ADM 3Q Net Down 31% On Ethanol, European Oilseeds
First Published Tuesday, 1st May 2012 02:03 pm - © 2012 Dow Jones
--ADM reports 3Q profit declines on ethanol, Europe oilseed processing
--Excess ethanol supplies weigh on margins
--Global grain trading profits have stabilized
(Updates to include ethanol profits and margins beginning in the 3rd paragraph, oilseed data in the 5th paragraph, grain trading business beginning in the 6th paragraph and additional details throughout)
By Ian Berry
Of Dow Jones NEWSWIRES
Archer Daniels Midland Co.'s (ADM) fiscal third-quarter earnings fell 31% amid an ethanol supply glut and weak European oilseed processing results.
The company, one of the world's largest grain traders and processors, has struggled in recent quarters as high market volatility has cut into trading profits, but it reported Tuesday that its global grain trading business has stabilized. Profits in its North American oilseed processing business, another source of problems for ADM, have also improved, the company said.
But ethanol profits fell sharply as expected, as excess production and stockpiles continues to weigh on the market. ADM reported earnings in its bioproducts division, which includes ethanol, fell 69% to $37 million.
Poor ethanol margins "have slowed industry production, improving alignment of supply and demand," the Decatur, Ill.-based company said. ADM said last quarter it would maintain production while waiting for poor margins to cause smaller companies to cut back. ADM and other ethanol companies are also counting on a summer increase in gasoline demand to help draw down ethanol supplies.
ADM's oilseeds processing segment's operating profit sank to $395 million from $512 million, even as sales rose 14%. Margins in Europe remained weak, the company said, but were "significantly offset" by improved results in North and South America.
Meanwhile, ADM's global grain trading business has stabilized. The company reported earnings of $179 million in its agricultural services segment, up $8 million from the prior year and within the company's historical range of $150 million to $200 million.
ADM's profits in the segment had tumbled previously amid poor international trading results. Extreme volatility in grains prices, which had made ADM and competitors cautious in trading, has since abated.
For the quarter ended March 31, the company posted a profit of $399 million, or 60 cents a share, down from $578 million, or 86 cents a share, a year earlier. Revenue increased 5.4% to $21.16 billion.
Analysts surveyed by Thomson Reuters were looking for earnings of 59 cents on revenue of $21.38 billion.
Adjusted earnings excluding restructuring charges, an accounting method called LIFO and other items fell to 78 cents from 89 cents.
Gross margin shrank to 4.8% from 5.8%.
ADM shares were up 2% to $31.46.
-By Ian Berry, Dow Jones Newswires; 312-750-4072; firstname.lastname@example.org
--Kristin Jones contributed to this report