ADM sales down but lower costs boost profit

By Lorraine Heller

- Last updated on GMT

Related tags Soybean Archer daniels midland Marketing Us

Archer Daniels Midland last week posted a significant dip in
first-quarter net income, but indicated that the year ahead could
be a good one for agricultural ingredients companies as a result of
good US harvests.

The food-processing and agricultural-services giant reported a four percent decrease in sales for the quarter to $8.6bn, compared to almost $9bn last year. Net income plunged 30 percent to $186mn, compared to last year's $266m.

However, the company revealed that operating profit increased in all major segments except the agricultural services segment, principally as a result of lower corn costs.

And with corn prices falling even further this year, profit margins look likely to be given a significant boost.

According to the US Department of Agriculture's (USDA) National Agricultural Statistics Service (NASS), US production of corn last year reached a record high of 11 billion bushels. Production this year will be slightly lower, at 10.86 billion bushels. However, prices for the commodity are due to fall a further 19 percent to $1.74 per bushel, compared to last year's $2.14, as a result of a large crop carry-on from last year.

"With this year's near record US harvest, the company is positioned to deliver solid results as we enter the fall season,"​ said ADM's chief executive officer G. Allen Andreas.

Lower corn prices resulted in the company's corn processing operation seeing a $33m increase in operating profit to $136m for the quarter, though this was partially offset by lower lysine selling prices and higher energy costs.

ADM's oilseeds processing operation saw profits increase by $8mn to $99m, with improved results in South America, Europe and Asia partially offset by decreased results in North America, while results for sweeteners and starches increased $37m to $92m.

Results for the company's bioproducts declined by $4m to $44m, primarily as a result of lower lysine selling prices, lower citric acid operating results and higher energy costs.

The agricultural services operation declined by $31m to $20m for the quarter due to a decline in global grain merchandising results and the impact of the recent hurricanes.

ADM is among the biggest processors of soybeans, corn, wheat and cocoa and produces soy meal and oil, biodiesel, ethanol, corn sweeteners and flour, with more than 250 processing plants and more than 26,000 employees worldwide.

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