ADM: Reports Second Quarter 2020 Results

Chicago / IL. (adm) Archer Daniels Midland Company (ADM) reported financial results for the quarter ended June 30, 2020. «This was another strong quarter for ADM. I am proud of our team’s excellent work, as their execution of our strategy continued to deliver results,» said Chairman and CEO Juan Luciano. «Through good and challenging times alike, we have kept a strong and steady focus on transforming and improving our company. Thanks to that work, and thanks to the ADM colleagues who have gone above and beyond to support our customers and the global food supply chain, we are delivering on our purpose by providing high quality nutrition around the world.

«We’re also living up to our ideals,» Luciano continued. «From our ambitious new sustainability goals, to the continued expansion of products and services to meet evolving consumer needs, to the critical efforts we are all making to protect our employees and support our communities during challenging times, our team is making a positive impact.

«As we advance our strategy, we are increasingly seeing growing benefits flow to our bottom line. Our team is exceeding the targets we’ve set for those factors under our control, and as we look at the second half of the year, we’ll continue to advance our key focus areas: optimizing business performance, accelerating Readiness – which has been critical to our resilience and agility this year – and harvesting the benefits of strategic growth investments, especially in our Nutrition segment. We are in a strong position, with great momentum, and we are confident in our ability to continue to deliver strong earnings and returns in 2020 and beyond.»

Second Quarter 2020 Highlights

(Amounts in millions except per share) 2020 2019
Earnings per share (as reported) USD 0.84 USD 0.42
Adjusted earnings per share USD 0.85 USD 0.60
Segment operating profit USD 813 USD 645
Adjusted segment operating profit1 USD 804 USD 682
Ag Services and Oilseeds 413 362
Carbohydrate Solutions 195 192
Nutrition 158 117
Other Business 38 11
  • EPS as reported of USD 0.84 includes a USD 0.02 per share charge related to asset impairment and restructuring accruals, a USD 0.02 per share charge related to early debt extinguishment, and a USD 0.03 per share credit related to the gain on sale of certain assets. Adjusted EPS, which excludes these items, was USD 0.85.

Results of Operations

Ag Services + Oilseeds: delivered higher results versus the second quarter of 2019.

  • Ag Services results were substantially better year over year. Strong execution in South America helped deliver record quarterly origination and export volumes in a significantly improved margin environment, driven by a weaker Brazilian Real and strong farmer selling. Global trade delivered another strong quarter, as countries looked to secure stable supplies of food amid the pandemic. Lower interior grain margins affected results in North America.
  • Crushing was lower versus the prior-year period. South America delivered significantly higher year-over-year results in an environment of solid domestic meal demand and the weaker Brazilian Real. In EMEAI, crush volumes and margins remained solid. In North America, margins were impacted by Covid-19 effects on customers.
  • Refined Products and Other was higher year over year, driven by improved biodiesel volumes and margins in North and South America as well as strong volumes and margins in refined and packaged oils in South America. Demand was lower for biodiesel in EMEAI, and edible oils in both EMEAI and North America.
  • Wilmar results were lower year over year.

Carbohydrate Solutions: results were similar to the year-ago quarter.

  • Starches and Sweeteners was lower year over year. Results were impacted by lower food service demand in North America and mark-to-market losses on corn oil contracts, partially offset by lower net raw material costs and strong risk management results. Wheat milling had another strong quarter, as solid retail demand and footprint optimization initiatives continued to drive results.
  • Vantage Corn Processors results were higher than the second quarter of 2019, driven by favorable risk management results on inventory positions and strong demand for industrial ethanol. While average industry ethanol margins were down versus the prior year, prices and margins improved throughout the quarter as lower production, including two idled ADM dry mills, and some recovery in driving miles led to falling industry stocks.

Nutrition: continued to deliver significant year-over-year profit growth.

  • Human Nutrition results were higher versus the prior-year quarter. Flavors continued to deliver solid results, as favorable sales mix and margin expansion in North America was offset by some softness in EMEAI. Strong execution to meet rising customer demand for plant-based proteins and edible beans drove higher results in Specialty Ingredients. Health + Wellness delivered higher performance on strong sales for probiotics, improved volumes and margins in fiber, and additional fermentation income.
  • Animal Nutrition was again higher year over year. Despite impacts from Covid-19 on demand in some regions, continued execution on Neovia synergies, robust demand for pet food and treats, and improvement in amino acids drove better results.

Other Business: results were higher, driven by improvements in captive insurance operations.

Other Items of Note

Segment operating profit of USD 813 million for the quarter includes charges related to asset impairment and restructuring activities of USD 14 million ( USD 0.02 per share) and gains on the sale of certain assets of USD 23 million ( USD 0.03 per share).

In Corporate results, interest expense decreased due to lower average borrowing costs from liability management actions taken in late 2019. Unallocated corporate costs for the quarter were higher year over year due to higher variable performance-related compensation expense accruals, and transfers of costs from business segments into Corporate due to centralization of certain activities. Other charges declined due to improved foreign hedging results on intercompany funding and improved investment performance. Corporate results also included debt extinguishment expenses of USD 14 million related to the early retirement of a bond.

The effective tax rate for the quarter was approximately 14 percent, very similar to the 13 percent in the prior year.