Grain News

ADM Reports 1Q Net Income of $269 Million, Down From $399 Million in 1Q 2012

Date Posted: May 1, 2013

Decatur, IL—Archer Daniels Midland Company (NYSE: ADM) reported May 1 financial results for the quarter ended March 31, 2013.

The company reported net earnings for the quarter of $269 million, or $0.41 per share, down from $0.60 per share in the same period one year earlier.

Adjusted earnings per share1 were $0.48, down from $0.78 in the same period last year.

Segment operating profit1 was $630 million.

“As expected, this was a challenging quarter, with agricultural services negatively impacted by the ongoing effects of last summer’s U.S. drought,” said ADM Chairman and CEO Patricia Woertz.

“In oilseeds, our earnings were reduced by challenges in Brazil and depressed margins in cocoa.

"Our ethanol business improved as declining inventories supported overall industry margins, and we began to see positive results from the actions we’ve been taking to improve the profitability of that business.

“We continue to manage through tight U.S. stocks of oilseeds and grains until the North American harvest.

"Demand for our products remains solid, and we will continue to leverage our global origination and processing network to serve the needs of our customers worldwide.”

Full ADM Report

First Quarter 2013 Highlights

• Adjusted EPS of $0.48 excludes approximately $34 million in pretax LIFO charges, or $0.03 per share, and a provision of $25 million, or $0.04 per share, related to the previously disclosed FCPA matter dating back to 2008 and earlier.

• Oilseeds Processing profit decreased $229 million due to significantly lower results from cocoa caused by industry margin pressures and weaker South American origination results.

• Corn Processing profit increased $20 million due to improved ethanol results. Sweeteners and starches results were negatively impacted by a $44 million pretax charge from corn hedge timing effects ($0.04 per share).

• Agricultural Services profit decreased $110 million as U.S. origination volumes declined.

Adjusted EPS of 48 Cents, down 30 Cents

Adjusted EPS decreased primarily due to lower segment operating profit. This quarter’s effective tax rate of 28 percent was in line with the same period last year.

Oilseeds Earnings Decline on Cocoa, South American Origination and North American Softseeds

Oilseeds operating profit in the first quarter was $313 million, down $229 million from the same period one year earlier.

Year-ago results included net favorable mark-to-market timing effects of about $60 million, while this quarter included minimal timing effects.

Crushing and origination operating profit was $156 million, down $108 million from the year-ago quarter.

In North America, softseed crushing results were down from last year’s strong results as tight supplies affected seed basis and capacity utilization.

North American soybean crushing results were strong in the quarter, but margins and production declined through the quarter amid weaker export meal demand and lower bean availability.

In South America, higher trucking costs and reluctant farmer selling negatively impacted results.

European crushing and origination results continued to recover, aided by reduced imports of North and South American meal.

Refining, packaging, biodiesel and other generated a profit of $108 million for the quarter, up $29 million, as U.S. biodiesel demand saw a modest recovery, offset by poor margin conditions in Europe.

Results included about $20 million in biodiesel blender’s credits, retroactive from 2012 blending.

Cocoa and other results decreased $181 million amid weaker press margins and the absence of last year’s $72 million favorable mark-to-market timing effect.

Press margins were negatively impacted by the addition of industry processing capacity, lower cocoa powder prices, and customer inventory reductions.

Oilseeds results in Asia for the quarter were up $31 million from the same period last year, principally reflecting ADM’s share of the improved results from Wilmar International Limited.

Corn Processing Results Reflect Improved Ethanol Conditions

Corn processing operating profit of $153 million represented an increase of $20 million from the same period one year earlier.

This quarter’s results included a $44 million negative timing effect related to open corn cash-flow hedges at quarter end (about $0.04 per share), up from $11 million in the same period last year.

Sweeteners and starches operating profit decreased $19 million to $76 million, and was improved when adjusted for corn hedge-program timing effects, as solid demand translated to tight sweetener industry capacity.

Bioproducts results increased $39 million to $77 million. Ethanol margins improved through the quarter as reduced industry production rates, lower levels of imports and steady domestic demand resulted in reduced inventories and improved margins.

Results also benefited from actions taken by ADM to improve the performance of its ethanol business.

Agricultural Services Pressured by Lower U.S. Volumes

Agricultural Services operating profit was $151 million, down $110 million from the same period one year earlier.

Merchandising and handling earnings declined $62 million to $86 million, due to lower volumes of U.S. origination and exports and lower execution margins in international merchandising.

Transportation results decreased $21 million to $6 million as lower U.S. exports reduced barge freight utilization.

Milling and other results remained steady, excluding last year’s $21 million equity income from Gruma.

ADM disposed of its ownership in Gruma in December 2012. The milling business continued to perform well.

Other Financial Results Improve

Operating profit from ADM’s Other Financial businesses was $13 million, up $31 million. Last year’s results had significant provisions for property and crop risk losses.

Provision for FCPA Matter

ADM is in discussions with the U.S. Department of Justice and the U.S. Securities and Exchange Commission regarding a previously disclosed FCPA matter dating back to 2008 and earlier, and expects a resolution sometime this year.

Based upon recent discussions, ADM believes it is appropriate to establish a provision of $25 million ($0.04 per share) to cover the potential assessments that may be imposed by these government agencies.

For more information, call 217-424-5413.

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