February 1, 2006

ADM posts strong Q2 earnings

Stock in Archer Daniels Midland Co. (ADM) surged to an all-time high on what one analyst called a "blow-out" quarter and on the company's forecast that more good times are ahead. In recent trading, the stock rose 9.9 percent to US$31.58.

The Decatur, Ill., agricultural manufacturer Tuesday reported net earnings for its fiscal second quarter ended Dec 31 of US$0.56/share, up from US$0.48 cents in the same quarter last year and ahead of the average estimate of US$0.42 cents expected by analysts surveyed by Thomson First Call.

Prudential Equity Group LLC analyst John M. McMillin called the quarter a "blow-out" and said the company's earnings acceleration "developed earlier than we anticipated, due in large part to the surprisingly low corn prices that developed after the Mississippi River was closed (due to New Orleans), and a bigger than expected harvest," he wrote in a Tuesday note.

The company said during its conference call that it was operating its biodiesel plants in Europe at full capacity and expected good corn prices for some time to come.

The company is building two new biodiesel plants in the US and expects strong demand for the fuel, which will help its oil-seeds processing unit. "Demand is extremely strong" particularly in Europe, said G. A. Andreas, the company's chairman, president, chief executive and chief operating officer during the company's quarterly earnings conference call Tuesday.

But biodiesel was just one aspect of a quarter that saw strong prices for its corn-based products drive up its corn processing unit's profits by $105 million, to $237 million for the quarter. Strong ethanol prices helped drive up profit as did unusually low prices for corn.

"We don't have any way of knowing what events we'll be faced with in the future but the outlook is quite encouraging for the corn business at this point in our history," said Andreas during the call.