Archer Daniels Midland Results Top Views -- Update
November 01 2016 - 11:23AM
Dow Jones News
By Jacob Bunge
A projected record U.S. harvest is set to boost Archer Daniels
Midland Co.'s grain trading business for the remainder of the year
and extend a crop-export surge, the company's chief executive said
Tuesday.
ADM's network of grain terminals, railcars and barges, already
laboring to direct a heavy flow of U.S. crops to overseas buyers,
will continue to move heavy volumes of corn, soybeans and wheat
into the beginning of 2017, lifting profit margins in one of the
company's largest segments.
"There is a big crop coming," said Juan Luciano, ADM's chief
executive, on a conference call discussing the company's
third-quarter results. "That is good for ADM."
Commodity traders and processors like Chicago-based ADM, along
with rivals like Cargill Inc. and Bunge Ltd., stand to benefit from
what U.S. government forecasters have pegged as a record-breaking
haul of corn and soybeans now being reaped by U.S. farmers. A
string of four consecutive bumper crops in North America has pushed
crop prices to low levels, translating to painfully low profits for
farmers, but lower costs for the companies that buy grain from
farmers to ship and process into flour, corn syrup and vegetable
oil.
ADM's third-quarter profits, boosted by strength in U.S. crop
exports that offset a drop in its oilseeds business, topped
analysts' expectations Tuesday. Shares soared 7% on the upbeat
outlook.
Mr. Luciano said that the availability and relative
competitiveness of U.S. grain on global markets made it likely that
North American exports would continue to do brisk business into the
first quarter of 2017, even as South American grain begins filling
bins and ships in Brazil and Argentina. The trend benefits ADM,
which maintains more grain-trading infrastructure in North America
than south of the equator.
Profit margins in the business, however, were unlikely to match
those ADM saw nearly three years ago, when a capacity crunch on
U.S. rail lines brought on by high traffic and a harsh winter
pushed grain-trading profits to very lofty levels, Mr. Luciano
said.
ADM is moving ahead with potential deals involving its corn dry
mills, which grind, crush and roll corn to produce ethanol fuel and
animal feed. Mr. Luciano told analysts that the company expects
final proposals from a "short list" of interested parties by the
end of 2016, after narrowing down proposals received in recent
months from seven interested parties.
"We are waiting for the second round of bids," he said. ADM has
been looking for ways to reduce invested capital in its business by
at least $1 billion over time and in some cases has brought in
partners to existing ventures, such as a 50% stake in a Brazilian
port sold last year to Glencore PLC.
In the third quarter, ADM earned $341 million, or 58 cents a
share, up from $252 million, or 41 cents a share, a year prior.
Results were boosted by gains in ADM's agricultural services and
corn-processing divisions, though oilseed profits fell by more than
half, mainly due to a quarterly loss reported by Wilmar
International Ltd., a Singapore-based commodity trader in which ADM
maintains a roughly 22% stake.
Excluding losses on sales and other special items, per-share
earnings fell a penny to 59 cents a share from 60 cents a year
before. Analysts surveyed by Thomson Reuters had expected 46 cents
a share.
Revenue slid 4.4% to $15.83 billion.
Joshua Jamerson contributed to this article.
Write to Jacob Bunge at jacob.bunge@wsj.com
(END) Dow Jones Newswires
November 01, 2016 11:08 ET (15:08 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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