ADM: Reports Q4 and FY-2020 Financial Results

Chicago / IL. (adm) Archer Daniels Midland Company (ADM) reported financial results for the quarter and fiscal year ended December 31, 2020. «I want to thank our team, which performed exceptionally well during truly unprecedented times to deliver four straight quarters of year-over-year adjusted segment operating profit growth in 2020, along with solid returns and record full-year adjusted EPS of USD 3.59,» said Chairman and CEO Juan Luciano.

«Around the globe, ADM colleagues demonstrated their resourcefulness, creativity and commitment by keeping our work environment safe from COVID-19, maintaining our operations and serving our customers. The team delivered on our strategic objectives, maintained a solid balance sheet, managed a wide variety of risks superbly, and showed the strength of our diversified and global value chain.

«Our Ag Services and Oilseeds team delivered outstanding results in 2020, crossing the USD 2 billion profit mark by capitalizing on our unparalleled and flexible global footprint to meet strong demand. With continued strong global demand for grains and oilseeds as well as meal and oils, we are confident in another outstanding performance from Ag Services + Oilseeds in 2021.

«In Carbohydrate Solutions,» Luciano continued, «the team achieved higher full-year results, demonstrating the power of our diversified product portfolio by pivoting quickly and effectively to meet incremental demand for industrial starches, retail flour and high-grade alcohol. The Carbohydrate Solutions business is well positioned to generate solid profit growth in 2021 as lockdown impacts dissipate.

«Our Nutrition business continued to harvest investments, lead in consumer growth trend areas, and partner with customers to deliver new products and solutions in 2020, driving 37 percent annual operating profit growth. Based on our current organic growth plans, we expect the Nutrition team to deliver solid revenue expansion and profit growth in 2021.

«For ADM, based on the continued delivery of drivers under our control and improving market conditions as the year progresses, we expect strong growth in segment operating profit and another record year of EPS in 2021. I am extremely proud of our team’s performance: Our momentum is strong, and our future is bright,» Chairman and CEO Juan Luciano said in his statement.

Fourth Quarter 2020 Highlights

(Amounts in millions except per share amounts) 2020 2019
Earnings per share (as reported) USD 1.22 USD 0.90
Adjusted earnings per share USD 1.21 USD 1.42
Segment operating profit USD 1,139 USD 934
Adjusted segment operating profit USD 1,152 USD 1,028
Ag Services and Oilseeds 834 739
Carbohydrate Solutions 208 174
Nutrition 127 102
Other Business (17 ) 13
  • Q4 2019 results included USD 270 million segment operating profit (USD 0.61 per share) impact of the retroactive biodiesel tax credit.
  • Q4 2020 EPS as reported of USD 1.22 includes a USD 0.03 per share charge related to asset impairment, restructuring and settlement; a USD 0.01 per share charge for acquisition-related expenses; a USD 0.01 per share credit related to gains on the sale of certain assets; and a USD 0.04 per share credit related to tax discrete items. Adjusted EPS, which excludes these items, was USD 1.21.1

Quarterly Results of Operations

Ag Services + Oilseeds achieved substantially higher results year over year, setting a Q4 record for adjusted operating profit.

  • Ag Services results were significantly higher than the prior-year period, driven by great execution in North America, where the business capitalized on strong global demand, particularly from China, to deliver higher export volumes and margins. As expected, South American origination was lower year over year after significantly accelerated farmer selling in the first half of 2020. Global Trade contributed to the higher year-over-year results as it continued to utilize its global network and manage risk well to meet customer demand. As anticipated, negative timing impacts from the prior quarter reversed.
  • Crushing delivered substantially higher results versus the prior-year period. The business captured significantly higher margins in all regions, driven by tight soybean supplies and strong global demand for both meal and vegetable oils. There was approximately USD 125 million in net negative timing in the quarter, driven by basis impacts and improving softseed margins.
  • Refined Products and Other results were higher year over year absent the recognition of the retroactive biodiesel tax credit in Q4 of 2019, with good results driven primarily by solid South American margins.
  • Equity earnings from Wilmar were higher versus the prior-year period.

Carbohydrate Solutions results were higher than the fourth quarter of 2019.

  • Starches and Sweeteners achieved significantly higher results versus the prior-year period, driven by lower net corn costs and intra-company insurance settlements. Earnings were partially offset by lower results from corn oil and wet mill ethanol margins.
  • Vantage Corn Processors results were better versus the prior-year period, though they continued to reflect the challenged ethanol industry environment. The business delivered higher year-over-year margins as it met increased demand for USP-grade alcohol, partially offset by fixed costs from the two temporarily idled dry mills.

Nutrition delivered 24 percent year-over-year operating profit growth.

  • Human Nutrition results were higher versus the prior-year quarter. Flavors delivered a strong quarter, driven by good sales and product mix in North America and EMEAI. Continued strength in plant proteins drove higher results in Specialty Ingredients. Health + Wellness delivered higher sales in probiotics and natural health and nutrition; prior-year results included revenue and income related to the launch of the strategic Spiber relationship. Results for the quarter also included an intra-company insurance settlement.
  • Animal Nutrition results were significantly higher year over year, driven by strong performances in Asia and EMEAI and improvement in amino acid results, partially offset by currency effects in Latin America.

Other Business results were substantially lower, driven by lower ADM Investor Services earnings and Captive Insurance underwriting results, including intra-company settlements referenced above in Carbohydrate Solutions and Nutrition results.

Other Items of Note

As additional information to help clarify underlying business performance, the table on page 10 includes reported earnings and EPS as well as adjusted earnings and EPS.

Segment operating profit of USD 1.1 billion for the quarter includes charges related to asset impairment, restructuring, and settlement activities of USD 16 million (USD 0.02 per share) and gains on the sale of certain assets of USD 3 million (USD 0.00 per share).

In Corporate results, unallocated corporate costs for the quarter were higher year over year due primarily to increased variable performance-related compensation expense accruals, and increased IT and project-related expenses. Other charges decreased due to lower railroad maintenance expenses partially offset by the absence of prior year investment gains. Corporate results also included restructuring charges of USD 11 million (USD 0.01 per share).

The effective tax rate for the quarter was approximately 8 percent compared to a positive 1 percent in the prior year. The calendar year 2020 effective tax rate was approximately 5 percent, down from approximately 13 percent in 2019. The decrease for the calendar year was due primarily to changes in the geographic mix of earnings and the impact of U.S. tax credits, mainly the railroad tax credits, which have an offsetting expense in cost of products sold. Absent the effect of EPS adjusting items, the effective tax rate for calendar year 2020 was approximately 9 percent.