- Net earnings of $276 million
- Adjusted EPS up 39 percent over
prior-year quarter
Archer Daniels Midland Company (NYSE: ADM) today reported
financial results for the quarter ended June 30, 2017.
“We continued to deliver on our strategic plan and capitalize on
improving conditions in some markets to achieve strong 39 percent
year-over-year earnings growth,” said ADM Chairman and CEO Juan
Luciano.
“Our actions in the first half of the year reflect ADM’s
continuous efforts to create shareholder value. We are diversifying
our capabilities and geographic reach through acquisitions and
organic expansions. We are aggressively managing costs and capital,
and taking additional portfolio actions; and we are ahead of pace
to meet our 2017 target of $225 million in run-rate savings.
“With these collective actions, we expect to deliver solid
year-over-year earnings growth and returns in 2017, and we are
poised to be an even stronger company in 2018.”
Second Quarter 2017 Highlights
2017 2016 (Amounts in
millions except per share data)
Earnings per share (as
reported) $ 0.48 $ 0.48 Adjusted
earnings per share1 $ 0.57 $
0.41 Segment operating profit $
642 $ 680 Adjusted segment operating
profit1 $ 658 $ 573
Agricultural Services 109 57 Corn Processing 224 163 Oilseeds
Processing 206 235 WFSI 92 94 Other 27 24
- EPS as reported of $0.48 includes a
$0.04 per share charge related to asset impairments, restructuring
and settlement activities; a $0.04 per share net loss on the sale
of assets and businesses; and a $0.01 per share LIFO charge.
Adjusted EPS, which excludes these items, was $0.571.
- Trailing four-quarter-average adjusted
ROIC was 6.8 percent1, 80 basis points above annual WACC of 6.0
percent.
- During the first half of 2017, the
company returned $875 million to shareholders through dividends and
share repurchases.
1 Non-GAAP financial measures; see pages 4, 9 and 10 for
explanations and reconciliations, including after-tax amounts.
Results of Operations
Ag Services delivered its fourth consecutive quarter of
year-over-year increases in operating profits.
In Merchandising and Handling, North America Grain results
increased significantly over the prior year with strong carries in
wheat, corn and soybeans. Global Trade generated solid results and
was up over the year-ago quarter, benefiting from improved margins,
favorable timing effects and actions to improve performance.
Transportation decreased from the prior-year period, primarily
due to river conditions and lower freight rates.
Milling and Other delivered solid results on steady margins and
favorable merchandising.
Corn Processing results were up from the year-ago quarter.
Higher volumes and improved margins in North America Sweeteners and
Starches contributed to another strong performance. Bioproducts
results increased over a weak prior year, with an improvement in
ethanol margins.
Oilseeds Processing benefited from the diversity of its
feedstocks, products and geographies; however, overall results were
down compared to the second quarter of 2016. Weak margins in both
global soybean crush and South American origination impacted
Crushing and Origination results. Softseeds earnings were higher as
a result of leveraging the business’s global flex capacity to
capitalize on margin opportunities.
Refining, Packaging, Biodiesel and Other had solid results in
all regions, with South America refined and packaged oils and the
global peanut business contributing to strong performance in the
quarter. North America Biodiesel results also improved over the
prior-year quarter, which was impacted by unfavorable timing
effects.
Asia experienced another good quarter, growing significantly
over the prior-year period due both to ADM’s increased ownership
stake in, and strong results from, Wilmar.
WFSI was in line with the prior-year quarter. WILD Flavors
delivered double-digit operating profit growth with strong sales
globally. Specialty Ingredients was down for the quarter.
Other Items of Note
As additional information to help clarify underlying business
performance, the tables on page 9 include both reported EPS as well
as adjusted EPS excluding significant timing effects.
Segment operating profit of $642 million for the quarter
includes charges of $26 million related to asset impairment,
restructuring and settlement activities, and a net pretax gain on
the sale of assets and businesses of $8 million. Prior-year segment
operating profit included asset impairment and restructuring
charges of $10 million and a net pretax gain on the sale of assets
and businesses of $118 million.
In Corporate results, Minority Interest and Other charges
increased from the prior year primarily due to updated portfolio
investment valuations in CIP, and Unallocated Costs were up due to
continued investments in ADM’s business transformation program and
related IT costs, and in research and development.
The 28 percent effective tax rate reflects an approximately 1
percent decrease due primarily to changes in the forecast
geographic mix of earnings and the effect of changes in discrete
items year over year, partially offset by the expiration of U.S.
tax credits including the biodiesel tax credit.
Conference Call Information
ADM will host a webcast on August 1, 2017, 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. These statements are based on many assumptions and
factors that are subject to risk and uncertainties. ADM has
provided additional information in its reports on file with the SEC
concerning assumptions and factors that could cause actual results
to differ materially from those in this presentation, and you
should carefully review the assumptions and factors in our SEC
reports. 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
approximately 32,000 employees serving customers in more than 160
countries. With a global value chain that includes approximately
500 crop procurement locations, 250 ingredient manufacturing
facilities, 38 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, Adjusted
Segment Operating Profit (a non-GAAP measure) and Corporate
Results
(unaudited)
Quarter endedJune 30 Six months endedJune 30
(In millions) 2017 2016 Change 2017 2016 Change
Segment Operating
Profit $ 642 $ 680 $
(38 ) $ 1,318 $ 1,253
$ 65 Less specified items: (Gains) losses on sales of
assets and businesses (8 ) (118 ) 110 (8 ) (118 ) 110 Impairment,
restructuring, and settlement charges 26 10 16 35 12 23 Hedge
timing effects (2 ) 1 (3 ) (9 ) (1 ) (8 )
Adjusted
Segment Operating Profit $ 658 $
573 $ 85 $ 1,336 $
1,146 $ 190 Agricultural
Services $ 109 $ 57
$ 52 $ 197 $
133 $ 64 Merchandising and
handling 40 (14 ) 54 59 10 49 Milling and other 58 56 2 103 104 (1
) Transportation 11 15 (4 ) 35 19 16
Corn Processing
$ 224 $ 163 $
61 $ 395 $ 292
$ 103 Sweeteners and starches 198 182
16 359 323 36 Bioproducts 26 (19 ) 45 36 (31 ) 67
Oilseeds Processing $ 206 $
235 $ (29 ) $ 520
$ 496 $ 24
Crushing and origination 38 135 (97 ) 158 255 (97 ) Refining,
packaging, biodiesel, and other 83 53 30 142 132 10 Asia 85 47 38
220 109 111
Wild Flavors & Specialty Ingredients
(WFSI) $ 92 $ 94
$ (2 ) $ 167 $
164 $ 3 WFSI 92 94 (2 ) 167 164
3
Other $ 27 $ 24
$ 3 $ 57 $ 61 $ (4 )
Financial 27 24 3 57 61
(4 )
Segment Operating Profit $ 642 $
680 $ (38 ) $ 1,318
$ 1,253 $ 65 Corporate
Results $ (259 ) $ (273
) $ 14 $ (477 )
$ (540 ) $ 63 LIFO credit
(charge) (9 ) (88 ) 79 4 (102 ) 106 Interest expense - net (81 )
(63 ) (18 ) (160 ) (131 ) (29 ) Unallocated corporate costs (134 )
(116 ) (18 ) (267 ) (232 ) (35 ) Minority interest and other
charges (35 ) (6 ) (29 ) (54 ) (75 ) 21
Earnings Before
Income Taxes $ 383 $ 407
$ (24 ) $ 841
$ 713 $ 128
Segment operating profit is ADM’s consolidated income from
operations before income tax excluding corporate items. Adjusted
segment operating profit, a non-GAAP measure, is segment operating
profit excluding specified items and timing effects. Timing effects
relate to hedge ineffectiveness and significant 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 significant timing effects. 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, the most directly comparable GAAP financial measure, or any
other measure of consolidated operating results under U.S. GAAP.
Consolidated Statements of
Earnings
(unaudited)
Quarter endedJune 30 Six months endedJune 30
2017 2016 2017 2016 (in millions, except per
share amounts) Revenues $ 14,943 $ 15,629 $ 29,931 $
30,013 Cost of products sold 14,056 14,892 28,176
28,495 Gross profit 887 737 1,755 1,518 Selling,
general, and administrative expenses 531 500 1,052 979 Asset
impairment, exit, and restructuring costs 23 12 33 25 Equity in
earnings of unconsolidated affiliates (109 ) (90 ) (281 ) (155 )
Interest income (25 ) (23 ) (48 ) (45 ) Interest expense 86 65 167
135 Other (income) expense - net (2 ) (134 ) (9 ) (134 ) Earnings
before income taxes 383 407 841 713 Income taxes (108 ) (119 ) (226
) (195 ) Net earnings including noncontrolling interests 275 288
615 518 Less: Net earnings (losses) attributable to noncontrolling
interests (1 ) 4 — 4
Net earnings
attributable to ADM $ 276 $
284 $ 615 $ 514
Diluted earnings per common share $
0.48 $ 0.48 $ 1.07 $
0.87 Average number of shares outstanding
574
594
576 595
Other (income)
expense - net consists of:
Gains on sales of assets (a) $ (35 ) $ (121 ) $ (51 ) $ (124 )
Other - net (b) 33 (13 ) 42 (10 ) $ (2 ) $ (134 ) $
(9 ) $ (134 ) (a) Current period gain includes gains related to the
sale of the crop risk services business in Other and individually
insignificant disposals in Ag Services and Corporate partially
offset by an adjustment of the proceeds of the 2015 sale of the
cocoa business in Oilseeds. Prior period gain related to realized
contingent consideration from the sale of the Company’s equity
investment in Gruma S.A.B de C.V. in December 2012 partially offset
by loss on sale of assets in Ag Services, recovery of loss
provisions and gain on the sale of the Company’s Brazilian sugar
ethanol facilities in Corn, revaluation of the remaining interest
to settlement value in conjunction with the acquisition of the
remaining interest in Amazon Flavors in WFSI, and individually
insignificant disposals in Oilseeds. (b) Other - net in the
current period includes provisions for contingent losses related to
certain settlement items in Oilseeds and WFSI and foreign exchange
losses. Other - net in the prior period includes foreign exchange
gains and other income.
Summary of Financial Condition
(Unaudited)
June 30,2017 June 30,2016 (in
millions)
Net Investment In Cash and cash equivalents (b) $
433 $ 334 Short-term marketable securities (b) 237 396 Operating
working capital (a) 7,034 8,184 Property, plant, and equipment
9,945 9,802 Investments in and advances to affiliates 4,856 4,429
Long-term marketable securities 199 487 Goodwill and other
intangibles 3,866 3,865 Other non-current assets 750 648
$ 27,320 $ 28,145 Financed
By Short-term debt (b) $ 353 $ 1,554 Long-term debt, including
current maturities (b) 6,627 5,832 Deferred liabilities 2,895 3,049
Temporary equity 27 41 Shareholders’ equity 17,418 17,669
$ 27,320 $ 28,145 (a)
Current assets (excluding cash and cash equivalents and short-term
marketable securities) less current liabilities (excluding
short-term debt and current maturities of long-term debt).
(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)
Six months endedJune 30 2017 2016 (in
millions)
Operating Activities Net earnings $ 615 $
518 Depreciation and amortization 452 452 Asset impairment charges
19 20 Gains on sales of assets (51 ) (121 ) Other - net (35 ) 169
Changes in operating assets and liabilities 314 (1,407 )
Total Operating Activities
1,314 (369 )
Investing Activities Purchases of property, plant and
equipment (452 ) (396 ) Net assets of businesses acquired (180 )
(120 ) Proceeds from sale of business/assets 149 96 Marketable
securities - net 106 63 Other investing activities (189 ) (456 )
Total Investing Activities
(566 ) (813
) Financing Activities Long-term debt
borrowings 17 — Long-term debt payments (269 ) (8 ) Net borrowings
(payments) under lines of credit 195 1,454 Share repurchases (511 )
(487 ) Cash dividends (364 ) (353 ) Other (7 ) (3 ) Total Financing
Activities
(939 ) 603 Increase
(decrease) in cash, cash equivalents, restricted cash, and
restricted cash equivalents (191 ) (579
) Cash, cash equivalents, restricted cash, and restricted
cash equivalents - beginning of period 688
1,003 Cash, cash equivalents, restricted cash, and
restricted cash equivalents - end of period $ 497
$ 424
Segment Operating Analysis
(unaudited)
Quarter endedJune 30 Six months
endedJune 30 2017 2016 2017 2016 (in ‘000s
metric tons)
Processed volumes Oilseeds
Processing 8,518 8,468 17,337 16,749 Corn Processing 5,840
5,087 11,384 10,829 Total processed volumes
14,358 13,555 28,721
27,578 Quarter endedJune 30 Six months
endedJune 30 2017 2016 2017 2016 (in millions)
Revenues Agricultural Services $ 5,848 $ 6,387 $ 12,654 $
12,867 Corn Processing 2,274 2,352 4,518 4,559 Oilseeds Processing
6,072 6,099 11,354 11,096 Wild Flavors and Specialty Ingredients
648 680 1,210 1,272 Other 101 111 195 219
Total revenues
$ 14,943 $ 15,629
$ 29,931 $ 30,013
Adjusted Earnings Per Share
A non-GAAP financial measure
(unaudited)
Quarter endedJune 30 Six months endedJune 30
2017 2016 2017 2016
EPS (fully diluted) as
reported $ 0.48 $ 0.48 $
1.07 $ 0.87 Adjustments: LIFO charge (credit)
(a) 0.01 0.09 — 0.11 (Gains) losses on sales of assets and
businesses (b) 0.04 (0.17 ) 0.04 (0.17 ) Asset impairment,
restructuring, and settlement charges (c) 0.04 0.01 0.05 0.02
Certain discrete tax adjustments (d) — — 0.01
— Sub-total adjustments 0.09 (0.07 ) 0.10
(0.04 )
Adjusted earnings per share $ 0.57
$ 0.41 $ 1.17
$ 0.83 Memo: Hedge timing effects
(gain) loss (e) — — (0.01 ) — Adjusted EPS
excluding timing effects $ 0.57 $ 0.41 $ 1.16
$ 0.83 (a) Current quarter and YTD changes in the
Company’s LIFO reserves of $9 million pretax ($6 million after tax)
and $4 million pretax ($2 million after tax), respectively, tax
effected using the Company’s U.S. effective income tax rate. Prior
quarter and YTD changes in the Company’s LIFO reserves of $88
million pretax ($55 million after tax), and $102 million pretax,
($63 million after tax), respectively, tax effected using the
Company’s U.S. effective income tax rate. (b)
Current period gain of $8 million pretax
($22 million loss after tax) related to the sale of the crop risk
services business partially offset by an adjustment of the proceeds
of the 2015 sale of the cocoa business, tax effected using the
applicable tax rates. Prior period gain of $118 million pretax
($101 million after tax), primarily related to recovery of loss
provisions and gain related to the sale of the Company’s Brazilian
sugar ethanol facilities, realized contingent consideration on the
sale of the Company’s equity investment in Gruma S.A.B de C.V. in
December 2012, and revaluation of the remaining interest to
settlement value in conjunction with the acquisition of the
remaining interest in Amazon Flavors, tax effected using the
applicable tax rates.
(c) Current quarter and YTD charges of $28 million pretax ($21
million after tax) and $38 million pretax ($29 million after tax),
respectively, related to impairment of certain long-lived assets,
restructuring charges, and a settlement charge, tax effected using
the applicable tax rates. Prior quarter and YTD charges of $12
million pretax ($8 million after tax) and $25 million pretax ($16
million after tax), respectively, primarily related to impairment
of certain long-lived assets and restructuring charges, tax
effected using the applicable tax rates. (d) Certain discrete tax
adjustments unrelated to current period earnings related to
valuation allowances totaling $4 million. (e) Current quarter and
YTD timing effect gains of $2 million pretax ($1 million after tax)
and $9 million pretax ($5 million after tax), respectively, tax
effected using the Company's U.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 EPS as
reported 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 underlying business performance and better
period-to-period comparability. These non-GAAP financial measures
are not intended to replace or be an alternative to EPS as
reported, 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 period in order to arrive at
an adjusted EPS amount for each specified item and timing effect.
Adjusted Return on Invested
Capital
A non-GAAP financial measure
(unaudited)
Adjusted ROIC Earnings (in
millions) Four Quarters Quarter
Ended Ended Sep. 30, 2016 Dec. 31, 2016
Mar. 31, 2017 June 30, 2017 June 30, 2017
Net earnings attributable to ADM $ 341 $ 424 $ 339 $ 276
$ 1,380 Adjustments: Interest expense 78 80 81 86
325 LIFO (85 ) 2 (13 ) 9
(87 ) Other
adjustments 82 (19 ) 10 20
93
Total adjustments 75 63 78 115
331 Tax on adjustments (22 )
(2 ) (24 ) (13 )
(61 ) Net adjustments 53 61
54 102
270 Total Adjusted ROIC
Earnings $ 394 $ 485 $ 393 $ 378
$ 1,650 Adjusted
Invested Capital (in millions)
Quarter Ended Trailing Four Sep. 30, 2016
Dec. 31, 2016 Mar. 31, 2017 June 30, 2017
Quarter Average Equity (1) $ 17,538 $ 17,173 $ 17,121
$ 17,411
$ 17,311 + Interest-bearing liabilities (2)
7,073 6,931 7,207 6,980
7,048 + LIFO adjustment (net of tax)
45 47 39 44
44 Other adjustments 57 10 12
43
31 Total Adjusted Invested Capital $
24,713 $ 24,161 $ 24,379 $ 24,478
$ 24,434 Adjusted Return on
Invested Capital 6.8 % (1)
Excludes noncontrolling interests
(2)
Includes short-term debt, current
maturities of long-term debt, capital lease obligations, and
long-term debt
Adjusted ROIC is Adjusted ROIC earnings
divided by adjusted invested capital. Adjusted ROIC earnings is
ADM’s net earnings adjusted for the after tax effects of interest
expense, changes in the LIFO reserve and other specified items.
Adjusted invested capital is the sum of ADM’s equity (excluding
noncontrolling interests) and interest-bearing liabilities adjusted
for the after tax effect of the LIFO reserve, and other specified
items. Management believes Adjusted ROIC is a useful financial
measure because it provides investors information about ADM’s
returns excluding the impacts of LIFO inventory reserves and other
specified items and increases period-to-period comparability of
underlying business performance. Management uses Adjusted ROIC to
measure ADM’s performance by comparing Adjusted ROIC to its
weighted average cost of capital (WACC). Adjusted ROIC, Adjusted
ROIC earnings and Adjusted invested capital are non-GAAP financial
measures and are not intended to replace or be alternatives to GAAP
financial measures.
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Archer Daniels Midland CompanyMedia RelationsColin
McBean, 312-634-8484orInvestor RelationsMark Schweitzer,
217-451-8286
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