November 4, 2009

ADM Q1 profit tumbles 53 percent on weak sales, prices

Archer Daniels Midland Co.'s (ADM) fiscal first-quarter earnings slumped 53 percent from last year's record levels on lower selling prices and demand, but results were better than earlier in 2009.

Chairman and Chief Executive Patricia Woertz noted the agribusiness giant continues to see demand improving in some key markets, she said.

ADM began seeing signs of demand improving sequentially in several of its markets in the prior quarter, including optimism about ethanol demand. The company emerged as the largest US producer, partly owing to bankruptcies and the shelving of new plants as demand collapsed. ADM still lost money on ethanol in the latest quarter as it works through its expensive corn inventory. Its ethanol business also could benefit if US regulators increase the amount of ethanol required in gasoline from 10 percent to 15 percent later this year.

For the quarter ended Sept. 30, the agribusiness giant reported a profit of US$496 million, or 77 cents a share, down from US$1.05 billion, or US$1.62 a share, a year earlier. Net sales decreased 29 percent to US$14.9 billion amid lower average selling prices, and to a lesser extent, foreign-exchange impacts.

Analysts polled by Thomson Reuters most recently forecast earnings of 57 cents on revenue of US$17.92 billion.

Gross margin fell to 6.5 percent from 8.8 percent on the revenue slide.

At its oilseeds processing segment, which includes its biodiesel business, earnings fell 44 percent amid lower margins and production. At its corn-processing operations, which includes its ethanol business, earnings increased 59 percent amid lower net corn and manufacturing costs. The sweeteners and starches business saw earnings increase, however its bioproducts business turned in a segment loss amid lower ethanol and lysine selling prices.

At its agricultural services segment, profit declined 59 percent amid less volatile commodity markets and lower demand.

Shares closed Monday at US$30.52 and didn't trade premarket. The stock is up by roughly 45 percent in the past year.