Agricultural commodities and products processor Archer Daniels Midland Co. (ADM) reported Tuesday a sharp fall in profit for the first quarter, reflecting lower processing volumes and average selling prices, as well as foreign exchange translation impacts. Quarterly earnings per share, however, topped market projections, while net sales missed Street view. Looking ahead, the Decatur, Illinois-based company said it sees demand improving in some key markets.
First-quarter net earnings attributable to the company were $496 million, down 53% from last year's $1.05 billion. On a per share basis, earnings fell 52% to $0.77 from $1.62 in the same quarter a year ago.
On average, ten analysts polled by Thomson Reuters expected the company to report earnings of $0.56 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter plunged 29% to $14.92 billion from $21.16 billion a year ago, and missed four Wall Street analysts' consensus revenue estimate of $17.22 billion.
The company attributed the fall in net sales primarily to decreased average selling prices and, to a lesser extent, foreign exchange translation impacts. The company said that average selling prices decreased in line with year-over-year declines in underlying commodity costs, and there were no material changes in overall sales quantities.
Total processing volumes in the quarter fell to 12.90 million metric tons from 13.49 million metric tons in the previous year. Segment operating profit declined 34% to $774 million from $1.18 billion last year.
Archer Daniels, one of the largest agricultural processors in the world, operates processing and manufacturing facilities, and processes crops to make food ingredients, animal feed ingredients, renewable fuels and naturally derived alternatives to industrial chemicals.
Segment-wise, Oilseeds Processing sales totaled $6.36 billion in the quarter, down from prior year's $7.77 billion, and processing volumes fell to 6.37 million metric tons from 7.02 million metric tons in the previous year. Operating profit for the segment declined to $284 million from last year's $510 million, on lower margins and production.
In the Corn Processing segment, sales for the quarter declined to $1.92 billion from $2.24 billion last year, while processing volumes grew to 4.62 million metric tons from 4.59 million metric tons in 2009. The segmental operating profit rose to $188 million from prior year's $118 million on lower net corn and manufacturing costs.
Agricultural Services sales plunged to $5.32 billion from $9.57 billion last year, while processing volumes of wheat, cocoa and malt rose to 1.91 million metric tons from 1.88 million metric tons a year ago. Operating profit from the division also fell to $175 million from $428 million last year, due to reduced demand and less volatile commodity market conditions.
Commenting on the first-quarter results, Chairman of the Board and Chief Executive Officer Patricia Woertz stated, "The ADM team executed well, delivering strong sequential earnings growth. Earnings were significantly better than the second half of fiscal 2009. As we advance our growth strategy, we are using our financial strength to build shareholder value."
In the preceding fourth quarter, Archer Daniels reported 83% plunge in net earnings to $64 million or $0.10 per share, 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% to $16.53 billion, on 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 peers, Westchester, Illinois-based Corn Products International, Inc. (CPO) last week reported a 40% fall in third-quarter profit to $52.8 million or $0.70 per share from $88.1 million or $1.15 per share last year, negatively impacted by higher net corn costs, unfavorable foreign currency translations and softer volumes. Net sales declined 10% to $970.6 million from $1.08 billion in the prior-year period.
White Plains, New York-based Bunge Limited (BG), a global agribusiness and food company, recently reported a 39% decline in net income for the third quarter to $197 million from $324 million last year, hurt by 24% decline in sales and a weaker than expected pricing environment in the Brazilian fertilizer market. Net income attributable to the company declined slightly to $232 million from $234 million last year. Meanwhile, net income available to Bunge common shareholders increased 8% to $232 million from $215 million a year ago, as the prior-year quarter results reflected convertible preference share dividends of $19 million. Earnings per share decreased 5% to $1.62 from $1.70 last year. Net sales declined to $11.3 billion from $14.8 billion last year.
"Looking ahead", Woertz said, "we see demand improving in some key markets, and we have the assets and acumen to capture value as the global economy resets."
While announcing the fourth quarter results, Woertz had stated that the company sees signs of improving demand in the various food, feed and fuel markets it serve, and that it remains financially strong and well positioned to capture value as global markets recover.
ADM closed Monday's regular trading session at $30.52. In the past 52 weeks, shares have been trading between $20.00 and $32.13.
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