ADM Archer Daniels Midland Company

   (FROM THE WALL STREET JOURNAL 11/4/15) 
   By Jacob Bunge 

Archer Daniels Midland Co. posted steeper-than-expected declines in quarterly sales and profit as the grain giant contended with weak commodity prices and slowdowns in some emerging markets.

ADM's stock tumbled 6.8% on Tuesday, wiping out about $2 billion in market value.

ADM, which besides being one of the world's top grain traders is a major ethanol producer, has seen profit margins for the corn-based fuel additive shrink in the face of lower oil prices.

The U.S. dollar's rise against overseas currencies also has restrained demand for ADM's exports of U.S. corn and other crops, Chief Executive Juan Luciano told investors on a post-earnings conference call.

ADM, which warned investors earlier this year about tougher conditions in the ethanol business, reported that third-quarter operating profit in its ethanol-producing division dropped 78% to $40 million, the biggest decline among ADM's units. The drop in oil prices has made gasoline cheap and limited the premiums that ADM and other ethanol producers can charge for the fuel additive, which typically accounts for about 10% of gas content at U.S. fuel pumps.

Slowing overseas economies buffeted ADM's grain-trading and oilseed divisions. The sliding Brazilian real encouraged farmers there to sell their grain, Mr. Luciano said, which provided a boost to ADM's Brazilian crop traders but crimped the competitiveness of its U.S. grain exports. The Chicago-based company maintains its biggest grain-terminal and shipment network in the U.S.

Operating profit in ADM's oilseeds business fell partly due to diminished European demand for vegetable oils, and the strengthening U.S. dollar damped profits in ADM's newly established division focused on flavorings and specialty ingredients.

"The macroeconomic [impact] was greater than we expected," said Mr. Luciano, who took over as ADM's CEO in January.

ADM and other big commodity-trading firms are trying to navigate economic turbulence in developing parts of the world, which has driven rapid shifts in currency values and commodity demand. Bunge Ltd. last week reported a steeper-than-expected decline in quarterly profit due to weaker results in vegetable oil and grain milling. Cargill Inc. posted a 20% increase in profit, boosted by well-timed trading in agricultural commodities, the company said.

Mr. Luciano said ADM, which maintains the largest U.S. production capacity for ethanol, is working to make its plants more efficient. He also expressed hope that foreign buyers such as China will buy more U.S. ethanol.

ADM is taking a close look at its two dry mills, which process corn into ethanol and byproducts used as animal feeds, and Mr. Luciano said that if ADM discovers the plants can't "compete in a more challenging U.S. ethanol environment," the company would "look at various alternatives to maximize shareholder value."

Overall, ADM posted third-quarter earnings of $252 million, or 41 cents a share, down from $747 million, or $1.14 a share, a year earlier. The quarter included $65 million in impairment, exit and restructuring costs.

Excluding those charges and other special items, per-share earnings fell to 60 cents from 86 cents a year earlier. Revenue slid 8.6% to $16.57 billion. Analysts had projected per-share earnings of 70 cents on revenue of $17.77 billion.

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Chelsey Dulaney contributed to this article.

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November 04, 2015 02:47 ET (07:47 GMT)

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