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ADM: Reports Third Quarter 2019 Financial Results

Chicago / IL. (adm) Archer Daniels Midland Company (ADM) reported financial results for the quarter ended September 30, 2019.

«We delivered solid third quarter results, consistent with the perspectives we provided last quarter, despite a difficult external environment,» said Chairman and CEO Juan Luciano. «We maintained our focus on serving our customers and advancing our strategic goals, and continued to realize the benefits of the actions that we took earlier this year.

«We are excited about our strategic growth activities, and particularly our participation and leadership in major global trends such as flexitarian diets, nutrition for health, and sustainable materials. We have invested in assets, platforms and technological capabilities to serve and grow with our customers, who are embracing these market-changing trends.

«While external conditions for certain businesses may remain fluid and potentially challenging in the near term, our growing leadership position in major global trends, and our strength in innovation, efficiency, and customer service, position us well for stronger results in 2020 and beyond.»

Third Quarter 2019 Highlights

(Amounts in millions except per share data) 2019 2018
.
Earnings per share (as reported) USD 0.72 USD 0.94
Adjusted earnings per share(1) USD 0.77 USD 0.92
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Segment operating profit USD 758 USD 881
Adjusted segment operating profit(1) USD 764 USD 861
Ag Services and Oilseeds 417 478
Carbohydrate Solutions 182 288
Nutrition 118 67
Other 47 28

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EPS as reported of USD 0.72 includes a charge of USD 0.08 per share related to asset impairment and restructuring charges, a USD 0.02 per share credit related to LIFO, and a USD 0.01 per share tax benefit related to the U.S. tax reform transition tax and certain other discrete items. Adjusted EPS, which excludes these items, was USD 0.77.1

(1) Non-GAAP financial measures.

Results of Operations

Ag Services + Oilseeds results were lower than the third quarter of 2018, which benefited from very strong crush margins.

  • Ag Services results were in line with the prior-year quarter. In South America, results were up on improved origination margins in Brazil and increased export volumes from Argentina. In North America, improved merchandising results from favorable ownership positions helped offset a continued challenging volume and margin environment for U.S. exports.
  • In Crushing, results were lower year over year. Crush margins globally were substantially below the record high levels seen in 2018, though still solid in North America and EMEA. In South America, margins were pressured by continued strong exports of soybeans to China. Global crush margins benefited from positive net timing effects of approximately USD 50 million during the third quarter.
  • Refined Products and Other results were significantly higher than the third quarter of 2018, largely driven by significant improvements in Golden Peanut and Tree Nuts.
  • Wilmar results were lower year over year.

Carbohydrate Solutions results were substantially lower than the year-ago period.

  • Starches and Sweeteners results were down versus the third quarter of 2018. Results in North America were affected by higher net corn costs partly offset by lower manufacturing costs, which included improvements at the Decatur corn complex. EMEA results were impacted by lower selling prices and continued pressure from Turkish sweetener quotas. In wheat milling, an increase in sales volumes was more than offset by lower margins due to limited opportunities in wheat procurement.
  • Bioproducts results were significantly lower, driven by a continued unfavorable margin environment in the ethanol industry.

Nutrition results were substantially higher.

  • WFSI results were significantly higher than the prior-year quarter, with growth across the portfolio. Higher sales and margins globally led to record quarterly results for WILD. In Specialty Ingredients, the protein business continued to expand amid the growing consumer market for alternative proteins. Continued contributions from growth investments in bioactives and fibers benefited the Health + Wellness business.
  • Animal Nutrition results were up year over year, driven largely by contributions from Neovia. Improvements in vitamin additives also helped contribute to positive results. Lysine production improved, though pricing was negatively impacted by lower global demand.

Other results were up substantially from the year-ago period, primarily driven by higher captive insurance earnings.

Other Items of Note

As additional information to help clarify underlying business performance, the table on page 9 includes reported earnings and EPS as well as adjusted earnings and EPS.

Segment operating profit of USD 758 million for the quarter includes charges related to asset impairment and restructuring activities of USD 6 million (USD 0.01 per share).

In Corporate results, unallocated corporate costs for the quarter decreased year over year, principally due to lower accruals for performance-related compensation, partially offset by higher spending in IT and Readiness-related project costs.

Corporate results also included non-cash early retirement charges and global workforce restructuring charges of USD 47 million (USD 0.07 per share) and a LIFO credit of USD 16 million (USD 0.02 per share).

The effective tax rate for the quarter was approximately 19 percent, up from approximately 15 percent in the prior year. The year-over-year change in rate was primarily driven by a lower 2018 annual effective tax rate that included the favorable impacts of both the 2017 retroactive biodiesel tax credit and certain favorable discrete tax items, and changes in the geographic mix of forecast pretax earnings.