Strong Results From Oilseeds And Sweeteners Drive Archer Daniels Q3 Profit Up By 9% - Update
(RTTNews) - Tuesday morning, agricultural products merchandiser Archer Daniels Midland Co. (ADM) said that its first quarter profit rose 9% impelled by strengths in sweeteners & starches, oilseed processing and global capabilities in grain merchandising and handling partially offset by higher corporate charges. On a per share basis, earnings advanced 11% and topped Street view by nine cents. Increased selling prices and higher sales volumes drove top line up 36%.
First Quarter Results
The Decatur, Illinois-based company posted first quarter net income of $441 million, up 9% from previous year's income of $403 million. Earnings per share increased 11% to $0.68 from $0.61 in the prior year quarter.
On average, 10 analysts polled by First Call/Thomson Financial expected the company to report earnings of $0.59 per share for the quarter.
The company attributed the rise in net income to a $149 million increase in segment operating profits partially offset by higher corporate charges related principally to LIFO inventory valuations and costs associated with the realignment of organizational structure.
Quarterly net sales and other operating income climbed 36% to $12.8 billion from $9.45 billion recorded in the equivalent quarter of the previous year. Seven Wall Street analysts had a consensus revenue estimate of $10.64 billion for the quarter.
The company stated that the increased selling prices resulting from sharp rises in commodity prices accounted for about 75% of the increase while higher sales volumes, principally vegetable oil and wheat, accounted for the remaining 25% growth.
Patricia Woertz Chairman and CEO of Archer Daniels, commented, "These exceptional results demonstrate the strength of ADM's diversified asset and product portfolio. Where excellent first quarter earnings of a year ago reflected steep growth in the ethanol market, our record first quarter earnings this year demonstrate our strengths in sweeteners & starches, oilseed processing and our global capabilities in grain merchandising and handling."
Archer Daniels' cost of products sold during the first quarter ascended to $11.9 billion from $8.58 billion in the comparable quarter of last year. Gross profit totaled $930 million, compared to $866 million in the previous year's first quarter.
Segment operating profit for the quarter increased 23% to $797 million from $648 million in the corresponding quarter of the previous year.
Segmental Results
Oilseeds Processing
The company's Oilseeds Processing operating profit amounted to $209 million, higher than $170 million a year ago, reflecting a strong global demand for protein meal and oil.
Crushing and origination results grew by $27 million primarily due to better crush margins in North America and improved origination results in South America partially offset by a reduction in crush margins in Europe. Value added refining, packaging and biodiesel results rose $13 million principally from improved refining volumes and margins. Fiscal year 2008 results include asset abandonment charges of $3 million.
Corn Processing
Corn Processing delivered first quarter operating profit of $253 million, down from $289 million last year, hit by lower ethanol sales prices and volumes and higher net corn costs which were partially offset by favorable risk management results.
Sweeteners and Starches operating profit were up by $45 million to $164 million from $119 million prior year, owing to a higher average sweetener and starch selling prices partially offset by higher net corn costs.
Bioproducts results fell $81 million to $89 million from $170 million reported a year earlier on higher net corn costs and lower ethanol selling prices and volumes. Last year's Bioproducts results reflect the positive impact on ethanol volumes and prices of the phase out of MTBE, the company said.
Agricultural Services
Agricultural Services operating profit advanced by $114 million to $229 million from prior year's profit of $115 million, helped by improved global merchandising and handling results as volatile commodity market conditions, large North American crops and global wheat shortages provided profit opportunities. Transportation results declined due principally to lower barge freight volumes.
Other
During the latest quarter, Other operating profit improved $32 million to $106 million from $74 million a year ago driven by the improved results of private equity fund investments and gains on sales of securities, which was partially offset by a decline in Wheat, Cocoa and Malt operating profits due principally to decreased cocoa processing results as higher cocoa bean and carrying costs negatively impacted press margins.
Corporate
Total corporate costs for the current quarter increased $78 million to $150 million from $72 million in the similar quarter of fiscal 2007. The most-recent quarter costs include a $23 million charge resulting from an organizational realignment initiative.
Peer Performance
Among Archer Daniels' rivals, White Plains, New York-based Bunge Ltd. (BG) reported third quarter net income of $351 million or $2.70 per share, compared to $169 million or $1.40 per share in the year-ago quarter. Net sales for the quarter climbed 82% to $12.7 billion from $6.97 billion in the same quarter last year.
Another competitor, Westchester, Illinois-based Corn Products International Inc. (CPO) announced third quarter net income of $51.1 million or $0.66 per share, compared to $37.0 million or $0.49 per share in the year-earlier quarter. Net sales for the quarter amounted to $877.4 million, up 30% from $674.2 million in the similar quarter of last year.
Stock Quotes
Archer Daniels closed Monday's trading at $34.52. In the Pre-Market session, the stock is trading at $36.15, up $1.63 or 4.72%. For the past 52-weeks, the stock has been trading between $30.20 and $39.65.
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