ADM predicts strong 2018, stays quiet on Bunge speculation

By Aerin Einstein-Curtis contact

- Last updated on GMT

© GettyImages/G0d4ather
© GettyImages/G0d4ather

Related tags: Archer daniels midland, Adm

Despite strong returns for feed ingredients, corn and agricultural service segments, Archer Daniels Midland Company (ADM) saw a decline in segment operating profit for the last quarter of 2017.

The agribusiness giant reported Q4 outcomes on Tuesday (February 6) for the period ending December 31, 2017.

The adjusted segment operating profit was $793m, a fall of $34m from the same quarter last year, said Ray Young, chief financial officer for ADM in a call on the results. 

Adjusted segment operating profit for the calendar year was about $2.67bn, up slightly from the $2.62bn reported in 2016, the company reported. Net earnings for the quarter were $788m; with net earnings for the year at $1.59bn.

“Despite some difficult operating conditions, our calendar year adjusted segment operating profit was slightly higher than 2016,”​ added Young.

The final quarter of the year was “solid,”​ said Juan Luciano, CEO of ADM, on the call.

“We pulled the levers that were under our control including cost and capital initiatives and interventions throughout the year to help us deliver value for our shareholders,” ​he said on the call. “For 2017 as a whole, we delivered double-digit adjusted earnings growth, [and] improved returns on invested capital."

“When I look at ADM today, I see a company that is poised to capitalize on micro-trends, harvest our recent investments and reap even more benefits from our actions,”​ he said.

“As we implement our strategies, all of these factors lead us to be optimistic about 2018,”​ he added.

The CEO mentioned the rumors circulating in the media in relation to ADM making a bid for rival, Bunge, but stressed that no questions would be taken on the topic during the call.   

“I want to make one final comment, obviously we are well aware of the recent stories in the press about ADM and Bunge as we move to Q&A, I’m sure you understand that we’re not going to comment on these sort of matters,” ​said Luciano

Speciality feed ingredients performing 

ADM’s agricultural services segment saw improvement during Q4 2017 compared to the year-ago period, said Young.

“Merchandising and handling was up year-over-year and our global trade team executed well, delivering positive results for the third consecutive quarter,” ​he said. “We’re continuing to see good contributions from our investments in destination marketing, including in Egypt and Israel, where we have expanded our capabilities in recent years.”

Segment results for the quarter were $301m, up from a reported $245m in Q4 2016.

However, in North America there continued to be a lack of competitiveness for exports of US grains, said Young. That negatively influenced both volumes and margins.

Corn processing reported a strong quarter with improved results compared to the prior year, he said. The segment saw about $261m, up from $255m the previous year.

“Animal nutrition was significantly higher than the year-ago quarter as ongoing efforts to improve our cost positions in the specialty feed ingredients business continued to bear fruit,”​ said Young.

However, results for oilseed processing dropped with lower crush and origination when compared to the fourth quarter of 2016, he said. Returns in Q4 2016 were $239m; they fell to $202m in 2017.

“Although margins were weak globally throughout the quarter, we continue to see indicators of improving global demand for soybean meal as the effects of alternative proteins diminish and livestock numbers continue to increase,” ​said Young. “Therefore, we saw margins trend up late in the fourth quarter. Weakness in South American origination margins and volumes negatively impacted results.”

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