February 3, 2010

ADM profit exceeds analysts' estimates on oilseed gains

Fiscal second-quarter profit for Archer Daniels Midland (ADM) fell less than analysts' estimates as earnings from oilseeds and corn processing increased.

Net income declined to US$567 million, or 88 cents a share, in the three months through December from US$578 million, or 90 cents, a year earlier, ADM said in a statement. Earnings excluding some one-time items were 87 cents a share, topping the 72-cent average estimate of 12 analysts in a survey. Sales dropped 4.6% to US$15.9 billion.

ADM, led by Chief Executive Officer Patricia Woertz, is benefiting from a large soy crop in the US, a drought that caused a soy shortage in South America, and strong export demand, particularly from China, Kenneth Zaslow, a New York- based analyst at BMO Capital Markets wrote in a January 25 note to investors.

ADM will likely generate near-record operating profit in its oilseed processing division during fiscal 2010, said Zaslow.

Profit at the oilseeds-processing unit rose 10% to US$352 million as the company earned more from crushing soy in North America.

Earnings at ADM's corn-processing division jumped 10-fold to US$290 million as margins on ethanol production increased and income from sweeteners and starches rose.

Earnings in the agricultural-services unit, which includes grain storage and transportation, dropped 68% as merchandising and handling results declined. The unit is the company's biggest.

Results included a US$54 million charge due to the last-in, first-out accounting method. On that same basis, profit in last year's fiscal second-quarter included a US$123 million credit.