--Archer Daniels Midland second-quarter earnings fall 21%
--Legal costs, currency hedges, last year's drought weigh on
results
--Company expects large U.S. grain harvest to boost
grain-handling results
(Updates throughout with detail, executive comments, share
price.)
By Ian Berry
Archer Daniels Midland Co's (ADM) second-quarter earnings fell
21% amid weaker grain-handling profits stemming from last year's
drought, but the company said a large U.S. crop this year should
revive the business.
ADM, along with other grain traders and processors, has
struggled in the wake of last year's historic drought to secure
soybean and corn supplies. While supplies have tightened throughout
the year, forecasters are expecting a record corn crop once U.S.
farmers begin harvesting in a few weeks.
The new harvest will help boost grain-handling volumes, and ADM
executives said it will help the company more fully utilize its
network of storage and transportation facilities.
Government forecasters in July projected a U.S. corn harvest
this year of 14 billion bushels, up 30% from last year and 13% from
2011.
"This is a recharge that is just essential for ADM," Craig Huss,
ADM's chief risk officer, told investors in a conference call. "As
the largest storer of grain in the U.S., we will be filling these
assets."
The large crop should also bolster margins in business ranging
from ethanol to corn sweetener, company officials said.
For the second quarter, the company's agricultural services
segment, which includes grain merchandising, saw profit fall 34% to
$81 million. The company's earnings were also hit by
foreign-currency hedging losses and an increased provision related
to a legal matter.
While the company waits for a large U.S. harvest, ADM, based in
Decatur, Ill., is already enjoying a revival in its ethanol
business, which had struggled for several quarters. Its
second-quarter operating profit more than doubled to $223 million
due in large part to stronger ethanol earnings, although the
company said the industry remains volatile.
ADM, one of the world's largest grain traders, is awaiting full
regulatory approval for its planned A$3.4 takeover of GrainCorp
Ltd. (GNC.AU), Australia's largest grain company, which accepted
the offer in April. The company has received six regulatory
approvals but is still awaiting approval from Australia and
China.
ADM reported a profit of $223 million, or 34 cents a share, down
from $284 million, or 43 cents, a year earlier. Excluding items
such as foreign-currency hedging losses and additional provisions
related to a Foreign Corrupt Practices Act matter, adjusted
earnings rose to 46 cents from 38 cents. Sales declined 0.6% to
$22.54 billion.
Analysts polled by Thomson Reuters had most recently forecast
per-share earnings of 44 cents on revenue of $22.87 billion.
The company said it increased a provision related to a bribery
investigation to $54 million from $25 million. The investigation,
which was previously announced, involves the U.S. Department of
Justice and the U.S. Securities and Exchange Commission.
ADM shares were recently up 0.3% to 37.98. They are up 39% so
far this year.
-Melodie Warner contributed to this article.
Write to Ian Berry at ian.berry@dowjones.com
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