ADM: Reports Third Quarter 2018 Earnings

Chicago / IL. (adm) Archer Daniels Midland Company (ADM) reported financial results for the quarter ended September 30, 2018. «The team delivered another strong quarter, capitalizing on robust global demand with good execution and great utilization of our global footprint,» said ADM Chairman and CEO Juan Luciano on 2018-11-06.

«For the last several years, through good conditions and bad, we’ve remained focused on serving our customers and delivering our strategic plan — optimizing our core, driving efficiencies, and expanding strategically. Now, as we look forward to 2019, we are continuing to enhance our earnings power, both through our growth investments and our Readiness initiative, which is beginning to drive fundamental changes in the way we run our company.

«Thanks to the team’s great work and the growing benefits of our strategic actions, we expect a solid end to 2018, as well as continued momentum for growth in earnings and returns in 2019 and the years to follow.»

Third Quarter 2018 Highlights

2018 2017
(Amounts in millions except per share data)
Earnings per share (as reported) USD 0.94 USD 0.34
Adjusted earnings per share USD 0.92 USD 0.45
Segment operating profit USD 881 USD 485
Adjusted segment operating profit USD 861 USD 541
Origination 129 39
Oilseeds 349 113
Carbohydrate Solutions 288 300
Nutrition 67 68
Other 28 21

EPS as reported of USD 0.94 includes a USD 0.01 per share charge related to LIFO, a USD 0.04 per share gain related to the sale of a business and an equity investment, and a USD 0.01 per share tax expense related to U.S. tax reform and certain discrete items. Adjusted EPS, which excludes these items, was USD 0.92.

Results of Operations

Origination results were up substantially year over year.

Merchandising and Handling was significantly higher versus the weak third quarter of 2017. In North America, the business managed risk well in a volatile price environment, and capitalized on its asset base to deliver higher volumes and margins, including strong export sales to customers in markets outside of China. In Global Trade, good utilization of the company’s global network of origination assets and continued expansion of destination marketing volumes and margins drove solid results.

Transportation results more than doubled year over year, driven by higher volumes and margins in ARTCO.

Oilseeds results were also up significantly over the prior-year period.

Crushing and Origination set a new record for crush volumes, leveraging its strong global asset base and the company’s growing destination marketing capabilities to capitalize on higher global crush margins. Soybean crush was the major driver of earnings growth, with North America, EMEA and South America all delivering substantially higher results year over year. Softseeds results had a significant improvement from the third quarter of 2017, with particularly good results in EMEA.

Refining, Packaging, Biodiesel and Other was down versus the third quarter of 2017. Biodiesel was up substantially year over year, and edible oils continued to perform well. Peanut shelling margins were significantly lower, primarily caused by large peanut inventories and difficult market conditions.

Asia was higher on strong Wilmar results.

Carbohydrate Solutions results were slightly lower than the year-ago quarter.

Starches and Sweeteners delivered solid results, slightly below the strong prior-year period. EMEA sweeteners continued to benefit from recent acquisitions, delivering good results despite sugar oversupply in the region. Flour milling was higher, benefiting from strong wheat procurement results and timing effects. North American liquid sweeteners were negatively impacted by higher input and manufacturing costs.

Bioproducts results were down, as positive results from effective ethanol risk management as well as beverage and industrial alcohols were offset by an extremely weak ethanol industry margin environment.

Decatur plant downtime issues continued to impact North American results.

Nutrition results were in line with the prior-year period, with very strong WFSI results offset by a weaker performance in Animal Nutrition.

WFSI results were significantly higher year over year. The business delivered 10 percent year-over-year sales growth on a constant currency basis, and more than 30 percent growth in operating profit. WILD EMEA and North America results were substantially higher on portfolio mix and improved volumes. In Specialty Ingredients, emulsifiers and proteins continued to perform well. The Health + Wellness business continued to grow with the addition of Protexin.

In Animal Nutrition, issues that developed during the quarter constrained lysine production volumes and increased manufacturing costs, contributing to lower year-over-year results. Lower premix margins also impacted results.

Other results increased due to improved captive performance underwriting performance.

Other Items of Note

ADM made changes to its segment reporting in the first quarter of 2018 to reflect the company’s new operating structure. To assist in reconciling the new segment results to the prior presentation, the table on page 11 provides financial information under the historical segmentation.

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

Segment operating profit of USD 881 million for the quarter includes gains of USD 21 million (USD 0.04 per share) related to the sale of a business and an equity investment, as well as a USD 1 million charge related to a settlement.

In Corporate results, unallocated corporate costs for the quarter increased principally due to performance-related compensation accruals. Higher project spending in information technology and growth-related projects also contributed to the increase.

Other charges for the quarter in Corporate improved due to better results from the company’s investment in Compagnie Industrielle et Financiere des Produits Amylaces SA (CIP).

The effective tax rate for the quarter was approximately 15 percent, up from approximately 13 percent in the prior year. The current quarter rate includes the effects of U.S. tax reform and the 2017 biodiesel tax credit recorded in the first quarter, along with certain favorable second quarter discrete tax items which impact the Company’s overall calendar-year rate.

Back to top