- Net earnings of $230 million, or $0.39
per share
- Challenging market conditions continued
into the quarter
- Continued to actively manage
portfolio
- Market dynamics could present
opportunities in second half of the year
Archer Daniels Midland Company (NYSE: ADM) today reported
financial results for the quarter ended Mar. 31, 2016.
The company reported adjusted earnings per share1 of $0.42, down
from $0.78 in the same period last year. Included in these results
was a $0.08 per share loss related to updated portfolio valuations
in an investment joint venture. Adjusted segment operating profit1
was $573 million, down 36 percent from $892 million in the year-ago
period. Net earnings for the quarter were $230 million, or $0.39
per share, and segment operating profit1 was $573 million.
“Challenging market conditions continued in the first quarter,
particularly affecting Ag Services,” said ADM Chairman and CEO Juan
Luciano. “Low U.S. export volumes and weak margins continued, and
in the quarter, poor results from the global trade desk impacted
results for Ag Services. Results for Corn improved compared to the
first quarter one year ago, led by a strong performance in
sweeteners and starches. For Oilseeds, global protein demand
remained solid. However, first quarter results were impacted by
weak global crush margins. WFSI results were in line with
expectations.
“During the quarter, we continued to advance our strategic plan.
We acquired a controlling stake in Harvest Innovations, enhancing
ADM’s plant protein, gluten-free ingredient portfolio. We announced
the purchase of a corn wet mill in Morocco that will further expand
our global sweeteners footprint. We opened our new,
state-of-the-art flavor creation, application and customer
innovation center in Cranbury, New Jersey. And, as part of our
ongoing portfolio management efforts, we reached an agreement to
sell our Brazilian sugarcane ethanol operations. In addition, we
achieved almost $50 million of run-rate savings in the quarter and
remain on track to meet our $275 million target by the end of the
calendar year. We repurchased about $300 million of shares in the
quarter as we continue to execute on our balanced capital
allocation framework.
“The first half of the year continues to present a challenging
environment. However, we are cautiously optimistic that reduced
South American soybean and corn production could bring improved
soybean crush margins and merchandising opportunities in the second
half of the year.”
First Quarter 2016 Highlights1
- Adjusted EPS of $0.42 excludes a $0.02
per share charge related to LIFO and $0.01 per share in
impairments. Included in adjusted EPS is a $0.08 per share loss
related to updated portfolio investment valuations in CIP, an
investment joint venture.
- Agricultural Services decreased $118
million compared to a strong quarter last year amid lower North
American export volumes and margins, fewer global merchandising and
transportation opportunities, as well as unfavorable Global Trade
Desk merchandising positions.
- Corn Processing increased $2 million as
strong results for sweeteners and starches were offset by weaker
lysine results and lower ethanol margins.
- Oilseeds Processing decreased $231
million compared to a very strong year-ago period, as higher
Argentine crush run rates weakened global margins.
- WILD Flavors and Specialty Ingredients
earned $70 million on solid performance from WILD Flavors and
higher results from specialty ingredients.
- Trailing four-quarter-average adjusted
ROIC was 6.3 percent, 30 basis points below our annual WACC of 6.6
percent.
- The company returned $0.5 billion to
shareholders through dividends and share repurchases.
1 Non-GAAP financial measures; see pages 4 and 9 for
explanations and reconciliations, including after-tax amounts.
Ag Services Earnings Decline on Reduced Merchandising
Opportunities
Agricultural Services operating profit was $76 million, down
$118 million from the year-ago quarter.
Merchandising and handling earnings declined $83 million to $24
million, primarily due to a challenging merchandising environment
that continued due to weak U.S. export competitiveness, lower North
American volumes and margins, and a quarterly loss for the global
trade desk compared to positive results last year. Losses from the
global trade desk were caused in part by unfavorable merchandising
positions.
Transportation results declined $28 million to $4 million, due
to low U.S. exports and high water conditions that resulted in
lower barge volumes and higher operating costs.
Milling and other had a solid quarter, but results were down $7
million to $48 million due to lower grain and feed margins.
Corn Processing Earnings Up, Led by Sweeteners and Starches
Results
Corn Processing operating profit increased from $127 million to
$129 million.
Sweeteners and starches results improved $56 million to $141
million as the business continued to perform well, with an improved
cost environment driven by strong capacity utilization.
Bioproducts results were down from $42 million to a loss of $12
million, due primarily to the continued challenging conditions in
the global lysine market. In addition, ethanol margins continue to
be impacted by high industry production levels that caused
inventories to build throughout the quarter.
Oilseeds Earnings Lower vs. Exceptionally Strong Year-Ago
Quarter
Oilseeds operating profit of $261 million decreased $231 million
from the strong year-ago results.
Crushing and origination operating profit of $120 million
declined $214 million from last year’s high levels. Global soybean
crush and origination results were down significantly due to lower
global margins resulting from increased Argentine soy meal exports
and significantly reduced U.S. meal exports. In addition, lower
softseed crush volumes and weaker Brazilian commercialization,
which slowed throughout the quarter, negatively impacted
results.
Refining, packaging, biodiesel and other generated a profit of
$79 million for the quarter, down $11 million from year-ago
results, with stronger results from North America and Europe offset
by weaker results in South America. With the sale of the Cocoa
business in October 2015, results decreased $24 million compared to
last year.
Oilseeds results in Asia for the quarter declined $6 million
from the year-ago period, due primarily to Wilmar’s lower fourth
quarter earnings.
WFSI Earns $70 million, Up vs. Last Year
WFSI operating profit was $70 million in the first quarter.
Results included operational start-up costs for the Tianjin
Fibersol facility in China and the Campo Grande specialty protein
complex in Brazil. Excluding these start-up costs, results improved
by about $5 million from prior year results with solid performance
from WILD Flavors and higher results from specialty proteins. With
more than 900 revenue synergy projects identified, WFSI remains on
track to achieve its 2016 targets.
Other Items of Note
As additional information to help clarify underlying business
performance, the tables on page 9 include both adjusted EPS as well
as adjusted EPS excluding significant timing effects.
Included in Corporate results was a $50 million loss related to
updated portfolio investment valuations in Compagnie Industrielle
et Financiere des Produits Amylaces SA (CIP). ADM holds a 43.7
percent equity interest in CIP, an investment joint venture held
since the late 1980s.
Conference Call Information
ADM will host a webcast on May 3, 2016, at 8 a.m. Central Time
to discuss financial results and provide a company update. A
financial summary slide presentation will be available to download
approximately 60 minutes prior to the call. To listen to the
webcast or to download the slide presentation, go to www.adm.com/webcast. A replay of the webcast will
also be available for an extended period of time at www.adm.com/webcast.
Forward-Looking Statements
Some of the above statements constitute forward-looking
statements. ADM’s filings with the SEC provide detailed information
on such statements and risks, and should be consulted along with
this release. To the extent permitted under applicable law, ADM
assumes no obligation to update any forward-looking statements.
About ADM
For more than a century, the people of Archer Daniels Midland
Company (NYSE: ADM) have transformed crops into products that serve
the vital needs of a growing world. Today, we’re one of the world’s
largest agricultural processors and food ingredient providers, with
more than 32,300 employees serving customers in more than 160
countries. With a global value chain that includes 428 crop
procurement locations, 280 ingredient manufacturing facilities, 39
innovation centers and the world’s premier crop transportation
network, we connect the harvest to the home, making products for
food, animal feed, industrial and energy uses. Learn more at
www.adm.com.
Financial Tables Follow
Segment Operating Profit and Corporate Results
A non-GAAP financial measure
(unaudited)
Quarter endedMarch 31 (In
millions) 2016 2015 Change
Agricultural Services Operating Profit Merchandising
and handling (excluding specified item) $ 24 $ 107 $ (83 ) Milling
and other 48 55 (7 ) Transportation 4 32 (28 ) Restructuring
charges* (1 ) — (1 ) Total Agricultural
Services $ 75 $ 194 $ (119 )
Corn
Processing Operating Profit Sweeteners and starches (excluding
specified item) $ 141 $ 85 $ 56 Bioproducts (excluding specified
item) (12 ) 42 (54 ) Corn hedge timing effects* 2 (14
) 16 Total Corn Processing $ 131 $ 113
$ 18
Oilseeds Processing Operating
Profit Crushing and origination (excluding specified item) $
120 $ 334 $ (214 ) Refining, packaging, biodiesel, and other
(excluding specified items) 79 90 (11 ) Asia 62 68 (6 )
Restructuring charges* (1 ) — (1 ) Biodiesel credits* — (9 ) 9
Cocoa hedge timing effects* — (14 ) 14
Total Oilseeds Processing $ 260 $ 469 $
(209 )
Wild Flavors & Specialty Ingredients Operating
Profit Wild Flavors and Specialty Ingredients $ 70
$ 68 $ 2 Total Wild Flavors and
Specialty Ingredients $ 70 $ 68 $ 2
Other Operating Profit Financial $ 37 $
11 $ 26 Total Other $ 37 $ 11
$ 26
Segment Operating Profit $ 573 $
855 $ (282 ) *Memo: Adjusted Segment Operating Profit $ 573 $ 892 $
(319 )
Corporate Results LIFO credit (charge) $ (14 )
$ 2 $ (16 ) Interest expense - net (68 ) (78 ) 10 Unallocated
corporate costs (116 ) (103 ) (13 ) Minority interest and other
charges (69 ) 14 (83 ) Total Corporate $ (267
) $ (165 ) $ (102 )
Earnings Before Income
Taxes $ 306 $ 690 $ (384 )
Segment operating profit is ADM’s consolidated income from
operations before income tax excluding corporate items. Adjusted
segment operating profit is segment operating profit adjusted,
where applicable, for specified items and timing effects (see items
denoted*). Timing effects relate to hedge ineffectiveness and
mark-to-market hedge timing effects. Management believes that
segment operating profit and adjusted segment operating profit are
useful measures of ADM’s performance because they provide investors
information about ADM’s business unit performance excluding
corporate overhead costs as well as specified items and timing
effects. Segment operating profit and adjusted segment operating
profit are non-GAAP financial measures and are not intended to
replace earnings before income tax, the most directly comparable
GAAP financial measure. Segment operating profit and adjusted
segment operating profit are not measures of consolidated operating
results under U.S. GAAP and should not be considered alternatives
to income before income taxes or any other measure of consolidated
operating results under U.S. GAAP.
Consolidated Statements of
Earnings
(unaudited)
Quarter endedMarch 31 2016 2015 (in
millions, except per share amounts) Revenues $ 14,384 $
17,506 Cost of products sold 13,588 16,404 Gross
profit 796 1,102 Selling, general, and administrative expenses 475
498 Asset impairment, exit, and restructuring costs 13 — Equity in
(earnings) losses of unconsolidated affiliates (65 ) (139 )
Interest income (22 ) (18 ) Interest expense 70 81 Other (income)
expense - net 19 (10 ) Earnings before income taxes 306 690
Income taxes (76 ) (197 ) Net earnings including noncontrolling
interests 230 493 Less: Net earnings (losses) attributable to
noncontrolling interests — — Net earnings
attributable to ADM $ 230 $ 493 Diluted
earnings per common share $ 0.39 $ 0.77 Average number of
shares outstanding 597 639
Other (income)
expense - net consists of:
Gain on sale/revaluation of assets/business (a) $ (3 ) $ (3 ) Other
- net 22 (7 ) $ 19 $ (10 ) (a) Current period
gain includes individually insignificant disposals in Ag Services
($2 million) and Oilseeds ($1 million). Prior period gain includes
individually insignificant disposals in Ag Services ($1 million)
and Oilseeds ($2 million).
Summary of Financial Condition
(Unaudited)
March 31,2016 March 31,2015 (in
millions) NET INVESTMENT IN Cash and cash equivalents (b) $ 706 $
890 Short-term marketable securities (b) 525 406 Operating working
capital (a) 7,667 8,147 Property, plant, and equipment 9,891 9,739
Investments in and advances to affiliates 4,089 3,959 Long-term
marketable securities 441 507 Goodwill and other intangibles 3,889
3,218 Other non-current assets 401 367 Net current assets held for
sale — 1,084 $ 27,609 $ 28,317 FINANCED BY Short-term
debt (b) $ 783 $ 848 Long-term debt, including current maturities
(b) 5,863 5,564 Deferred liabilities 3,050 3,148 Shareholders’
equity 17,913 18,757 $ 27,609 $ 28,317 (a)
Current assets (excluding cash and cash equivalents, short-term
marketable securities, and current assets held for sale) less
current liabilities (excluding short-term debt, current maturities
of long-term debt, and current liabilities held for sale). (b) Net
debt is calculated as short-term debt plus long-term debt,
including current maturities less cash and cash equivalents and
short-term marketable securities.
Summary of Cash Flows
(unaudited)
Three months endedMarch 31 2016 2015
(in millions) Operating Activities Net earnings $ 230 $ 493
Depreciation and amortization 231 216 Asset impairment charges 11 —
Gain on sale of assets and acquisition (3 ) (3 ) Other - net 88
(129 ) Changes in operating assets and liabilities (534 ) (532 )
Total Operating Activities 23 45 Investing Activities
Purchases of property, plant and equipment (180 ) (244 ) Net assets
of businesses acquired (84 ) — Proceeds from sale of
business/assets 11 6 Marketable securities - net (50 ) 100 Other
investing activities (145 ) (123 ) Total Investing Activities (448
) (261 ) Financing Activities Long-term debt borrowings — 8
Long-term debt payments (4 ) (7 ) Net borrowings (payments) under
lines of credit 697 742 Purchases of treasury stock (296 ) (566 )
Cash dividends (177 ) (177 ) Other 1 7 Total
Financing Activities 221 7 Increase (decrease) in cash and
cash equivalents (204 ) (209 ) Cash and cash equivalents -
beginning of period 910 1,099 Cash and cash
equivalents - end of period $ 706 $ 890
Segment Operating Analysis
(unaudited)
Quarter endedMarch 31 2016 2015 (in
‘000s metric tons)
Processed
volumes
Oilseeds 8,281 8,849 Corn 5,742 5,302 Total processed volumes
14,023 14,151 Quarter endedMarch 31 2016 2015 (in
millions)
Revenues
Agricultural Services $ 6,480 $ 8,045 Corn Processing 2,207 2,466
Oilseeds Processing 4,997 6,293 Wild Flavors and Specialty
Ingredients 592 606 Other 108 96 Total revenues $ 14,384 $ 17,506
Adjusted Earnings Per Share
A non-GAAP financial measure
(unaudited)
Quarter endedMarch 31 2016 2015
Reported EPS (fully diluted) $ 0.39 $ 0.77 Adjustments: LIFO
(credit) charge (a) 0.02 — Asset impairment and restructuring
charges (b) 0.01 — U.S. biodiesel credits (c) — 0.01 Sub-total
adjustments 0.03 0.01 Adjusted earnings per share (non-GAAP) $ 0.42
$ 0.78 Memo: Timing effects (gain) loss Corn (c) — 0.01
Cocoa (d) — 0.02 Sub-total timing effects — 0.03 Adjusted EPS
excluding timing effects (non-GAAP) $ 0.42 $ 0.81 (a)
The company’s pretax changes in its LIFO reserves during the
period, tax effected using the Company’s U.S. effective income tax
rate. (b) Charges of $13 million, pretax, primarily related to
software impairment and restructuring charges, tax effected using
the applicable tax rates. (c) Prior period credits of $9 million,
pretax, related to U.S. biodiesel blending credits recorded in a
later period. (d) Corn timing effects for corn hedge
ineffectiveness gains tax effected using the Company’s U.S.
effective income tax rate. (e) Cocoa timing effects tax effected
using the Company’s effective income tax rate.
Adjusted EPS and adjusted EPS excluding timing effects reflect
ADM’s fully diluted EPS after removal of the effect on Reported EPS
of certain specified items and timing effects as more fully
described above. Management believes that these are useful measures
of ADM’s performance because they provide investors additional
information about ADM’s operations allowing better evaluation of
ongoing business performance. These non-GAAP financial measures are
not intended to replace or be an alternative to Reported EPS, the
most directly comparable GAAP financial measure, or any other
measures of operating results under GAAP. Earnings amounts
described above have been divided by the company’s diluted shares
outstanding for each respective quarter in order to arrive at an
adjusted EPS amount for each specified item and timing effect.
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Archer Daniels Midland CompanyMedia RelationsSteve
Schrier312-634-8484orInvestor RelationsMark
Schweitzer217-451-8286
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