Chicago / IL. (adm) Archer Daniels Midland Company (ADM) reported financial results for the quarter ended Dec. 31, 2015. The company reported adjusted earnings per share1 of 0.61 USD, down from 1.00 USD in the same period last year. Adjusted segment operating profit1 was 599 million USD, down 47 percent from 1’128 million USD in the year-ago period. Net earnings for the quarter were 718 million USD, or 1.19 USD per share, and segment operating profit1 was 900 million USD. Global dynamics reduced margins across the U.S. agricultural export sector, the U.S. ethanol industry and in the soybean crushing industry worldwide.
«Adverse market conditions that impacted many of our businesses earlier in the year continued through the fourth quarter», said Juan Luciano, ADM chairman and CEO. «Despite the challenging conditions, we achieved 2015 adjusted ROIC of 7.3 percent, 70 basis points above our annual cost of capital, generating positive EVA. In the fourth quarter, we advanced our strategic plan by expanding our international corn processing footprint with the acquisition of Eaststarch, progressing our destination marketing strategy with the announcement of the Medsofts Egyptian joint venture, and strengthening our European Olenex refined oils joint venture. And, today we are announcing an investment in Harvest Innovations, a leading producer of non-GMO, organic and gluten-free ingredients. From a portfolio management perspective, we completed the sale of our global cocoa business».
«With current headwinds likely to persist, we remain focused on the areas within our control. We will continue to implement our pipeline of operational excellence initiatives, with an objective of an incremental 275 million USD of run-rate savings by the end of the calendar year. As part of the evolution of our strategic plan, we are taking a fresh look at the capital intensity of our operations and portfolio, seeking innovative ways to lighten-up and redeploy capital in our efforts to drive long-term returns».
«In 2016, our balanced capital allocation framework remains a priority, including a quarterly dividend rate increase of 7 percent to 0.30 USD per share, and share repurchases of between 1.0 billion USD and 1.5 billion USD, subject to strategic capital requirements. With a strong balance sheet, we will also remain opportunistic for investments, especially bolt-ons, in this more challenged macro environment».
Fourth Quarter 2015 Highlights
- Adjusted EPS of 0.61 USD excludes approximately 0.70 USD of gains on sale or revaluation of assets, 0.24 USD of charges related to asset impairments and restructurings, and other net credits of 0.12 USD.
- Agricultural Services decreased 207 million USD compared to a very strong quarter last year amid lower North American export volumes and margins.
- Corn Processing decreased 155 million USD as U.S. ethanol industry margins were lower due to pricing pressures brought on from declining crude oil prices and high industry production levels.
- Oilseeds Processing results were lower than the very strong year-ago period, as global soybean crush margins declined significantly during the quarter.
- Wild Flavors and Specialty Ingredients earned 47 million USD, with «Wild» Flavors achieving its first-year accretion target of 0.10 USD per share.
- Trailing four-quarter-average adjusted ROIC was 7.3 percent, 70 basis points above annual WACC of 6.6 percent.
- During 2015, the company returned 2.7 billion USD to shareholders through dividends and the repurchase of 43 million shares.
Dividend Declaration
- ADM’s Board of Directors has declared a quarterly cash dividend of 0.30 USD per share, an increase of more than 7 percent from the prior quarterly rate, resulting in estimated annual dividend payments of 700 million USD in 2016.
- The dividend is payable on March 8, 2016, to shareholders of record at the close of business on Feb. 16, 2016. As of Dec. 31, 2015, there were 595’328’637 shares of ADM common stock outstanding.
Ag Services Earnings Decline on Lower North American Margins and Export Volumes
Agricultural Services operating profit was 214 million USD, down 207 million USD from the very strong year-ago period when ADM exported and handled record grain volumes in 2014.
Merchandising and handling earnings declined 163 million USD to 100 million USD. Despite a large 2015 U.S. crop, low commodity prices limited grain movements, resulting in fewer merchandising opportunities. In addition, a strong U.S. Dollar, along with ample global crop supplies limited U.S. export volumes and margins. These declines were partially offset by improved performance by ADM’s Global Trade Desk.
Transportation results declined 39 million USD to 53 million USD, as lower U.S. exports reduced barge freight rates and volumes.
Milling and other had another strong quarter, down slightly to 61 million USD.
Solid Sweetener Results Offset by Lower Ethanol Results
Corn Processing operating profit decreased from 281 million USD to 126 million USD.
Sweeteners and starches results improved 48 million USD to 102 million USD as the business continued to perform well, with lower input costs and good demand.
Bioproducts results declined from 227 million USD to 24 million USD as steep declines in crude oil prices drove lower ethanol prices. This, combined with continued high industry production levels, progressively reduced industry margins through the quarter.
In addition, lysine operating profits were challenged by excess global supply resulting in declines in pricing and margins – and some production outages in our plant.
Oilseeds Earnings Lower vs. Very Strong Year-Ago Quarter
Oilseeds operating profit of 195 million USD decreased 164 million USD from the strong year-ago results.
Crushing and origination operating profit declined 120 million USD from last year’s high levels to 86 million USD. Global soybean crush margins decreased throughout the quarter driven by anticipation of more competitive Argentine soybean meal entering well-supplied world markets. In addition, ample global meal supplies, in combination with the strong U.S. Dollar, further negatively impacted U.S. meal exports and margins. Brazilian origination results were lower as grain was commercialized earlier in the year compared to the prior year. Softseed margins remained under pressure due to lower prices.
Refining, packaging, biodiesel and other generated a profit of 57 million USD for the quarter, down 6 million USD from year-ago results as declining crude oil prices and weaker global demand pressured global biodiesel margins.
Cocoa and other results decreased 25 million USD, to 4 million USD, reflecting the sale of the cocoa business in October 2015.
Oilseeds results in Asia for the quarter declined 13 million USD from the year-ago period due primarily to non-operating charges included in Wilmar’s Q3 results.
WFSI Earns 47 million USD, as «Wild» Flavors Achieves First-Year Accretion Target
In the fourth quarter, WFSI operating profit was 47 million USD. Positive contributions from «Wild» Flavors, SCI and Eatem Foods offset declines in some of the other specialty ingredients businesses, which were impacted by various factors including weaker sales overseas.
In its first full year as part of ADM, «Wild» Flavors contributed 0.10 USD of earnings accretion.
Other Items of Note
Segment Operating profit of 900 million USD as reported for the quarter includes a net gain of 212 million USD on the sale of the global cocoa and chocolate businesses and a 185 million USD gain on the revaluation of the company’s previously held investment in Eaststarch C.V. in conjunction with the acquisition of the remaining interest and other gains/losses totaling 6 million USD. In addition, fourth quarter earnings before income taxes include a number of impairment and restructuring charges totaling 171 million USD.
For the fourth quarter, the effective tax rate was negative 2 percent, significantly impacted by the tax effects of portfolio transactions, including the gain on sale of the global cocoa business, the gain on revaluation of the Eaststarch investment, planning related to the «Wild» acquisition, and other adjustments. Excluding these items and their tax impacts, the effective tax rate was 24 percent for the fourth quarter and 27 percent for the full year, and was favorably impacted by geographic mix and discrete tax items.
As additional information to help clarify underlying business performance, the tables on page 9 include both adjusted EPS as well as adjusted EPS excluding significant timing effects.
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