Despite fall in sales, ADM doubles income on strong season

05 August 2014 13:32 Source:ICIS News

(adds updates for divisions performance from paragraph 8)

LONDON (ICIS)--Archer Daniels Midland (ADM) net income for the second quarter of 2014 more than doubled year on year to $533m on the back of strong ethanol demand, a recovery of US grain exports and good demand for oilseeds products, the US commodities firm said on Tuesday.

The jump in net income is also related to the base it was coming from. In the second quarter of 2013, ADM reported a 21% fall in net income on the back of an inventory charge and foreign currency hedging losses related to its acquisition of Australia’s GrainCorp.

The company's second-quarter 2014 sales fell by 4.6% to $21.5bn year on year.

ADM’s shareholders will receive diluted earnings per share (EPS) of $0.81, compared to $0.34 in the second quarter of 2013.

The company is optimistic about the remaining months of 2014 and said it expects large harvests both in North America and Europe.

“[In Q2] We capitalised on robust ethanol demand, a recovery of US grain export volumes and continuing strong demand for oilseeds products,” said ADM CEO Patricia Woertz.

“Today, the crops in North America and Europe are developing nicely, so we are preparing for what could be very large harvests,” she added.

The company reported better operating profits in all divisions. The most notable jump came from the Agricultural Services division, which saw operating profit more than double to $203m on the back of improved 'merchandising and handling'.

That subdivision, in fact, increased its profit from $14m in the second quarter of 2013 to $115m in the same period of 2014 on the back of strong US export volumes, the partial recovery of a loss reserve and a continued improvement in international merchandising results, said the company.

Oilseeds Processing, on the other hand, registered operating profit of $327m, a slight increase from the $321m registered in the second quarter of 2013.

This division benefited from better results at its refining, packaging and biodiesel activities, and its cocoa business, although the biggest sub segment at the division, crushing and origination, saw its operating profit decline $22m to $163m.

“North and South American soybean crushing operations and North American canola crushing operations all saw good volumes and margins. [Although] those were offset by lower results from South American origination amid slower farmer selling,” said ADM.

Finally, the company’s corn processing activities saw operating profit increasing by $69m to $277m in the second quarter of 2014 compared to the same period a year earlier. The improvement came on the back of good performance at the sweeteners and starches subdivision, which kept “steady volumes with lower average selling prices offset by lower net corn costs,” said ADM.

On the back of good ethanol demand, the subdivision Bioproducts registered an operating profit of $141m, $44m more than a year earlier.

By Jonathan Lopez