ADM reports earnings of $233 million

Archer Daniels Midland Company reported net earnings of $233 million for the quarter ended March 31, 2019 on April 26, 2019.

“The first quarter proved more challenging than initially expected,” said Chairman and CEO Juan Luciano. “Despite a challenging start to the year, we continue to make excellent progress on our key imperatives for 2019: improving performance in certain businesses, accelerating our Readiness efforts, and delivering results from our growth investments. We are very encouraged with our new Neovia business and the creation of a global Animal Nutrition platform.”

Luciano remains optimistic for the second half of the year and the company announced a series of measures to continue to underpin long-term-value creation:

1. First, to meet growing customer demand, ADM plans to repurpose its corn wet mill in Marshall, Minnesota, to produce higher volumes of food and industrial-grade starches as well as liquid feedstocks for food and industrial uses, phasing out production of high-fructose corn syrup at that facility as soon as committed deliveries are complete.
2. Second, the company is creating an ethanol subsidiary, which will include ADM’s dry mills in Columbus, Nebraska; Cedar Rapids, Iowa; and Peoria, Illinois. The ethanol subsidiary will report as an independent segment. The new structure will allow the company to advance strategic alternatives, which may include, but are not limited to, a potential spin-off of the business to existing ADM shareholders.
3. Finally, ADM has begun a series of actions to enhance agility, accelerate growth, and strengthen customer service. These actions include organizational changes to centralize and standardize business activities and processes, and enhance productivity and effectiveness; accelerating the capture of planned synergies after a period of acquisitions; and offering early retirement for some colleagues in the U.S. and Canada. ADM also plans to reduce 2019 capital spending by 10%, to the range of $0.8 to $0.9 billion.

Results of Operations

• Merchandising and Handling results were higher than the first quarter of 2018, which had been impacted negatively by significant mark-to-market timing effects. Good execution that drove solid margins in North American grain; a strong performance in structured trade finance; and the reversal of some timing impacts from the fourth quarter all helped to offset a softer performance in global trade, which was impacted by normalized South American soybean and soybean meal margins compared with the first quarter of last year. Results in the quarter were also negatively affected by high water conditions, which limited grain movement and sales in North America.
• Transportation was up year-over-year as higher freight rates and improved northbound movements offset lower overall barge volumes caused by unfavorable river conditions.
• Oilseeds results were comparable to the year-ago period, which benefited significantly from the Biodiesel Tax Credit.
• Crushing and Origination results were up significantly versus the first quarter of 2018, which included significant negative timing effects. Higher executed crush margins around the globe and favorable timing effects from prior-year hedges drove improved results, more than offsetting the impacts of slow farmer selling and lower Chinese demand on South American origination.
• Refining, Packaging, Biodiesel and Other results were lower than the year-ago quarter, which included the significant impact of the 2017 Biodiesel Tax Credit. Increased contributions from food oils in North America and Europe helped contribute.
• Carbohydrate Solutions results were significantly lower than the year-ago quarter.
• Starches and Sweeteners was down versus the first quarter of 2018, driven by pressured European sweetener industry volumes and margins, impacts of severe weather in North America, higher manufacturing costs at the Decatur complex, and weaker margins in flour milling.
• Bioproducts results were much lower than the prior-year period. Ethanol margins were down significantly versus last year’s first quarter in a continued weak industry environment, and production volumes were affected by severe weather.
• Nutrition results overall were down year-over-year, with WFSI results higher and Animal Nutrition results lower.
• WFSI results were higher year-over-year, with 21% profit growth spread across all three businesses, and WILD Flavors in particular turning in another very strong performance. Year-over-year sales increased 11% on a constant currency basis, and an improved product mix helped drive positive results.
• Animal Nutrition results were lower than the first quarter of 2018. Last year’s quarter benefited from temporary industry effects on vitamin additives. Neovia closed on Jan. 31, resulting in additional up-front costs related to inventory revaluation. Lysine production and yields continued to improve from the third quarter 2018 production disruptions, with the expectation of achieving normalized yields by the end of the second quarter.
• Other results were in line with the year-ago period. Captive insurance was lower on unfavorable underwriting results, and ADM Investor Services results improved year-over-year.