May 3, 2004

 

 

ADM Earnings Nearly Double on Corn Processing Profits
 

Quarterly earnings in its corn and oilseed processing, as well as agricultural services operations, nearly doubled on strength, sending its shares up 4.5 percent. Agribusiness Archer Daniels Midland Co. (ADM) revealed this news on Friday.

 

Corn processing profit jumped 80 percent to $160 million, and profit from oilseed processing, primarily soybeans, climbed 56 percent to $117.5 million, ADM said.

 

"It was a very strong quarter for the company. They've effectively hedged their commodity exposure, which helped them achieve better-than-expected margins in their oilseed crushing and corn processing," stated Christine McCracken, analyst with Midwest Research.

 

The processing segments benefited from rallies in corn and soybean futures early this year, as prices jumped to multiyear highs after a 2003 drought depleted U.S. crops.

 

Decatur, Illinois-based ADM, the No. 1 U.S. food processor, takes raw commodities such as corn and soybeans, and processes them into products including ethanol, corn sweeteners and soymeal for animal feed. The company was able to capitalize on the rise in futures prices by selling its products at a greater profit.

 

Corn-processing profits were boosted by a steady climb in prices and demand for the corn-based gasoline additive ethanol. Since Jan. 1, New York and Connecticut banned the use of the rival additive methyl tertiary butyl ether (search) (MTBE). ADM is the top U.S. producer of ethanol.

 

"The big driver in the quarter was ethanol," McCracken said. "Ethanol prices, year over year, are up 51 percent, and for the quarter it's 48 percent."

 

Soymeal prices were also up sharply from levels a year ago, boosting oilseed processing profits.

 

As at March 31, ADM's earnings in its fiscal third quarter rose 94 percent, to $226.8 million, or 35 cents per share, from $116.8 million, or 18 cents per share, a year earlier.

 

Analysts' average forecast was 27 cents per share, according to Reuters Research, a unit of Reuters Group Plc.

 

Sales and other operating income rose 18 percent to $9.3 billion.

 

The company's agricultural services profit, including grain buying and storage, jumped sharply to $55.8 million on strength from expansion of its worldwide grain handling capabilities. ADM has expanded its grain operations in South America and Asia over the past several years, in a bid to take advantage of those emerging markets while idling processing plants in North America.

 

ADM was the last of the three big agribusiness companies to report earnings this quarter. White Plains, New York-based Bunge Ltd. (BG), the No. 3 North American food processor, on Thursday said quarterly net rose 75 percent as the soaring soybean prices boosted profits.

 

Privately-held Cargill Inc., the industry No. 2, said earlier this month that quarterly profit rose 11 percent on growth in its grain, oilseed and sugar units