Agricultural commodities and products processor Archer Daniels Midland Co. (ADM) on Tuesday reported a 83% year-over-year plunge in profit for the fourth quarter, hurt by a double digit sales drop across all its operating divisions amid the global economic downturn. net sales and other operating income for the quarter dropped 24%, and topped analysts' expectations.
Archer Daniels is one of the largest agricultural processors in the world, operating processing and manufacturing facilities across the U.S. and worldwide. Serving as a vital link between farmers and consumers, the company takes crops and processes them to make food ingredients, animal feed ingredients, renewable fuels and naturally derived alternatives to industrial chemicals.
In a statement, chairman and chief executive officer, Patricia Woertz said, "In the fourth quarter, we felt the impact of the global economic downturn, as we concluded a year of good performance overall. In this downturn, we used our strong balance sheet and cash flow to make strategic investments to build long-term value."
Fourth Quarter Results
The Decatur, Illinois-based company posted net earnings of $64 million or $0.10 per share for the fourth quarter, about 83% lower than $372 million or $0.58 per share in the prior-year quarter.
On average, eight analysts polled by Thomson Reuters expected the company to report earnings of $0.45 per share for the fourth quarter. Analysts' estimates typically exclude special items.
Archer Daniels' net sales and other operating income for the quarter dropped 24% to $16.53 billion from $21.78 billion in the same quarter last year, but topped six Wall Street analysts' consensus estimate of $15.23 billion.
The company primarily attributed the drop in sales during the quarter to lower average selling prices due to decreases in underlying commodity costs and foreign exchange translation impacts, which was partially offset by higher sales volumes.
Among Archer Daniels' peers, Westchester, Illinois-based Corn Products International, Inc. (CPO) reported last week a loss for the second quarter that primarily reflected significant impairment and restructuring charges. Ne loss was $84.8 million or $1.13 per share, compared to net income of $68.4 million or $0.90 per share last year. Excluding charges, the company's net income was $25.5 million or $0.34 per share for the quarter. On an adjusted basis, quarterly earnings fell from last year on higher corn costs, unfavorable foreign currency translations and softer volumes, yet topped market projections. Quarterly net sales declined 11% to $911.6 million from $1.029 billion last year.
Another peer, White Plains, New York-based Bunge Ltd. (BG) reported last month lower second-quarter profit, hurt by sales declines in all of its business segments leading to a total sales drop of 23%. Net income was $293 million or $2.28 per share, sharply lower than $731 million or $5.45 per share a year ago. Quarterly net sales dropped to $10.99 billion from $14.37 billion last year. However, the company expects a solid fourth half and confirmed its earnings outlook for fiscal 2009.
Segmental Details
Oilseeds processing net sales and other operating income for the fourth quarter declined to $6.76 billion from $7.69 billion in the year-ago quarter. The segment reported operating profit of $227 million, down from $375 million in the prior-year quarter as global demand weakened.
Net sales and other operating income for corn processing totaled $1.90 billion, lower than the prior-year quarter's $2.13 billion. Operating loss for the segment was $11 million, compared to a profit of $262 million a year ago, hurt by the effects of higher net corn costs and a weak ethanol environment.
Agricultural services posted net sales and other operating profit of $6.57 billion, down from $10.42 billion in the year-ago quarter. The segment's operating loss was $17 million, compared to a profit of $106 million in the same quarter last year, reflecting weaker global demand for agricultural commodities and less favorable risk management results.
The company's net sales and other operating income from other operations was $1.30 billion, lower than $1.55 billion a year ago. Operating profit was $9 million in the quarter, sharply lower than $34 million in the same quarter of last year, due principally to investment and insurance losses.
Other Metrics
Total segment operating profit for the fourth quarter plunged 73% to $208 million from $777 million in the prior-year quarter. Gross profit for the fourth quarter dropped to $361 million from $807 million in the year-ago quarter.
Archer Daniels' selling, general and administrative expenses were recorded at $320 million, lower than $347 million in the prior-year quarter. Income taxes decreased $169 million for the quarter from last year.
The company ended the fourth quarter with cash and cash equivalents of $1.06 billion, compared to $810 million in the year-ago quarter.
Full Year Highlights
For fiscal 2009, Archer Daniels reported net earnings of $1.71 billion or $2.65 per share, 5% lower than $1.80 billion or $2.79 per share posted in fiscal 2008. Analysts expected the company to report full year earnings of $3.34 per share.
Archer Daniels' net sales and other operating income for the full year 2009 edged down 1% to $69.21 billion from $69.82 billion reported last year. The Street was looking for revenues of $68.32 billion for fiscal 2009.
Looking Ahead..........
"As we look ahead, we see signs of improving demand in the various food, feed and fuel markets we serve. We remain financially strong and well positioned to capture value as global markets recover," Woertz added.
Stock Quote
In Tuesday's regular trading session, ADM is currently trading at $29.54, down $0.85 or 2.80% on a volume of 2.01 million shares. In the past 52-week period, the stock has been trading in a range of $13.53 to $32.13.
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