ADM Can Grow Medium-Term Earnings Power to $4.50 per Share, Luciano Says
May 21 2015 - 12:30PM
Business Wire
- Continued Progress to be Achieved
through Cost, Efficiencies, Strategic Growth
Archer Daniels Midland Company (NYSE: ADM) CEO Juan Luciano said
today that further progress on the company’s strategic plan of
optimizing the core, driving operational efficiencies and growing
strategically—coupled with a balanced approach to capital
allocation—could drive the company’s medium-term earnings power
well above the $3.00 level.
Speaking at BMO’s 2015 Farm to Market Conference in New York,
Luciano said, “Under normal crop conditions—given the investments
and cost-reductions we’ve made—we expect the company to be able to
generate ROIC of about 10 percent and an earnings-power range of
between $4.00 and $4.50 per share in the medium-term.”
Luciano noted that ADM was on a three-phase value-creation
journey that began in 2011, when the company began intensifying its
focus on capital discipline, cost reductions and cash generation.
The result was a substantial improvement in returns—the company
closed out 2014 with trailing four-quarter-average adjusted ROIC of
9.0 percent, which was up 240 basis points year over year.
He added that ADM has now embarked on the second phase of its
journey, in which the company is focused on improving earnings
power and returns by:
- Optimizing the core of the
business. In recent months, Luciano noted, the company’s
Agricultural Services business unit launched a global merchandising
desk that enables ADM to efficiently and cost-effectively link
surplus origination areas with destination markets. This platform
helped the company drive higher merchandised volumes in the first
quarter of 2015. In addition, the Corn business unit sold its
lactic acid business, and the Oilseeds business unit acquired a
bottled-oil company in Belgium that will help the business’
European operations reduce dependence on biodiesel production.
- Driving operational
efficiencies. At the end of the first quarter of 2015, ADM had
identified more than $200 million in run-rate savings, toward its
goal of $550 million in five years, Luciano noted. The company has
also launched an internal campaign to elicit all colleagues’ ideas
for additional cost-savings and margin-improvement opportunities.
The approach is similar to the Billion Dollar Challenge the company
issued in 2012, which resulted in the unlocking of $2 billion in
cash in half the time originally allotted to achieve $1
billion.
- Expanding strategically. Luciano
also announced that the company was investing to increase export
capacity at its port facilities in Puerto San Martin, Santa Fe,
Argentina, by approximately 20 percent. Currently, ADM can export 2
million metric tons of grain and meal per year from the facility.
Since the beginning of 2015, the company has also made several
other strategic growth investments, he noted. It acquired full
ownership of corn wet mills in Bulgaria and Turkey as well as a 50
percent stake in a wet mill in Hungary. It acquired full ownership
of export facilities at the Black Sea port of Constanta in Romania.
And in China, ADM has built one sweetener-production facility,
agreed to acquire a second, and is expanding its network of
animal-feed premix plants to serve the country’s growing demand
from livestock producers.
Luciano noted that longer-term, as the company enters the third
stage of its value-creation journey, ADM could deliver ROIC above
10 percent, which would exceed its current target of 200 basis
points above the company’s long-term WACC of 8 percent.
“ADM has a clear, aggressive strategy to drive earnings growth
and returns, and we are executing against that strategy,” he said.
“Our focus on value creation, which began at the top, is now being
spearheaded by our teams worldwide. They are leading the charge.
And through their efforts, we will continue delivering excellent
value to customers and shareholders.”
Forward-Looking Statements
Some of the above statements constitute forward-looking
statements. ADM’s filings with the SEC provide detailed information
on such statements and risks, and should be consulted along with
this release. To the extent permitted under applicable law, ADM
assumes no obligation to update any forward-looking statements.
About ADM
For more than a century, the people of Archer Daniels Midland
Company (NYSE: ADM) have transformed crops into products that serve
the vital needs of a growing world. Today, we’re one of the world’s
largest agricultural processors and food ingredient providers, with
more than 33,000 employees serving customers in more than 140
countries. With a global value chain that includes more than 460
crop procurement locations, 300 ingredient manufacturing
facilities, 40 innovation centers and the world’s premier crop
transportation network, we connect the harvest to the home, making
products for food, animal feed, chemical and energy uses. Learn
more at www.adm.com.
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Archer Daniels Midland CompanyMedia
RelationsJackie Anderson312-634-8484media@adm.com
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