ADM Archer Daniels Midland Company

Archer Daniels Midland Company (NYSE:ADM) today reported net earnings for the fiscal year ended June 30, 2011, of $ 2.0 billion and record segment operating profit of $ 4.0 billion, up 5 percent and 24 percent, respectively, from the prior year.

For the quarter ended June 30, 2011, net earnings were $ 381 million, down $ 65 million, and segment operating profit was $ 888 million, up $ 89 million, from the same period one year earlier.

• ADM earned $ 0.58 diluted EPS for the fourth quarter, versus last year’s $ 0.69 fourth quarter.
• Fourth-quarter segment operating profit improved 11 percent from the same period last year, to $ 888 million.
• Oilseeds Processing profit increased $ 20 million on strong performance in North American crushing operations, despite a weak global margin environment.
• Corn Processing profit decreased $ 22 million on significantly higher net corn costs.
• Agricultural Services profit increased $ 15 million due to strong U.S. merchandising results.
• Net income was negatively impacted by tax expense related to specific items and geographic mix of earnings.

“Despite a challenging environment in several key markets, ADM delivered solid operating results across all our businesses for the quarter. We earned record operating profit for the fiscal year with our growing global asset base, diversified product portfolio and the acumen of the ADM team,” said Patricia Woertz, ADM chairman and CEO. “Looking ahead, we are confident in our people, our assets and our financial strength to deliver profitable growth and value for our shareholders as we serve the vital needs of a growing world.”

 

Financial Highlights

 

(Amounts in millions, except per share data)

    Quarter Ended

June 30

Year Ended

June 30

    2011   2010   Change   2011   2010   Change Segment operating profit $ 888   $ 799   $ 89 $ 4,021   $ 3,239   $ 782 Net earnings $ 381 $ 446 $ (65 ) $ 2,036 $ 1,930 $ 106 Diluted earnings per share $ 0.58 $ 0.69 $ (0.11 ) $ 3.13 $ 3.00 $ 0.13 Average shares outstanding     652     643         654     644    

A summary of segment operating profit and net earnings follows:

  Quarter ended       Year ended   June 30     June 30     2011   2010   Change 2011   2010   Change (in millions)     Oilseeds Processing $ 379 $ 359 $ 20 $ 1,524 $ 1,400 $ 124 Corn Processing 118 140 (22 ) 1,062 722 340 Agricultural Services 193 178 15 922 668 254 Other   198     122     76     513     449     64   Segment operating profit 888 799 89 4,021 3,239 782 Corporate   (124 )   (249 )   125     (1,006 )   (654 )   (352 ) Earnings before income taxes 764 550 214 3,015 2,585 430 Income taxes     (385 )   (105 )   (280 )   (997 )   (666 )   (331 ) Net earnings including

noncontrolling interests

379

445

(66

)

2,018

1,919

99

  Less: Net earnings (losses)

attributable to noncontrolling

interests

 

(2

 

)

 

(1

 

)

 

(1

 

)

 

(18

 

)

 

(11

 

)

 

(7

 

)

            Net earnings

$

381

 

$

446

 

$

(65

)

$

2,036

 

$

1,930

 

$

106

   

Discussion of Net Earnings

Net earnings for the fourth quarter of $ 381 million decreased $ 65 million due principally to higher income tax expense of $ 280 million. This was partially offset by higher segment operating profit of $ 89 million and credits in LIFO inventory valuations, included in corporate, caused by lower agricultural commodity prices at the end of the fourth quarter compared to the beginning of the quarter. Earnings before income taxes include a LIFO credit of $ 52 million or $ 0.05 per share this quarter, compared to a LIFO charge of $ 23 million or $ 0.02 per share last year.

The company’s effective income tax rate for the fourth quarter was 50 percent, compared to the prior year’s quarter rate of 19 percent. ADM recorded additional tax expenses in the fourth quarter to bring the effective tax rate for the full year to 33 percent compared to the prior year’s rate of 26 percent. The effective tax rate for the fiscal year was atypical and was primarily the result of several unfavorable specific tax items and changes in the geographic mix of earnings.

For fiscal year 2012, based on current estimates, ADM expects its effective tax rate to be in the range of 28-30 percent.

Oilseeds Processing

Oilseeds operating profit in the fourth quarter increased $ 20 million to $ 379 million.

Crushing and origination operating profit increased $ 14 million to $ 232 million for the quarter. North American results improved across the oilseed portfolio, particularly in softseeds, despite a weak margin environment. European and South American results were lower and were partially offset by positive mark-to-market timing effects.

Refining, packaging, biodiesel and other generated a profit of $ 86 million for the quarter, up $ 7 million from last year, as improved results from North America offset lower results from Europe and South America.

Oilseeds results in Asia for the quarter were in line with last year, principally reflecting ADM’s share of the results from equity investee, Wilmar International Limited.

Corn Processing

For the quarter, corn processing operating profit was $ 118 million, a decline of $ 22 million from the same quarter last year. While processed volumes were up 15 percent, net corn costs increased significantly from the fourth quarter of last year.

Sweeteners and starches operating profit of $ 9 million was down $ 110 million, as higher average selling prices and sales volumes were more than offset by higher net corn costs. Export demand for sweeteners remained strong.

Bioproducts profit in the quarter rose $ 88 million to $ 109 million, driven by higher ethanol prices, favorable ownership positions and strong demand for value-added food and feed ingredients, particularly lysine and other amino acids.

Agricultural Services

Agricultural Services operating profit of $ 193 million increased $ 15 million from last year’s results.

Merchandising and handling earnings increased primarily due to stronger results from North American interior elevators and export operations, partially offset by weaker international results. Earnings from transportation operations were essentially flat compared to the fourth quarter of last year.

Other

In the fourth quarter, profits from ADM’s Other business units increased $ 76 million to $ 198 million.

In other processing, which includes wheat milling, cocoa and ADM’s share of Gruma, S.A.B. de C.V., profits were $ 192 million, an increase of $ 64 million from the year-ago quarter. ADM’s portion of Gruma’s results included a $ 78 million gain on the disposal of assets.

Other financial increased $ 12 million mainly due to improved results of ADM’s captive insurance subsidiary and ADM Investor Services.

Corporate

Corporate results improved $ 125 million. Lower commodity prices through the fourth quarter led to $ 52 million of LIFO credits on a decrease in ADM’s LIFO inventory valuation reserves this quarter. This is compared to a LIFO charge of $ 23 million a year ago. Last year’s fourth quarter also included $ 59 million of unrealized losses on interest rate swaps.

Current Market Conditions

U.S. corn and soybean supplies are tight. Overall global crop supplies remain adequate following a good world wheat harvest and a record soybean harvest in South America. ADM is monitoring crop progress and harvests in Europe, North America and China.

Global demand for crops and agricultural products remains strong. Global protein meal and vegetable oil demand continues to grow, while industry margins remain under pressure. Export demand continues to drive strong U.S. corn sweetener volumes. With positive blending economics, ethanol consumption in the U.S. remains at maximum blendable levels.

Conference Call Information

ADM will host a conference call and audio webcast at 8 a.m. Central Time on Tuesday, August 2, 2011, 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 call via the Internet or to download the slide presentation, go to www.adm.com/webcast. To listen by telephone, dial 866-788-0538 in the U.S. or 857-350-1676 if calling from outside the U.S.; the access code is 78084113. Replay of the call will be available from 11 a.m. Central Time on August 2 to August 9, 2011. To listen to the replay by telephone, dial 888-286-8010 or 617-801-6888; the access code is 24939972. To listen to the replay online, visit www.adm.com/webcast.

About ADM

Every day, the 30,000 people of Archer Daniels Midland Company (NYSE:ADM) turn crops into renewable products that meet the demands of a growing world. At more than 265 processing plants, we convert corn, oilseeds, wheat and cocoa into products for food, animal feed, chemical and energy uses. We operate the world’s premier crop origination and transportation network, connecting crops and markets in more than 75 countries. Our global headquarters is in Decatur, Illinois, and our net sales for the fiscal year ended June 30, 2011, were $81 billion. For more information about our company and our products, visit www.adm.com.

 

Segment Operating Analysis

(unaudited)

  Quarter ended   Year ended   June 30   June 30   2011     2010   2011     2010 (in ‘000s metric tons)

Processed volumes

    Oilseeds Processing 7,038 7,184 29,630 29,095 Corn Processing 6,039 5,240 23,412 19,618 Wheat and cocoa   1,725   1,743   7,179   7,291 Total processing volumes   14,802   14,167   60,221   56,004   Quarter ended Year ended   June 30   June 30   2011     2010   2011     2010 (in millions)

Net sales and other operating income

Oilseeds Processing $ 8,567 $ 5,488 $ 26,662 $ 21,810 Corn Processing 2,841 1,969 9,908 7,874 Agricultural Services 9,960 7,006 37,927 26,756 Other   1,502   1,240   6,179   5,242

Total net sales and other operating income

$ 22,870 $ 15,703 $ 80,676 $ 61,682  

Segment Operating Profit and Corporate Results

(unaudited)

  Quarter ended

June 30

    Year ended

June 30

    2011   2010   Change 2011   2010     Change (in millions)         Oilseeds Processing Operating Profit Crushing and origination $ 232 $ 218 $ 14 $ 1,013 $ 818 $ 195

Refining, packaging, biodiesel and other

 

86

79

7

329

291

38

Asia   61     62     (1 )   182     291     (109 ) Total Oilseeds Processing $ 379 $ 359 $ 20 $ 1,524 $ 1,400 $ 124   Corn Processing Operating Profit Sweeteners and starches $ 9 $ 119 $ (110 ) $ 320 $ 529 $ (209 ) Bioproducts   109     21     88     742     193     549   Total Corn Processing $ 118 $ 140 $ (22 ) $ 1,062 $ 722 $ 340   Agricultural Services Operating Profit Merchandising and handling $ 184 $ 169 $ 15 $ 818 $ 583 $ 235 Transportation   9     9     –     104     85     19   Total Agricultural Services $ 193 $ 178 $ 15 $ 922 $ 668 $ 254   Other Operating Profit Processing $ 192 $ 128 $ 64 $ 474 $ 403 $ 71 Financial   6     (6 )   12     39     46     (7 ) Total Other $ 198   $ 122   $ 76   $ 513   $ 449   $ 64     Segment Operating Profit $ 888 $ 799 $ 89 $ 4,021 $ 3,239 $ 782   Corporate LIFO credit (charge) $ 52 $ (23 ) $ 75 $ (368 ) $ 42 $ (410 ) Interest expense - net (82 ) (74 ) (8 ) (335 ) (283 ) (52 ) Corporate costs (94 ) (63 ) (31 ) (326 ) (266 ) (60 ) Debt buyback costs (8 ) – (8 ) (8 ) (75 ) 67

Unrealized gains (losses) on interest rate swaps

 

–

(59

)

59

30

(59

)

89

Other   8     (30 )   38     1     (13 )   14   Total Corporate $ (124 ) $ (249 ) $ 125   $ (1,006 ) $ (654 ) $ (352 )   Earnings Before Income Taxes $ 764   $ 550   $ 214   $ 3,015   $ 2,585   $ 430    

Consolidated Statements of Earnings

(unaudited)

  Quarter ended   Year ended   June 30   June 30   2011       2010     2011       2010   (in millions, except per share amounts)     Net sales and other operating income $ 22,870 $ 15,703 $ 80,676 $ 61,682 Cost of products sold   21,772     14,777     76,376     57,839   Gross profit 1,098 926 4,300 3,843 Selling, general and administrative expenses 423 331 1,611 1,398

Equity in (earnings) losses of unconsolidated affiliates

(208 )

(133

)

(542

)

(561

)

Interest income (39 ) (27 ) (136 ) (126 ) Interest expense 129 118 482 422 Other (income) expense – net   29     87     (130 )   125   Earnings before income taxes 764 550 3,015 2,585 Income taxes   (385 )   (105 )   (997 )   (666 ) Net earnings including noncontrolling interests 379 445 2,018 1,919

Less: Net earnings (losses) attributable to noncontrolling interests

  (2 )   (1 )   (18 )   (11 ) Net earnings attributable to ADM $ 381   $ 446   $ 2,036   $ 1,930     Diluted earnings per common share $ 0.58   $ 0.69   $ 3.13   $ 3.00     Average number of shares outstanding   652     643     654     644      

Other (income) expense - net consists of:

Gain related to Golden Peanut acquisition

$ – $ – $ (71 ) $ – Debt buyback costs 15 – 15 75

Unrealized losses (gains) on interest rate swaps

– 59 (30 ) 59 Other – net   14     28     (44 )   (9 ) $ 29   $ 87   $ (130 ) $ 125    

Summary of Financial Condition

(unaudited)

 

June 302011

   

June 302010

(in millions) NET INVESTMENT IN   Working capital $ 16,339 $ 10,279 Property, plant, and equipment 9,500 8,712 Investments in and advances to affiliates 3,240 2,799 Long-term marketable securities 666 678 Other non-current assets   1,283   1,225 $ 31,028 $ 23,693   FINANCED BY Short-term debt $ 1,875 $ 374 Long-term debt, including current maturities 8,444 7,174 Deferred liabilities 1,871 1,514 Shareholders’ equity   18,838   14,631 $ 31,028 $ 23,693  

Summary of Cash Flows

    (unaudited) Year Ended June 30 2011   2010 (in millions) Operating Activities Net earnings $ 2,018 $ 1,919 Depreciation and amortization 877 912 Other – net (3 ) (153 ) Changes in operating assets and liabilities   (5,232 )   6   Total Operating Activities (2,340 ) 2,684 Investing Activities Purchases of property, plant and equipment (1,247 ) (1,607 ) Net assets of businesses acquired (218 ) (62 ) Marketable securities – net (285 ) 67 Other investing activities   75     (63 ) Total Investing Activities (1,675 ) (1,665 ) Financing Activities Long-term debt borrowings 1,564 27 Long-term debt payments (417 ) (552 ) Debt repayment premium and costs (21 ) (71 ) Net borrowings under lines of credit 1,381 29 Shares issued related to equity unit conversion 1,750 – Purchases of treasury stock (301 ) (100 ) Cash dividends (395 ) (372 ) Other   23     11   Total Financing Activities   3,584     (1,028 ) Decrease in cash and cash equivalents (431 ) (9 ) Cash and cash equivalents - beginning of period   1,046     1,055   Cash and cash equivalents - end of period $ 615   $ 1,046