2nd UPDATE: ADM Profit Falls 15% On Higher Taxes, Corn Costs
August 02 2011 - 1:21PM
Dow Jones News
Archer Daniels Midland Co. (ADM) executives said Tuesday that a
four-fold jump in its tax bill last quarter was an anomaly as it
derived more of its profits from U.S. operations.
The world's largest grain processor by revenue reported a 15%
drop in fiscal fourth-quarter earnings, weighed by the tax charge
and rising corn costs, with analysts also questioning the
transparency of its hedging program.
Pat Woertz, chairman and chief executive, said on a call with
analysts that ADM has been putting an increased emphasis on
transparency in recent months, but added that in some cases
volatile crop markets make forecasting difficult.
Profits became concentrated in the U.S. during the last quarter
because of improved oilseed processing margins here and
weaker-than-expected international merchandising results.
The 2011 earnings mix included "a lot of unique items that will
not replicate itself in 2012," Chief Financial Officer Ray Young
said.
Profit from ADM's corn-processing unit fell 16% despite a 15%
increase in volume. Corn futures at the Chicago Board of Trade hit
an all-time record of nearly $8 a bushel in early June, an increase
of over $4.50 a bushel over the prior year.
ADM's corn sweetener profits dwindled to $9 million from $110
million a year ago due to the rising corn prices. Young said prior
corn sweetener profits included hedging gains on corn that did not
extend to the fourth quarter.
A lack of transparency on hedging is the reason the stock has
"gotten killed" over the past three months, Citi analyst David
Driscoll told ADM executives during the conference call. The stock
is down 21% during that period. It was down 3.67% Tuesday to
$29.36.
"It's days like today where people say, 'See? You can't predict
it,'" Driscoll said.
ADM and other grain merchandisers have largely benefitted during
the past year from a grain export ban in the Black Sea region that
sent buyers scrambling elsewhere to secure supplies. Companies such
as ADM, with a global network of grain storage and transportation,
were well-positioned.
Supplies remain tight, but the environment is shifting. Black
Sea exports have resumed, and ADM and other companies are now
focusing on strengthening their presence in the region. ADM
announced Tuesday it would expand its network along the Danube
River in Romania with 12 new river elevators and an export terminal
on the Black Sea. The project would resemble its storage network
along the Mississippi River in the U.S., Woertz said.
For the quarter ended June 30, ADM reported a profit of $381
million, or 58 cents a share, down from $446 million, or 69 cents a
share, a year earlier. Revenue soared 45% to $22.87 billion.
-By Ian Berry, Dow Jones Newswires; 312-750-4072;
ian.berry@dowjones.com
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