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ADM delivers record earnings

Tim Robberts/Stone/GettyImages paper-cut dollar and growth arrow.
China's appetite for U.S. crops drives earnings to $3.59 a share and CEO expects another record year in 2021.

By Isis Almeida

China is so hungry for American crops that it’s driving earnings of one of the world’s largest agricultural commodities traders to a record.

Archer-Daniels-Midland Co. delivered all-time high earnings of $3.59 a share on an adjusted basis last year, and Chief Executive Officer Juan Luciano expects another record year in 2021. China is scooping up U.S. crops, pushing combined American corn and soybean exports to a record in the fourth quarter, according to data from the U.S. Department of Agriculture compiled by Bloomberg.

Profits at the Chicago-based company’s traditional business are a stark turnaround after years of bumper crops that curbed the volatility traders need to thrive. They also come on top of growth from ADM’s diversification away from trading, with bets on things like veggie burgers, pet food and probiotics.

“Our Ag Services and Oilseeds team delivered outstanding results in 2020, crossing the $2 billion profit mark by capitalizing on our unparalleled and flexible global footprint to meet strong demand,” Luciano said in a statement Tuesday. “We expect strong growth in segment operating profit and another record year of EPS in 2021.”

ADM shares, which rose to a record last week, rose 0.4% before falling 1.5% by 10:47 a.m. in New York.

“The equity market has been expecting a big 4Q from ADM given outstanding operating conditions during the quarter and the company delivered,” said Vincent Andrews, an analyst at Morgan Stanley. “The question now is how good 2021 will be.”

The company also beat expectations for the fourth quarter, delivering adjusted earnings per share of $1.21. That’s 12% higher than analysts had forecast. ADM’s traditional business, which consists of grain trading and handling and oilseeds processing, set a record adjusted operating profit in the quarter.

“Ag Services results were significantly higher than the prior-year period, driven by great execution in North America, where the business capitalized on strong global demand, particularly from China, to deliver higher export volumes and margins,” the company said in the statement.

Profits from soybean processing were also “substantially higher” than a year earlier due to tight supplies and strong demand for meal, a key ingredient in animal feed, as well as oils used for cooking and biodiesel. Demand for soybean oil for renewable diesel could reach 0.5 billion pounds a year, Luciano said.

ADM’s nutrition business delivered 24% growth in operating profit and the company expects “solid revenue expansion” and profit expansion from the unit in 2021. Results for its Vantage Corn Processors unit, which contains the three dry ethanol mills ADM wants to offload, were higher versus a year earlier, “though they continued to reflect the challenged ethanol industry environment.”

The company increased its cash dividend by 2.8% from the previous quarter. It also expects a better environment for its ethanol business as China has already bought a record amount of the biofuel, said Chief Financial Officer Ray Young.

How did ADM do in 2020?

--With assistance from Dominic Carey.
© 2021 Bloomberg L.P.


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