ADM Archer Daniels Midland Company

In a bid to enhance the grain storage capacity and quicken the unloading activities Archer Daniels Midland Company (ADM), recently announced strategic measures including the acquisition of five grain storage elevators from Olsen Brothers Enterprises in Wisconsin, USA and an agreement to acquire four more elevators from Olsen's Mill Acquisition Company. Moreover, Archer Daniels has entered into a lease agreement for an elevator with the latter.

However, the financial terms of the acquisition were not disclosed by the company.

All ten elevators are located in Wisconsin and are well equipped to handle the harvest given its high-speed unloading, which helps farmers get in and out quickly. The combined storage capacities of all ten elevators are approximately 20 million bushels.

Management has decided to supply the grains procured from these facilities to the local dairy markets, ADM's domestic processing operations and export markets. With this deal, the company's total number of grain elevators has increased to more than 200 with an aggregate storage capacity of over 440 million bushels.

The elevators, which the company acquired, are located in Auroraville, Belmont, Boscobel, Milwaukee, Oshkosh, Ripon, Stevens Point, Viroqua and Westfield area and each are capable of loading trucks. Out of these locations, Boscobel, Oshkosh, Ripon and Stevens Point have additional capacities of loading railcars.

The Milwaukee location has the ability to load railcars as well as shuttle barges on Lake Michigan. Moreover, the elevator under lease is located in Platteville and is capable of loading trucks.

Recent Earnings Update

Archer Daniels reported a disappointed fourth-quarter 2011 results, with earnings falling approximately 16% to 58 cents per share from 69 cents reported in the prior-year quarter primarily due to a sharp rise in income tax rate, partially offset by increased segmental profit and positive discrepancy from changes in Last-In-First-Out (LIFO) inventory valuations caused by lower agricultural commodity prices. Quarterly earnings also missed the Zacks Consensus Estimate of 84 cents per share.

Archer Daniels, which competes with Bunge Limited (BG) and Corn Products International Inc. (CPO), currently has a Zacks #5 Rank, implying a short-term 'Strong Sell' rating on the stock. Besides, the company retains a long-term 'Underperform' recommendation.

 
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