ADM sees mixed results in Q2 financials, predicts strong year

By Aerin Einstein-Curtis contact

- Last updated on GMT

ADM sees mixed results in Q2 financials, predicts strong year

Related tags: Soybean, Archer daniels midland

Despite a slow start, Archer Daniels Midland forecasts a strong finish to the year based on feed meals, milling and soy crush.

The company released its second quarter financial information on Tuesday. Revenue in the period dropped to $17.2bn from $21.5bn in Q2 2014.

The agribusiness giant suggested though some overall numbers, including those in the agricultural services division were down, they were following established trends and likely to pick up through the rest of the year.

“We continue to feel good about 2015,”​ said Juan Luciano, company president, CEO and director on the call with analysts.

Second quarter numbers

The adjusted segment operating profit was $724m, down 13% from $835m in the same period in 2014, reported ADM.

Agricultural Services operating profit was $127m, down $57m from the year-ago period.

The declines reportedly stemmed from slow North American exports and the June 30 USDA report, which caused a price jump for some commodities. Although, some of that loss was balanced with an uptick in the South American exports, which bumped oilseed results, said Luciano.

However, milling saw a growth of about $25m and the second quarter set a record for ADM’s global milling operations.

Corn Processing decreased $80m on lower bioproducts results.

Positives for the company

Oilseeds operating profit of $301m jumped $4m from the year-ago results. Crushing and origination operating profit increased $35m to $198m. Strong soybean meal demand, combined with ample global bean supplies, supported strong global soy crush results, said ADM.

The company said large South American corn and soybean harvests helped drive volumes through the origination and recently expanded port operations there. “In the first half of 2015, we crushed record volumes of soybeans globally,” ​said Luciano in the call. “As part of our strategic plan for oilseeds, we've added switch capacity to more of our North American crush plants, and we profited from our global switch capacity in a weak softseed margin environment this quarter.”

The balance sheet remains strong, said Ray Young, ADM CFO.

Looking forward

Since December the company has been making some efforts to meet goals previously outlined.

“We've continued to advance our strategic plan that's improving our [return on capital investment] ROIC and growing our [economic value added] EVA.

Among numerous other actions, we closed the sale of our global chocolate business to Cargill; we closed the Barcarena port transaction with Glencore in June; and we remain on track to close both our Eaststarch transaction and the sale of our global cocoa business later this year,”​ said the CEO in the call.

Looking forward, the trends are positive, he said. The large US harvest has benefits and the expected demand should remain strong for ethanol. Additionally, global demand for meal is anticipated to maintain usage of ADM’s soybean processing ability.

It is expected that oilseed crush can be maintained throughout the year as the company’s swing capacity at different crushing facilities will allow them to maximize crush in different areas, said Luciano. That strength should continue to offset any weaknesses in softseed and corn, he said.

Similarly, said the CEO, there is an expectation that once the North American harvest starts, agricultural services earnings will increase as there was a similar trend last year.

The ethanol market also will help as it is expected to stay strong in the near and medium-terms for both domestic and especially export use, he said. New markets for export continue to be developed, said ADM. 

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