By Jacob Bunge
Archer Daniels Midland Co. reported a narrow decline in
first-quarter earnings as the company's grain-trading division
struggled against bad weather and slow selling of crops by
farmers.
Continued challenges in the unit offset stronger results in
ADM's soybean processing and its ethanol division, where profits
climbed thanks to an increased supply of U.S. corn, executives said
Tuesday.
"With farmers not selling and [corn prices] not breaking and the
weather getting in the way, that was the combination" that
challenged grain-trading results, ADM President Juan Luciano told
analysts on a conference call. "We're working very hard to make
that a stronger business."
ADM ranks among the world's largest dealers in corn, soybeans,
wheat and other major crops, buying them from farmers and selling
them to governments and food companies. It also processes the
commodities into food ingredients and fuels. The company, based in
Decatur, Ill., had $90 billion in revenues last year.
ADM on Tuesday reported a profit of $267 million, or 40 cents a
share, down from $269 million, or 41 cents a share, a year earlier.
Excluding inventory-related impacts and other items, adjusted
earnings rose to 55 cents from 46 cents.
Revenue decreased 4.7% to $20.7 billion.
Analysts polled by Thomson Reuters expected per-share profit of
74 cents and revenue of $22.04 billion.
ADM shares fell 3.3% to $42.91 in mid-morning trading.
ADM and other agricultural companies benefited from last year's
bountiful harvests in the U.S. and elsewhere, reducing the cost of
securing corn and soybeans to trade and process into feed for
livestock or oil for food production. ADM's oilseed division earned
$358 million over the first quarter and its corn-processing unit
earned $261 million, as cheaper corn helped ADM export more ethanol
at favorable prices, Mr. Luciano said.
U.S. farmers, however, responded to the drop in corn prices
stemming from last year's record harvest by stashing grain in new
and larger storage bins. These have allowed farmers to hold off
selling grain to merchants like ADM at the lowest rates, and wait
for prices to move higher, a phenomenon that continued to cut into
ADM's profits, according to Mr. Luciano.
The brutal winter in North America also hit the grain trade,
bogging down trains and boosting the cost of transporting products
in the U.S. and Canada. Mr. Luciano estimated Tuesday that
weather-related disruptions shaved $20 million to $30 million from
ADM's grain-trading results. Agricultural services, the division
that includes ADM's grain-trading operations, earned $153 million
in the quarter.
Mr. Luciano told analysts that another big harvest in the U.S.
would help the business regain strength, and farmers would have to
empty their bins by late summer. "We still need another strong corn
crop for the pipeline to be refilled, and for us to have the full
potential of the ag services earnings," he said.
China's demand for animal feed, which analysts have begun to
question this year as herds there shrunk and soybean processors
struggled, remains "solid" and should pick up in the second half of
this year, Mr. Luciano said. In the U.S., ADM's feed business later
this quarter may begin to feel the impact of a swine virus that has
killed millions of young pigs and dented pork production, reducing
demand for feed, Mr. Luciano said.
Tess Stynes contributed to this article.
Write to Jacob Bunge at jacob.bunge@wsj.com
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