Tuesday, agricultural commodities and products processor Archer Daniels Midland Co. (ADM) reported a 98% plunge in profit for the third quarter from the prior-year period, hurt by charges related to the company's equity investments and lower demand for agricultural commodities and crop-based fuels like ethanol amid the global economic slowdown.
Third-Quarter Results
For the third quarter, the Decatur, Illinois-based company posted net earnings of $8 million, or $0.01 per share, down from $517 million, or $0.80 per share, in the prior-year quarter.
The results for the latest quarter include a non-cash after-tax charge of $132 million related to currency derivative losses of the company's equity investee, Gruma S.A.B. de C.V., and an income-tax charge of $97 million related to the company's investment in Wilmar International Ltd. Negative impacts related to the equity investments reduced net earnings for the quarter by $229 million, or $0.36 per share.
On average, eleven analysts polled by Thomson Reuters expected the company to earn $0.49 per share for the quarter. Analysts' estimates typically exclude special items.
Archer Daniels' net sales and other operating income for the quarter declined 21% to $14.84 billion from $18.71 billion in the same period last year. Analysts had a consensus revenue estimate of $16.94 billion for the quarter.
The decline in net sales and other operating income for the quarter was due to decreased average selling prices that resulted from price moderation of underlying commodity costs as well as foreign exchange impacts, in addition to decreased sales volumes.
The company's segment operating profit for the quarter dropped 72% to $254 million from $913 million in the prior-year quarter.
The company ended the second quarter with cash and cash equivalents of $2.19 billion, up from $1.21 billion as at March 31, 2008.
Peer Performance
In April, Westchester, Illinois-based Corn Products International Inc. (CPO) reported a sharp fall in profit for the first quarter, negatively impacted by lower volumes, lower co-product prices, and unfavorable foreign currency translations. The company's net income for the quarter attributable to shareholders plunged 74% to $16.8 million or $0.22 per share, from $64.3 million or $0.85 per share, in the same period last year. Adjusting shipping and handling costs, quarterly net sales fell 11% to $831.1 million from $930.9 million in the prior-year period
White Plains, New York-based Bunge Ltd. (BG) reported a net loss for the first quarter of $176 million, compared with net income of $322 million last year, hurt primarily by high cost fertilizer inventories and aggressive pricing by competitors, together with lower demand for soybean-based products. Net sales for the quarter dropped 26% to $9.2 billion from $12.47 billion a year ago.
Segmental Details
Archer Daniels' oilseeds processing segment recorded a decline in net sales and other operating income to $4.69 billion from $5.72 billion in the year-ago quarter. Operating profit for the segment was $224 million, down 5% from $237 million in the prior-year quarter, decreased primarily due to weaker demand in North America, partially offset by improved results in Asia.
Net sales and other operating income for the company's corn processing segment totaled $1.73 billion, down from $1.81 billion in the prior-year quarter. Operating profit for the segment plummeted 72% to $49 million from $172 million a year ago, principally to lower Bio-products results, driven primarily by weakness in the ethanol market.
The U.S. ethanol sector contracted toward the end of last year with demand falling in a weakening economy, a drop in oil and gas prices, and the global credit crunch.
The company's agricultural services segment posted net sales and other operating profit of $7.30 billion, down from $9.78 billion in the previous-year quarter. The segment's operating profit dropped 67% to $121 million from $366 million in the same quarter of last year, as global supplies of agricultural commodities increased while demand slowed, which led to a contraction of market opportunities.
Net sales and other operating income from other operations was $1.13 billion for the quarter, down from $1.40 billion a year ago. Operating loss for the quarter was $140 million, compared to operating income of $138 million in the same period last year. The loss was primarily due to a non-cash loss related to the company's investment in Gruma S.A.B. de C.V.
Year-to-Date Results
For the nine months, Archer Daniels reported a 15% increase in net earnings to $1.64 billion, or $2.55 per share, from $1.43 billion or $2.21 per share, in the prior-year period.
The company's net sales and other operating income for the nine-month period increased 10% to $52.68 billion from $48.03 billion in the same period last year, due principally to increased average selling prices resulting primarily from higher underlying commodity costs. This was partially offset by decreased sales volumes.
Stock Quotes
In Tuesday's regular trading session, ADM is trading at $25.31, down $0.86 or 3.29% on a volume of 0.14 million shares. In the past 52 weeks, the stock has been trading in a range of $13.53-$45.00.
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