ADM: Reports Third Quarter Financial Results

Chicago / IL. (adm) Archer Daniels Midland Company (ADM) reported financial results for the quarter ended September 30, 2016. «After working through the challenging environment in the first half of the year, we capitalized on improving operating conditions in the third quarter and are positioned well for a solid finish to the year», said ADM Chairman and CEO Juan Luciano. «Ag Services results were driven by U.S. exports that surged through the quarter, creating improved merchandising opportunities as the global market relied heavily on U.S. exports of corn and soybeans. Results for Corn included strong performance in North American sweeteners and starches, growth from our international corn operations and steady results for bioproducts. Oilseeds results were impacted by significantly lower global soy crushing margins, weaker origination results in Brazil and the unusual equity loss from our Wilmar investment. WFSI results included strong growth from WILD Flavors with mixed results from our specialty ingredients businesses».

«We continued to execute our strategic plan in the quarter. We acquired Caterina Foods, a manufacturer of specialty gluten-free and high-protein pastas. In addition, we further invested in Asia’s growing and evolving food demand by increasing our strategic ownership stake in Wilmar to 23 percent. Our ethanol dry mill review has progressed and we are targeting receipt of final proposals from a short list of interested parties by the end of the calendar year. And, we have implemented nearly 250 million USD of new run-rate savings actions through the third quarter and expect to exceed our 275 million USD target by the end of the calendar year. In line with our balanced capital allocation framework, we have returned 1.3 billion USD to shareholders in dividends and share buybacks through the first nine months of the year».

«With improving market conditions and a large U.S. harvest, combined with the team’s solid execution capabilities, we feel good about the remainder of the year and a stronger 2017».

Third Quarter 2016 Highlights

		Q3/2016																Q3/2015
(in millions, except per share amounts)		As Reported				Adj						Adjusted1						As Reported						Adj						Adjusted1
Earnings per share		USD	0.58			USD		0.01				USD		0.59				USD		0.41				USD		0.19				USD		0.60
Segment Operating Profit1
Agricultural Services		USD	193			USD		2				USD		195				USD		149				USD		—				USD		149
Corn Processing		212				2						214						131						34						165
Oilseeds Processing		144				1						145						335						(59				)		276
WFSI		73				—						73						70						—						70
Other		23				—						23						24						—						24
Total		USD	645			USD		5				USD		650				USD		709				USD		(25		)		USD		684

(1) Non-GAAP financial measures, including after-tax amounts.

Third Quarter 2016 Highlights (continued)

• EPS as reported of 0.58 includes USD a 0.09 USD per share credit related to LIFO, 0.08 USD per share of charges related to asset impairments, restructuring and settlements, and other charges of 0.02 USD per share. Excluding these items, adjusted EPS is 0.59 USD¹.
• Trailing four-quarter-average adjusted ROIC was 5.8 percent¹, 80 basis points below our annual WACC of 6.6 percent.
• The effective tax rate for the quarter was 28 percent compared to 31 percent in the year-ago quarter due to changes in the mix of earnings.
• During the first nine months of 2016, the company returned 1.3 billion USD to shareholders through dividends and share repurchases.

(1) Non-GAAP financial measures, including after-tax amounts.

Results of Operations

In Ag Services, merchandising and handling results were up due to increased volumes and improved margins as crop shortages in South America accelerated this year’s seasonal shift in global demand to North America. The global trade desk results were lower in the quarter as some commodity prices declined, causing global buyers to draw down their inventories, which limited merchandising opportunities.

Transportation results improved due to strong exports and improved freight rates.

Milling and Other continued to perform well with another solid quarter, consistent with the year-ago period, on strong product margins related to seasonal demand.

In Corn Processing, sweeteners and starches results improved as the North American business continued to perform well with solid demand, production efficiencies and improved raw material costs. The company’s results from its international corn operations improved in the quarter. Bioproducts results, excluding last year’s Brazilian sugar impairment charge, were essentially flat with improved operational performance and margins from Animal Nutrition, offset by slightly lower ethanol results compared to last year.

In Oilseeds Processing, crushing and origination results declined significantly versus a very strong year-ago quarter due to lower soy crush margins. In addition, origination volumes were lower due to reduced Brazilian soybean and corn crops.

Refining, packaging, biodiesel and other results were up from the year-ago quarter due to solid results in biodiesel, specialty fats and oils and better Golden Peanut and Tree Nuts margins.

Oilseeds results in Asia for the quarter declined from the year-ago period, primarily due to Wilmar’s unusual equity loss in the second quarter . ADM records its share of Wilmar’s results on a one-quarter lag basis and recorded a 48 million USD equity loss in the third quarter, compared to income of 36 million USD in the third quarter one year ago.

WFSI results were up slightly versus the year-ago quarter with strong operating profit growth in flavors and ingredient systems, and the integration of Eatem Foods, offset by mixed results from the specialty ingredients businesses and some start-up items.

Other financial operating profit was essentially flat on steady ADM Investor Services volumes and results from captive insurance operations.

Other Items of Note

As additional information to help clarify underlying business performance, the tables on page 9 include both reported EPS as well as adjusted EPS excluding significant timing effects.

Segment operating profit of 645 million USD as reported for the quarter includes charges of 2 million USD in Ag Services related to asset impairment and restructuring; charges of 2 million USD in Corn Processing primarily related to a 4 million USD final settlement of sales proceeds from the Brazilian sugar ethanol disposal, partially offset by hedge timing gains; and a 1 million USD restructuring charge in Oilseeds. Prior year Oilseeds results included earnings of 63 million USD related to the company’s cocoa business which was sold in the fourth quarter of 2015, including 31 million USD of hedge timing effects.

In addition, corporate results include 74 million USD in legal settlements and related fees, impairment charges and losses on sales of various equity investments.

The effective tax rate for the quarter was 28 percent compared to 31 percent in the year-ago quarter, due to changes in the geographic mix of earnings and the tax impact of portfolio actions.