performance of our people and with our results this quarter,” said Chairman of the Board and Chief Executive Officer Patricia Woertz. “While our earnings, in total, were comparable to last year’s strong second quarter, the market conditions and the mix of earnings were markedly different. This, once again, demonstrates the ability of the ADM team to utilize the geographic scope and diversity of our asset base to create value for our stockholders.”
- 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.
- Financial Highlights
| (Amounts in millions, except per share data and percentages) | ||||||||||||||||
| Quarter Ended | Six Months Ended | |||||||||||||||
| December 31 | December 31 | |||||||||||||||
| 2009 | 2008 | % Change | 2009 | 2008 | % Change | |||||||||||
| Net sales | $ | 15,913 | $ | 16,673 | (5%) | $ | 30,834 | $ | 37,833 | (18%) | ||||||
| Segment operating profit | $ | 970 | $ | 815 | 19% | $ | 1,744 | $ | 1,991 | (12%) | ||||||
| Net earnings attributable to ADM | $ | 567 | $ | 578 | (2%) | $ | 1,063 | $ | 1,623 | (35%) | ||||||
| Earnings per share | $ | 0.88 | $ | 0.90 | (2%) | $ | 1.65 | $ | 2.52 | (35%) | ||||||
| Average number of shares outstanding | 645 | 643 | 644 | 644 | ||||||||||||
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.
A summary of segment operating profit and net earnings is as follows:
| Quarter ended | Six months ended | ||||||||||||||||||||||||
| December 31 | December 31 | ||||||||||||||||||||||||
| 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||
| Oilseeds Processing | $ | 352 | $ | 319 | $ | 33 | $ | 636 | $ | 829 | $ | (193 | ) | ||||||||||||
| Corn Processing | 290 | 29 | 261 | 478 | 147 | 331 | |||||||||||||||||||
| Agricultural Services | 150 | 462 | (312 | ) | 325 | 890 | (565 | ) | |||||||||||||||||
| Other | 178 | 5 | 173 | 305 | 125 | 180 | |||||||||||||||||||
| Segment operating profit | 970 | 815 | 155 | 1,744 | 1,991 | (247 | ) | ||||||||||||||||||
| Corporate | (186 | ) | 2 | (188 | ) | (243 | ) | 312 | (555 | ) | |||||||||||||||
| Earnings before income taxes | 784 | 817 | (33 | ) | 1,501 | 2,303 | (802 | ) | |||||||||||||||||
| Income taxes | (223 | ) | (238 | ) | 15 | (443 | ) | (678 | ) | 235 | |||||||||||||||
| Net earnings including noncontrolling interests | 561 | 579 | (18 | ) | 1,058 | 1,625 | (567 | ) | |||||||||||||||||
| Less: Net earnings (losses) attributable to noncontrolling interests |
(6 |
) |
1 |
7 |
(5 |
) |
2 |
7 | |||||||||||||||||
| Net earnings attributable to ADM | $ | 567 | $ | 578 | $ | (11 | ) | $ | 1,063 | $ | 1,623 | $ | (560 | ) | |||||||||||
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
| Quarter ended | Six months ended | ||||||||||||||||||||
| December 31 | December 31 | ||||||||||||||||||||
| 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||
| (in millions) | |||||||||||||||||||||
| Crushing and origination | $ | 193 | $ | 187 | $ | 6 | $ | 328 | $ | 526 | $ | (198 | ) | ||||||||
| Refining, packaging, biodiesel and other | 76 | 86 | (10 | ) | 146 | 192 | (46 | ) | |||||||||||||
| Asia | 83 | 46 | 37 | 162 | 111 | 51 | |||||||||||||||
| Total Oilseeds Processing | $ | 352 | $ | 319 | $ | 33 | $ | 636 | $ | 829 | $ | (193 | ) | ||||||||
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
| Quarter ended | Six months ended | ||||||||||||||||||||
| December 31 | December 31 | ||||||||||||||||||||
| 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||
| (in millions) | |||||||||||||||||||||
| Sweeteners and starches | $ | 171 | $ | 140 | $ | 31 | $ | 365 | $ | 205 | $ | 160 | |||||||||
| Bioproducts | 119 | (111 | ) | 230 | 113 | (58 | ) | 171 | |||||||||||||
| Total Corn Processing | $ | 290 | $ | 29 | $ | 261 | $ | 478 | $ | 147 | $ | 331 | |||||||||
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
| Quarter ended | Six months ended | ||||||||||||||||||||
| December 31 | December 31 | ||||||||||||||||||||
| 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||
| (in millions) | |||||||||||||||||||||
| Merchandising and handling | $ | 103 | $ | 385 | $ | (282 | ) | $ | 260 | $ | 770 | $ | (510 | ) | |||||||
| Transportation | 47 | 77 | (30 | ) | 65 | 120 | (55 | ) | |||||||||||||
| Total Agricultural Services | $ | 150 | $ | 462 | $ | (312 | ) | $ | 325 | $ | 890 | $ | (565 | ) | |||||||
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
| Quarter ended | Six months ended | ||||||||||||||||||||
| December 31 | December 31 | ||||||||||||||||||||
| 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||
| (in millions) | |||||||||||||||||||||
| Processing | $ | 159 | $ | 51 | $ | 108 | $ | 266 | $ | 154 | $ | 112 | |||||||||
| Financial | 19 | (46 | ) | 65 | 39 | (29 | ) | 68 | |||||||||||||
| Total Other | $ | 178 | $ | 5 | $ | 173 | $ | 305 | $ | 125 | $ | 180 | |||||||||
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
| Quarter ended | Six months ended | ||||||||||||||||||||||||
| December 31 | December 31 | ||||||||||||||||||||||||
| 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||
| LIFO credit (charge) | $ | (54 | ) | $ | 123 | $ | (177 | ) | $ | 22 | $ | 576 | $ | (554 | ) | ||||||||||
| Interest expense - net | (71 | ) | (42 | ) | (29 | ) | (136 | ) | (70 | ) | (66 | ) | |||||||||||||
| Corporate costs | (70 | ) | (35 | ) | (35 | ) | (139 | ) | (129 | ) | (10 | ) | |||||||||||||
| Other | 9 | (44 | ) | 53 | 10 | (65 | ) | 75 | |||||||||||||||||
| Total Corporate | $ | (186 | ) | $ | 2 | $ | (188 | ) | $ | (243 | ) | $ | 312 | $ | (555 | ) | |||||||||
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.
Conference Call Information
Archer Daniels Midland Company will host a conference call and audio webcast at 8:30 a.m. Central Time on Tuesday, February 2, 2010, to discuss financial results and provide a Company update. A financial summary slide presentation will be available to download approximately 60 minutes prior to the call. To listen to the call via the Internet or to download the slide presentation, go to www.adm.com/webcast. To listen by telephone, dial 800-299-7635 or 617-786-2901; the access code is 75645282. Replay of the call will be available beginning at 11:30 a.m. Central Time on February 2 to February 9, 2010. To listen to the replay by telephone, dial 888-286-8010 or 617-801-6888; the access code is 72817894. To listen to the replay online, visit www.adm.com/webcast.
About ADM
Every day, the 28,000 people of Archer Daniels Midland Company (NYSE:ADM) turn crops into renewable products that meet the demands of a growing world. At more than 230 processing plants, we convert corn, oilseeds, wheat and cocoa into products for food, animal feed, chemical and energy uses. We operate the world’s premier crop origination and transportation network, connecting crops and markets in more than 60 countries. Our global headquarters is in Decatur, Illinois, and our net sales for the fiscal year ended June 30, 2009, were $69 billion. For more information about our Company and our products, visit www.adm.com.
| Archer Daniels Midland Company | ||||||||||||||||
| Consolidated Statements of Earnings | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Quarter ended | Six months ended | |||||||||||||||
| December 31 | December 31 | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| (in millions, except per share amounts) | ||||||||||||||||
| Net sales and other operating income | $ | 15,913 | $ | 16,673 | $ | 30,834 | $ | 37,833 | ||||||||
| Cost of products sold | 14,860 | 15,461 | 28,808 | 34,754 | ||||||||||||
| Gross profit | 1,053 | 1,212 | 2,026 | 3,079 | ||||||||||||
| Selling, general and administrative expenses | 358 | 337 | 712 | 746 | ||||||||||||
| Other (income) expense – net | (89 | ) | 58 | (187 | ) | 30 | ||||||||||
| Earnings before income taxes | 784 | 817 | 1,501 | 2,303 | ||||||||||||
| Income taxes | 223 | 238 | 443 | 678 | ||||||||||||
| Net earnings including noncontrolling interests | 561 | 579 | 1,058 | 1,625 | ||||||||||||
| Less: Net earnings (losses) attributable to noncontrolling interests | (6 | ) | 1 | (5 | ) | 2 | ||||||||||
| Net earnings attributable to ADM | $ | 567 | $ | 578 | $ | 1,063 | $ | 1,623 | ||||||||
| Diluted earnings per common share | $ | .88 | $ | .90 | $ | 1.65 | $ | 2.52 | ||||||||
| Average number of shares outstanding | 645 | 643 | 644 | 644 | ||||||||||||
| Other (income) expense - net consists of: | ||||||||||||||||
| Interest expense | $ | 105 | $ | 130 | $ | 203 | $ | 268 | ||||||||
| Investment income | (36 | ) | (48 | ) | (66 | ) | (102 | ) | ||||||||
| Net gain on marketable securities transactions | (6 | ) | – | (7 | ) | (9 | ) | |||||||||
| Equity in earnings of unconsolidated affiliates | (139 | ) | (93 | ) | (291 | ) | (216 | ) | ||||||||
| Other – net | (13 | ) | 69 | (26 | ) | 89 | ||||||||||
| $ | (89 | ) | $ | 58 | $ | (187 | ) | $ | 30 | |||||||
| Archer Daniels Midland Company | |||||||||||||||
| Segment Operating Analysis | |||||||||||||||
| (unaudited) | |||||||||||||||
| Quarter ended | Six months ended | ||||||||||||||
| December 31 | December 31 | ||||||||||||||
| 2009 | 2008 | 2009 | 2008 | ||||||||||||
| (in millions) | |||||||||||||||
| Net sales and other operating income | |||||||||||||||
| Oilseeds Processing | $ | 4,880 | $ | 5,296 | $ | 11,238 | $ | 13,068 | |||||||
| Corn Processing | 2,029 | 1,853 | 3,945 | 4,094 | |||||||||||
| Agricultural Services | 7,640 | 8,141 | 12,962 | 17,710 | |||||||||||
| Other | 1,364 | 1,383 | 2,689 | 2,961 | |||||||||||
| Total net sales and other operating income | $ | 15,913 | $ | 16,673 | $ | 30,834 | $ | 37,833 | |||||||
| Quarter ended | Six months ended | ||||||||||||||
| December 31 | December 31 | ||||||||||||||
| 2009 | 2008 | 2009 | 2008 | ||||||||||||
| (in millions) | |||||||||||||||
| Segment Operating profit (loss) | |||||||||||||||
| Oilseeds Processing (3) | $ | 352 | $ | 319 | $ | 636 | $ | 829 | |||||||
| Corn Processing | 290 | 29 | 478 | 147 | |||||||||||
| Agricultural Services (3) | 150 | 462 | 325 | 890 | |||||||||||
| Other (1) (3) | 178 | 5 | 305 | 125 | |||||||||||
| Total segment operating profit | 970 | 815 | 1,744 | 1,991 | |||||||||||
| Corporate (2) (3) | (186 | ) | 2 | (243 | ) | 312 | |||||||||
| Earnings before income taxes | $ | 784 | $ | 817 | $ | 1,501 | $ | 2,303 | |||||||
| Quarter ended | Six months ended | ||||||||||||||
| December 31 | December 31 | ||||||||||||||
| 2009 | 2008 | 2009 | 2008 | ||||||||||||
| (in 000s metric tons) | |||||||||||||||
| Processing volumes | |||||||||||||||
| Oilseeds Processing | 7,799 | 7,136 | 14,172 | 14,160 | |||||||||||
| Corn Processing | 4,767 | 4,416 | 9,264 | 9,004 | |||||||||||
| Wheat, cocoa and malt | 1,874 | 1,847 | 3,908 | 3,725 | |||||||||||
| Total processing volumes | 14,440 | 13,399 | 27,344 | 26,889 | |||||||||||
| (1) Includes asset impairment charges of $ 9 million in Other for the quarter and six months ended December 31, 2008. | |||||||||||||||
| (2) Includes LIFO charge of $ 54 million for the quarter and LIFO credit of $ 22 million for the six months ended December 31, 2009. Includes LIFO credit of $ 123 million for the quarter and $ 576 million for the six months ended December 31, 2008. | |||||||||||||||
| (3) Includes gain on asset and business disposal of $ 7 million in Corporate for the quarter and $ 3 million, $ 2 million, $ 5 million and $ 7 million in Oilseeds, Agricultural Services, Other and Corporate, respectively, for the six months ended December 31, 2008. | |||||||||||||||
| Archer Daniels Midland Company | ||||||||
| Summary of Financial Condition | ||||||||
| (unaudited) | ||||||||
| December 31 | June 30 | |||||||
| 2009 | 2009 | |||||||
| (in millions) | ||||||||
| NET INVESTMENT IN | ||||||||
| Working capital | $ | 11,255 | $ | 10,927 | ||||
| Property, plant, and equipment | 8,636 | 7,950 | ||||||
| Investments in and advances to affiliates | 2,693 | 2,459 | ||||||
| Long-term marketable securities | 651 | 626 | ||||||
| Other non-current assets | 1,161 | 1,139 | ||||||
| $ | 24,396 | $ | 23,101 | |||||
| FINANCED BY | ||||||||
| Short-term debt | $ | 221 | $ | 356 | ||||
| Long-term debt, including current maturities | 7,644 | 7,640 | ||||||
| Deferred liabilities | 1,736 | 1,452 | ||||||
| Shareholders' equity | 14,795 | 13,653 | ||||||
| $ | 24,396 | $ | 23,101 | |||||
| Summary of Cash Flows | ||||||||
| (unaudited) | ||||||||
| Six Months Ended | ||||||||
| December 31 | ||||||||
| 2009 | 2008 | |||||||
| (in millions) | ||||||||
| Operating Activities | ||||||||
| Net earnings | $ | 1,058 | $ | 1,625 | ||||
| Depreciation and amortization | 431 | 381 | ||||||
| Other – net | 171 | (434 | ) | |||||
| Changes in operating assets and liabilities | (280 | ) | 4,293 | |||||
| Total Operating Activities | 1,380 | 5,865 | ||||||
| Investing Activities | ||||||||
| Purchases of property, plant and equipment | (939 | ) | (1,069 | ) | ||||
| Proceeds from sales of businesses | – | 237 | ||||||
| Net assets of businesses acquired | (57 | ) | (24 | ) | ||||
| Other investing activities | 216 | (701 | ) | |||||
| Total Investing Activities | (780 | ) | (1,557 | ) | ||||
| Financing Activities | ||||||||
| Long-term debt borrowings | 10 | 102 | ||||||
| Long-term debt payments | (36 | ) | (16 | ) | ||||
| Net borrowings (payments) under lines of credit | (140 | ) | (2,698 | ) | ||||
| Purchases of treasury stock | – | (100 | ) | |||||
| Cash dividends | (180 | ) | (167 | ) | ||||
| Other | 8 | 9 | ||||||
| Total Financing Activities | (338 | ) | (2,870 | ) | ||||
| Increase in cash and cash equivalents | 262 | 1,438 | ||||||
| Cash and cash equivalents - beginning of period | 1,055 | 810 | ||||||
| Cash and cash equivalents - end of period | $ | 1,317 | $ | 2,248 | ||||
Archer Daniels Midland Company
David Weintraub, 217-424-5413
Director, External Communications
Dwight Grimestad, 217-424-4586
Vice President, Investor Relations