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Earnings in white on background of yellow words Tashatuvango/Thinkstock

ADM reports net earnings of $536 million in third quarter

Decatur plant downtime issues continued to impact North American results.

Archer Daniels Midland Company reported financial results for the quarter ended Sept. 30, 2018, on Nov. 6.

The highlights:

  • Net earnings of $536 million, up significantly year over year.
  • Trailing four-quarter ROIC of 8.3%.
  • Growing benefits from strategic actions lead to confidence in ongoing earnings growth.

“The team delivered another strong quarter, capitalizing on robust global demand with good execution and great utilization of our global footprint,” said ADM Chairman and CEO Juan Luciano.

“For the last several years, through good conditions and bad, we’ve remained focused on serving our customers and delivering our strategic plan — optimizing our core, driving efficiencies, and expanding strategically. Now, as we look forward to 2019, we are continuing to enhance our earnings power, both through our growth investments and our Readiness initiative, which is beginning to drive fundamental changes in the way we run our company.

“Thanks to the team’s great work and the growing benefits of our strategic actions, we expect a solid end to 2018, as well as continued momentum for growth in earnings and returns in 2019 and the years to follow.” 

EPS as reported of $0.94 includes a $0.01 per share charge related to LIFO, a $0.04 per share gain related to the sale of a business and an equity investment, and a $0.01 per share tax expense related to U.S. tax reform and certain discrete items. Adjusted EPS, which excludes these items, was $0.92.1 for the third quarter.

Results of Operations

  • Origination results were up substantially year over year. 
  • Merchandising and Handling was significantly higher versus the weak third quarter of 2017. In North America, the business managed risk well in a volatile price environment, and capitalized on its asset base to deliver higher volumes and margins, including strong export sales to customers in markets outside of China. In Global Trade, good utilization of the company’s global network of origination assets and continued expansion of destination marketing volumes and margins drove solid results.
  • Transportation results more than doubled year over year. 
  • Oilseeds results were also up significantly over the prior-year period. 
  • Crushing and Origination set a new record for crush volumes, leveraging its strong global asset base and the company’s growing destination marketing capabilities to capitalize on higher global crush margins. Soybean crush was the major driver of earnings growth, with North America and South America all delivering substantially higher results year over year. Softseeds results had a significant improvement from the third quarter of 2017. 
  • Refining, Packaging, Biodiesel and Other was down versus the third quarter of 2017. Biodiesel was up substantially year over year, and edible oils continued to perform well. Peanut shelling margins were significantly lower, primarily caused by large peanut inventories and difficult market conditions. 
  • Carbohydrate Solutions results were slightly lower than the year-ago quarter. 
  • Starches and Sweeteners delivered solid results, slightly below the strong prior-year period. EMEA sweeteners continued to benefit from recent acquisitions, delivering good results despite sugar oversupply in the region. Flour milling was higher, benefiting from strong wheat procurement results and timing effects. North American liquid sweeteners were negatively impacted by higher input and manufacturing costs.
  • Bioproducts results were down, as positive results from effective ethanol risk management as well as beverage and industrial alcohols were offset by an extremely weak ethanol industry margin environment.
  • Decatur plant downtime issues continued to impact North American results. 
  • Nutrition results were in line with the prior-year period. 
  • In Animal Nutrition, issues that developed during the quarter constrained lysine production volumes and increased manufacturing costs, contributing to lower year-over-year results. Lower premix margins also impacted results.

Other Items of Note

  • Segment operating profit of $881 million for the quarter includes gains of $21 million ($0.04 per share) related to the sale of a business and an equity investment, as well as a $1 million charge related to a settlement.
  • The effective tax rate for the quarter was approximately 15%, up from about 13% in the prior year. The current quarter rate includes the effects of U.S. tax reform and the 2017 biodiesel tax credit recorded in the first quarter. 

Source: ADM

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