ADM: Reports First Quarter Adjusted EPS of 0.42 USD

Chicago / IL. (adm) Archer Daniels Midland Company (ADM) reported financial results for the quarter ended Mar. 31, 2016. The company reported adjusted earnings per share of 0.42 USD, down from 0.78 USD in the same period last year. Included in these results was a 0.08 USD per share loss related to updated portfolio valuations in an investment joint venture. Adjusted segment operating profit1 was 573 million USD, down 36 percent from 892 million USD in the year-ago period. Net earnings for the quarter were 230 million USD, or 0.39 USD per share, and segment operating profit was 573 million USD.

«Challenging market conditions continued in the first quarter, particularly affecting Ag Services», said ADM Chairman and CEO Juan Luciano. «Low U.S. export volumes and weak margins continued, and in the quarter, poor results from the global trade desk impacted results for Ag Services. Results for Corn improved compared to the first quarter one year ago, led by a strong performance in sweeteners and starches. For Oilseeds, global protein demand remained solid. However, first quarter results were impacted by weak global crush margins. WFSI results were in line with expectations».

«During the quarter, we continued to advance our strategic plan. We acquired a controlling stake in Harvest Innovations, enhancing ADM’s plant protein, gluten-free ingredient portfolio. We announced the purchase of a corn wet mill in Morocco that will further expand our global sweeteners footprint. We opened our new, state-of-the-art flavor creation, application and customer innovation center in Cranbury, New Jersey. And, as part of our ongoing portfolio management efforts, we reached an agreement to sell our Brazilian sugarcane ethanol operations. In addition, we achieved almost 50 million USD of run-rate savings in the quarter and remain on track to meet our 275 million USD target by the end of the calendar year. We repurchased about 300 million USD of shares in the quarter as we continue to execute on our balanced capital allocation framework».

«The first half of the year continues to present a challenging environment. However, we are cautiously optimistic that reduced South American soybean and corn production could bring improved soybean crush margins and merchandising opportunities in the second half of the year».

First Quarter 2016 Highlights

• Adjusted EPS of 0.42 USD excludes a 0.02 USD per share charge related to LIFO and 0.01 USD per share in impairments. Included in adjusted EPS is a 0.08 USD per share loss related to updated portfolio investment valuations in CIP, an investment joint venture.
• Agricultural Services decreased 118 million USD compared to a strong quarter last year amid lower North American export volumes and margins, fewer global merchandising and transportation opportunities, as well as unfavorable Global Trade Desk merchandising positions.
• Corn Processing increased 2 million USD as strong results for sweeteners and starches were offset by weaker lysine results and lower ethanol margins.
• Oilseeds Processing decreased 231 million USD compared to a very strong year-ago period, as higher Argentine crush run rates weakened global margins.
• «Wild» Flavors and Specialty Ingredients earned 70 million USD on solid performance from «Wild» Flavors and higher results from specialty ingredients.
• Trailing four-quarter-average adjusted ROIC was 6.3 percent, 30 basis points below our annual WACC of 6.6 percent.
• The company returned 0.5 billion USD to shareholders through dividends and share repurchases.

Ag Services Earnings Decline on Reduced Merchandising Opportunities: Agricultural Services operating profit was 76 million USD, down 118 million USD from the year-ago quarter. Merchandising and handling earnings declined 83 million USD to 24 million USD, primarily due to a challenging merchandising environment that continued due to weak U.S. export competitiveness, lower North American volumes and margins, and a quarterly loss for the global trade desk compared to positive results last year. Losses from the global trade desk were caused in part by unfavorable merchandising positions.

Transportation results declined 28 million USD to 4 million USD, due to low U.S. exports and high water conditions that resulted in lower barge volumes and higher operating costs. Milling and other had a solid quarter, but results were down 7 million USD to 48 million USD due to lower grain and feed margins.

Corn Processing Earnings Up, Led by Sweeteners and Starches Results: Corn Processing operating profit increased from 127 million USD to 129 million USD. Sweeteners and starches results improved 56 million USD to 141 million USD as the business continued to perform well, with an improved cost environment driven by strong capacity utilization. Bioproducts results were down from 42 million USD to a loss of 12 million USD, due primarily to the continued challenging conditions in the global lysine market. In addition, ethanol margins continue to be impacted by high industry production levels that caused inventories to build throughout the quarter.

Oilseeds Earnings Lower versus Exceptionally Strong Year-Ago Quarter: Oilseeds operating profit of 261 million USD decreased 231 million USD from the strong year-ago results. Crushing and origination operating profit of 120 million USD declined 214 million USD from last year’s high levels. Global soybean crush and origination results were down significantly due to lower global margins resulting from increased Argentine soy meal exports and significantly reduced U.S. meal exports. In addition, lower softseed crush volumes and weaker Brazilian commercialization, which slowed throughout the quarter, negatively impacted results.

Refining, packaging, biodiesel and other generated a profit of 79 million USD for the quarter, down 11 million USD from year-ago results, with stronger results from North America and Europe offset by weaker results in South America. With the sale of the Cocoa business in October 2015, results decreased 24 million USD compared to last year.

Oilseeds results in Asia for the quarter declined 6 million USD from the year-ago period, due primarily to Wilmar’s lower fourth quarter earnings.

WFSI Earns 70 million USD, Up versus Last Year: WFSI operating profit was 70 million USD in the first quarter. Results included operational start-up costs for the Tianjin Fibersol facility in China and the Campo Grande specialty protein complex in Brazil. Excluding these start-up costs, results improved by about 5 million USD from prior year results with solid performance from «Wild» Flavors and higher results from specialty proteins. With more than 900 revenue synergy projects identified, WFSI remains on track to achieve its 2016 targets.

Other Items of Note

Included in Corporate results was a 50 million USD loss related to updated portfolio investment valuations in Compagnie Industrielle et Financiere des Produits Amylaces SA (CIP). ADM holds a 43.7 percent equity interest in CIP, an investment joint venture held since the late 1980s.