Chicago / IL. (adm) Archer Daniels Midland Company (ADM) reported financial results for the quarter ended December 31, 2016. «We capitalized on an improved environment, delivering stronger fourth quarter performance after working through difficult market conditions earlier in the year», said ADM Chairman and CEO Juan Luciano. «Ag Services saw strong results in North America and weak results from the global trade desk. The Corn business delivered a good quarter, led by sweeteners and starches, and saw solid results from bioproducts. Oilseeds results were comparable to last year despite lower global crush margins. In WFSI, Wild Flavors continued to deliver earnings growth, while some of our specialty ingredients businesses faced challenges, which we are addressing.
«We have continued to take important steps to advance our strategic plan by completing additional acquisitions, organic growth projects and portfolio management actions; exceeding our 2016 target for run-rate cost savings; and progressing in our efforts to reduce capital intensity. In line with our balanced capital allocation framework, we returned 1.7 billion USD to shareholders in dividends and share buybacks during the year. With expected improvements across all of our businesses throughout the year and additional contributions from recent projects and new facilities as they ramp up, we are optimistic about improving results throughout 2017».
Fourth Quarter 2016 Highlights
| Q4/2016 | Q4/2015 | ||||||||||||||||||||||||
| (in millions, except per share amounts) | As Reported | Adj | Adjusted1 | As Reported | Adj | Adjusted1 | |||||||||||||||||||
| Earnings per share | USD | 0.73 | USD | 0.02 | USD | 0.75 | USD | 1.19 | USD | (0.54 | ) | USD | 0.65 | ||||||||||||
| Segment Operating Profit1 | |||||||||||||||||||||||||
| Agricultural Services | USD | 237 | USD | 8 | USD | 245 | USD | 219 | USD | (5 | ) | USD | 214 | ||||||||||||
| Corn Processing | 249 | 6 | 255 | 200 | (74 | ) | 126 | ||||||||||||||||||
| Oilseeds Processing | 233 | 6 | 239 | 426 | (197 | ) | 229 | ||||||||||||||||||
| WFSI | 37 | 1 | 38 | 38 | 9 | 47 | |||||||||||||||||||
| Other | 50 | – | 50 | 17 | – | 17 | |||||||||||||||||||
| Total | USD | 806 | USD | 21 | USD | 827 | USD | 900 | USD | (267 | ) | USD | 633 | ||||||||||||
1 Non-GAAP financial measures; see pages 4 and 9 for explanations and reconciliations, including after-tax amounts.
Fourth Quarter 2016 Highlights (continued)
- EPS as reported of 0.73 USD includes a 0.03 USD per share charge related to asset impairments, restructuring and settlements; a 0.04 USD per share OPEB curtailment gain; and certain discrete tax expense items of 0.03 USD per share. Adjusted EPS, which excludes these items, is 0.75 USD1.
- Trailing four-quarter-average adjusted ROIC was 5.9 percent1, 70 basis points below annual WACC of 6.6 percent.
- The effective tax rate was 32 percent for the quarter and 29 percent for fiscal year 2016, compared to negative 2 percent in the year-ago quarter and 19 percent for fiscal year 2015, due to changes in the geographic mix of earnings and discrete tax items. (See Other Items of Note on page 3 for further details.)
- During 2016, the company returned 1.7 billion USD to shareholders through dividends and share repurchases.
1 Non-GAAP financial measures; see pages 9 and 10 for explanations and reconciliations, including after-tax amounts.
Results of Operations
Ag Services saw good execution in North America amid strong global demand for U.S. commodities. Merchandising and handling results increased on strong export volumes in an improved margin environment. However, the global trade desk incurred losses, driven by poor execution and limited forward merchandising opportunities.
Transportation performed well, with modest improvements in results despite an environment of lower freight rates.
Milling and Other had another strong quarter driven by solid product margins-including wheat merchandising and handling income-and sales volumes.
Corn Processing posted significantly improved results. Good performance in sweeteners and starches was driven by solid demand in North America and improved contributions from international operations. Higher results in bioproducts were driven by improved ethanol margins and volumes as a result of robust domestic and export demand. Animal nutrition posted improved results, in part due to operational improvements in the company’s lysine production processes.
Oilseeds Processing results were comparable to the challenging year-ago period. In crushing and origination, South America results were impacted by reduced volumes as a result of the short 2016 soybean and corn crops in Brazil. Global soybean crush margins were negatively impacted by ample substitute proteins worldwide, despite strong global crush volumes. Softseeds performance improved due to higher volumes and margins, driven by more favorable seed supply and better demand for oil.
Refining, packaging, biodiesel and other posted continued strong performance, bolstered by good demand for refined oils and biodiesel.
Results in Asia improved over the prior-year quarter, reflecting increased ownership and improved results from Wilmar.
In WFSI, the Wild Flavors business delivered solid year-over-year growth, with results from the Eatem foods acquisition in North America and good sales in EMEAI and Asia Pacific more than offsetting weaker sales in Latin America. However, overall results declined in the quarter due to continued challenges in certain specialty ingredients businesses. The company began implementing the restructuring of the specialty commodities unit, and saw ongoing market softness in hydrocolloids and fibers, as well as the effects of a short crop in edible beans.
Other Financial operating profit improved on better claims and underwriting results in insurance operations, and a strong performance from ADM Investor Services.
