With high costs relating to the failed bid to acquire Australian grain handler GrainCorp, Archer Daniels Midland Co (ADM) saw a 27% fall in its fourth quarter profit, overshadowing its strength in its corn processing and oilseeds businesses as lower crop prices boosted margins.

 

 

ADM had pursued grain handler GrainCorp for 13 months before Australia's government blocked the deal in November. ADM retains a stake of about 20% in the company.

 

"The strategic rationale for ownership in GrainCorp remains the same today as it did before with its good business location, strategic region and proximity to Asia. We're pleased with our current ownership stake and have no plans to sell it at this time," said ADM's chief executive, Patricia Woertz.

 

A strong balance sheet will allow ADM to pursue additional investments in 2014, but the company's focus could be on "consolidation plays," said chief operations officer, Juan Luciano.

 

Shares of ADM slipped 0.4% to US$38.76 in afternoon trading on the New York Stock Exchange. ADM reported strong results in its corn processing and oilseeds divisions as bumper US crops, following an historic drought in 2012, replenished supplies and bolstered margins. The company also highlighted good demand for ethanol and biodiesel.

 

ADM is one of four large agribusinesses known as the ABCDs which dominate the global grain trade. The others are Bunge Ltd, Cargill Inc. and Louis Dreyfus Corp.

 

ADM's agricultural services segment struggled to capitalise on the US grain bounty as some farmers resisted selling at lower prices, striking a blow to its grain trading returns. Poor international merchandising results further dragged on the segment, including a small impact from cancellations of US corn sales to China amid a dispute over an unapproved biotech variety.

 

ADM viewed the slow farmer sales of corn in the US mostly as a delay, similar to limited South American sales in the first quarter last year. US corn has already started to flow in 2014 and more will eventually come to market.

 

Analyst Morningstar raised its fair value estimate for ADM stock to US$39 per share from US$37 previously due to the big US crop and lower corn prices. Still, ADM may face challenges in the coming year as the US Environmental Protection Agency considers a proposal to reduce biofuel blending requirements.

 

For the quarter ending on December 31, 2013, ADM earned a net profit of US$374 million, or US$0.56 per share, compared with US$510 million, or US$0.77 a share, a year earlier, the company said.

 

Revenue slipped to US$24.1 billion, from US$24.9 billion in the same quarter a year ago, below forecasts for US$24.7 billion. Oilseeds processing profit rose 16% to US$478 million in the quarter while corn processing earnings surged to US$279 million from just US$3 million a year ago.

 

Agricultural services profit fell to US$46 million, down US$271 million from the same quarter the prior year.