Archer Daniels Midland Company reported financial results for the quarter ended Dec. 31, 2018, and declared a cash dividend of 35 cents per share on the company’s common stock.
“Our team executed well, delivering strong year-over-year profit growth in the fourth quarter,” said Chairman and CEO Juan Luciano. “Looking back on the full year, the team did a great job focusing on the items we could control, as we continued innovating to serve customer needs and advancing our strategic priorities. Our effective management through complicated and rapidly changing trade, geopolitical and market conditions helped deliver an impressively strong 2018 that included solid profit growth, improved returns on invested capital and higher cash flows.”
Fourth quarter 2018 highlights
Earnings per share in 2018 were 55 cents, compared to $1.39 in 2017. EPS as reported of $0.55 includes a $0.02 per share loss related to the sale of businesses and assets, a $0.35 per share charge related to asset impairment, restructuring and settlement charges, a $0.01 per share charge related to acquisition expenses, and a $0.05 per share tax benefit related to the U.S. tax reform and certain discrete items. Adjusted earnings per share in 2018 were 88 cents, compared to 82 cents per share in 2017. Adjusted EPS excludes these items.
Segment operating profit was $786 million in 2018, compared to $733 million in 2017.
Adjusted segment operating profit was $860 million, compared to $793 million in 2017.
The cash dividend of 35 cents per share is a 4.5% increase from last quarter’s dividend of 33.5 cents per share. The dividend is payable on March 12, 2019, to shareholders on record on Feb. 19, 2019.
This is ADM’s 349th consecutive quarterly payment, a record of 87 years of uninterrupted dividends. As of Dec. 31, 2018, there were 558,990,582 shares of ADM common stock outstanding.
Results of Operations
Origination results were down versus the fourth quarter of 2017.
Merchandising and Handling results were lower than the prior-year period, which included significant insurance settlements and other income. North American results benefited from wheat basis gains due to strong carries, as well as solid execution that drove improvements in export margins and comparable year-over-year export volumes, despite the extremely small volume of U.S. soybean exports to China. North American exports of corn, and soybeans to markets outside of China, were higher. Global Trade benefited from good execution in origination and destination marketing, as well as an intra-company insurance settlement, offset by timing losses in ocean freight hedges, which are expected to reverse.
Transportation results benefited from improved freight rates, offset by increased operating costs.
Oilseeds results were more than double the prior-year period.
Crushing and Origination results were up significantly year over year, as the business continued to leverage its global asset footprint to capitalize on solid demand for soybean meal and strong crush margins.
Refining, Packaging, Biodiesel and Other was up on strong biodiesel volumes and margins as well as higher year-over-year results from food oils, partially offset by challenging market conditions in nut processing.
Carbohydrate Solutions results were lower than the year-ago quarter.
In Starches and Sweeteners, North American volumes remained solid. Results were driven by lower margins and sales in EMEA; higher costs in North American liquid sweeteners, in part due to lower production rates at the Decatur complex; and lower co-product income.
Bioproducts results were lower than the fourth quarter of 2017, when trading results were very strong. Ethanol margins and volumes were down in a continued weak industry pricing and margin environment.
Nutrition results were down versus the prior-year period.
WFSI results were higher year over year, with sales up 14% versus the prior-year quarter on a constant currency basis. Recent acquisitions in WILD and Health & Wellness, along with strong demand for lecithin, also contributed to higher results.
Animal Nutrition results were significantly lower, driven primarily by continued production issues that compressed margins in amino acids, including lysine.
Other Items of Note
Segment operating profit of $786 million for the quarter includes losses of $8 million ($0.02 per share) related to the sale of businesses and assets, as well as a $66 million charge ($0.10 per share) related to asset impairment, restructuring, and settlement charges.
Corporate results also include asset impairment and restructuring charges of $67 million ($0.09 per share), a non-cash pension settlement charge of $117 million ($0.16 per share), and acquisition-related expenses of $12 million ($0.01 per share).
The effective tax rate for the full year 2018 was approximately 12%, and includes the effects of U.S. tax reform and the 2017 biodiesel tax credit recorded in the first quarter along with certain discrete tax items netting to a favorable $74 million. The effective tax rate for the fourth quarter of 2018 was a positive 2% and reflects a favorable change in the geographic mix of 2018 pretax earnings compared to estimates earlier in the year and certain discrete tax items recorded during the quarter netting to a favorable $35 million. The effective tax rate for the fourth quarter in the prior year reflects the initial implementation of U.S. tax reform.